“If you really need a loan, it’s probably because you’ve already missed a few payments and your credit history has gone for toss. “The Hard-Money Loan” However the important thing about debt-consolidation loans is that they are easy to get, provided you have not messed with your credit score. This advice is given by many financial advisory.
At times you would find that your monthly payment is lower then other loans but you would end up paying more then the regular loan. The debt-consolidator may give an offer of easy-does-it loan but if you analyze this very carefully then you would see that the consolidator is charging you high interest rates than you are paying now as high as 22% or even 23%.
Debt Consolidators Who Promise to Take Care of Everything:
This is one dream that we would like to dream about especially when you miss your payments to make to the lenders. This Nice Big Debt Consolidation Company comes along and swears they’ll make your life so much easier. They’ll negotiate lower interest rates, reduce your monthly payments.
You must be wondering how the debt consolidators companies charge you. These companies build in a fee as part of the monthly payment you make to them. However the fact is totally different what they do is only about 10% of the payment is made to the creditor, some debit directly from your checking account and get the benefit of the remaining amount lets say about 12% to 14% share is taken by the debt-consolidator.
Is it worth paying someone else to do what you can do on your own? That is funny, because when I plugged my debt into the MSN Money Debt Consolidator — a less biased source, since they are not getting no fee from me, they said I could pay off my debt in 41 months, providing I make slightly higher minimum payments to each card: a total of just $60 extra per card.
I was just thinking to myself, is it worth paying someone else to do what you can do on your own? Simply what you have to do is negotiate lower interest rates and stretch out your repayment schedule and pay off the highest interest debt first.
The Balance Transfer Trap:
If you think you can swing from the balance-transfer vines for a few months, just make sure you formally close all your accounts yourself, and then notify the credit-card company to mark the account “closed at customer’s request.” “Otherwise, on your credit report, it will look like the creditor closed your account,” says one of the biggest credit reporting agencies. Thus making you look like an even worse risk, even when you’re doing your best not to be.
View the original article here
Tuesday, April 26, 2011
Monday, April 25, 2011
How To Avoid Foreclosure
Nobody plans it thus nobody wants it to happen. Just like unwanted events in family life, losing the house is considered as the most dreadful. Home foreclosure is the last thing you want because this entails auction of the property to recover the investment made by the lender. But it’s not always enough to cover for the total investment hence deficiency judgment could be filed against you.
Reasons for foreclosure: Too much debt obligation, medical emergency and sudden loss of a family member, marriage break up which resulted to loss of secondary source of income, unexpected employment, and the inability to settle adjustable interest rate which increased dramatically.
So here are some helpful tips to avoid foreclosure:
Repayment Plan: This is only applicable if there are few missed payments. If your lender agrees, through this you will be able to spread out missed payments for a longer term.
Note modification: This is applicable for adjustable loans. You can make an arrangement with your lender to modify the interest rate which will be more manageable for you.
Refinance: This is a way to increase your loan balance so you can add back payments then re-amortize your loan. This is applicable if you have enough home equity.
Take advantage of forbearance: This is a form of agreement between a borrower and a lender giving more time to wait for repayment. Talking to your lender explaining that you are going through hard times explaining your situation bad I hope if the house was acquired in good faith then there becomes some sort of good alliance between you and your lender. This is better than ignoring notifications sent by your lender which could signify your intention not to pay.
Debts forgiveness: Again good communication matters, although it rarely happens, this is a good way to ask your lender to give you more time to repay your mortgage loan. It simply requires that you make a commitment of making succeeding payments current.Prior to foreclosure, the lender files a Notice of Default against your property. This is a form of public notification which could impair your good credit standing. Always remember to update your lender about the possible date of your repayment. In most cases, lenders become unwilling to negotiate once foreclosure procedures have initiated.
Some other means to deal with foreclosure include selling your property, considering a short sale. Be smart in selling your property by reaching out to expert sellers and obtaining some tips to get the best offers. Short sale applies when the price of your home is less than that of the money you owe. Whichever of these two remaining options you choose, you are bound to lose your home. Well, at least you are not ending up with bad credit.
View the original article here
Reasons for foreclosure: Too much debt obligation, medical emergency and sudden loss of a family member, marriage break up which resulted to loss of secondary source of income, unexpected employment, and the inability to settle adjustable interest rate which increased dramatically.
So here are some helpful tips to avoid foreclosure:
Repayment Plan: This is only applicable if there are few missed payments. If your lender agrees, through this you will be able to spread out missed payments for a longer term.
Note modification: This is applicable for adjustable loans. You can make an arrangement with your lender to modify the interest rate which will be more manageable for you.
Refinance: This is a way to increase your loan balance so you can add back payments then re-amortize your loan. This is applicable if you have enough home equity.
Take advantage of forbearance: This is a form of agreement between a borrower and a lender giving more time to wait for repayment. Talking to your lender explaining that you are going through hard times explaining your situation bad I hope if the house was acquired in good faith then there becomes some sort of good alliance between you and your lender. This is better than ignoring notifications sent by your lender which could signify your intention not to pay.
Debts forgiveness: Again good communication matters, although it rarely happens, this is a good way to ask your lender to give you more time to repay your mortgage loan. It simply requires that you make a commitment of making succeeding payments current.Prior to foreclosure, the lender files a Notice of Default against your property. This is a form of public notification which could impair your good credit standing. Always remember to update your lender about the possible date of your repayment. In most cases, lenders become unwilling to negotiate once foreclosure procedures have initiated.
Some other means to deal with foreclosure include selling your property, considering a short sale. Be smart in selling your property by reaching out to expert sellers and obtaining some tips to get the best offers. Short sale applies when the price of your home is less than that of the money you owe. Whichever of these two remaining options you choose, you are bound to lose your home. Well, at least you are not ending up with bad credit.
View the original article here
Sunday, April 24, 2011
The Top 10 Billionaires in the World
According to Forbes, two new records have been made this year 2011:
1) Total number of Billionaires (1210) and
2) combined wealth of them ($4.5 trillion).
The new comers to the list are mainly from Brazil, Russia, India and China. The most surprising is that Bill Gates now moved to the 2nd position and the person who has beaten him is Carlos Slim from Mexico.
Here is the list of top 10 Billionaires in the world:
No. 1 Carlos Slim Helú & family
Net Worth: $74 billion
Source: Telecom
Citizenship: Mexico
No. 2 Bill Gates
Net Worth: $56 billion
Source: Microsoft
Citizenship: U.S.
No. 3 Warren Buffett
Net Worth: $50 billion
Source: Berkshire Hathaway
Citizenship: U.S.
No. 4 Bernard Arnault
Net Worth: $41 billion
Source: LVMH
Citizenship: France
No. 5 Larry Ellison
Net Worth: $39.5 billion
Source: Oracle
Citizenship: U.S.
No. 6 Lakshmi Mittal
Net Worth: $31.1 billion
Source: Steel
Citizenship: India
No. 7 Amancio Ortega
Net Worth: $31 billion
Source: Zara
Citizenship: Spain
No. 8 Eike Batista
Net Worth: $30 billion
Source: Mining, oil
Citizenship: Brazil
No. 9 Mukesh Ambani
Net Worth: $27 billion
Source: Petrochemicals
Citizenship: India
No. 10 Christy Walton & family
Net Worth: $26.5 billion
Source: Wal-Mart
Citizenship: U.S.
Saturday, April 23, 2011
The Top 10 Billionaires in the World
According to Forbes, two new records have been made this year 2011:
1) Total number of Billionaires (1210) and
2) combined wealth of them ($4.5 trillion).
The new comers to the list are mainly from Brazil, Russia, India and China. The most surprising is that Bill Gates now moved to the 2nd position and the person who has beaten him is Carlos Slim from Mexico.
Here is the list of top 10 Billionaires in the world:
No. 1 Carlos Slim Helú & family
Net Worth: $74 billion
Source: Telecom
Citizenship: Mexico
No. 2 Bill Gates
Net Worth: $56 billion
Source: Microsoft
Citizenship: U.S.
No. 3 Warren Buffett
Net Worth: $50 billion
Source: Berkshire Hathaway
Citizenship: U.S.
No. 4 Bernard Arnault
Net Worth: $41 billion
Source: LVMH
Citizenship: France
No. 5 Larry Ellison
Net Worth: $39.5 billion
Source: Oracle
Citizenship: U.S.
No. 6 Lakshmi Mittal
Net Worth: $31.1 billion
Source: Steel
Citizenship: India
No. 7 Amancio Ortega
Net Worth: $31 billion
Source: Zara
Citizenship: Spain
No. 8 Eike Batista
Net Worth: $30 billion
Source: Mining, oil
Citizenship: Brazil
No. 9 Mukesh Ambani
Net Worth: $27 billion
Source: Petrochemicals
Citizenship: India
No. 10 Christy Walton & family
Net Worth: $26.5 billion
Source: Wal-Mart
Citizenship: U.S.
View the original article here
1) Total number of Billionaires (1210) and
2) combined wealth of them ($4.5 trillion).
The new comers to the list are mainly from Brazil, Russia, India and China. The most surprising is that Bill Gates now moved to the 2nd position and the person who has beaten him is Carlos Slim from Mexico.
Here is the list of top 10 Billionaires in the world:
No. 1 Carlos Slim Helú & family
Net Worth: $74 billion
Source: Telecom
Citizenship: Mexico
No. 2 Bill Gates
Net Worth: $56 billion
Source: Microsoft
Citizenship: U.S.
No. 3 Warren Buffett
Net Worth: $50 billion
Source: Berkshire Hathaway
Citizenship: U.S.
No. 4 Bernard Arnault
Net Worth: $41 billion
Source: LVMH
Citizenship: France
No. 5 Larry Ellison
Net Worth: $39.5 billion
Source: Oracle
Citizenship: U.S.
No. 6 Lakshmi Mittal
Net Worth: $31.1 billion
Source: Steel
Citizenship: India
No. 7 Amancio Ortega
Net Worth: $31 billion
Source: Zara
Citizenship: Spain
No. 8 Eike Batista
Net Worth: $30 billion
Source: Mining, oil
Citizenship: Brazil
No. 9 Mukesh Ambani
Net Worth: $27 billion
Source: Petrochemicals
Citizenship: India
No. 10 Christy Walton & family
Net Worth: $26.5 billion
Source: Wal-Mart
Citizenship: U.S.
View the original article here
Need extra cash? Get an Online Payday Loan
Do you need extra cash till your next payday? Its very easy to apply for one online payday loan and get approved for it. If you need an extra $100 or $1000 before your next payday comes, getting an online payday loan is the easiest way to meet your financial requirements. Online payday loan companies will review your application form and approve it instantly. The money will be deposited to your checking account in a short period of time.
Sometimes the need of extra cash arises when you least expect it. You may need extra cash at times of emergencies like your home or car needs an immediate repair, medical or other emergencies. You might be running low on cash for several days to a week or more before your next pay check comes. Payday loan is an immediate solution at such times of crisis.
Applying for an online payday loan and getting approved for it has now become a lot easier due to the convenience of the internet. There are many online lenders who are offering cheap interest rates on the loan amount and the repayment period is up to 30 days. You just need to answer few simple questions, provide proof of your banking and employment information. Once you fax all the documents, you are approved for the loan and the cash deposited to your bank account within the same day.
Payday loans can solve many of your immediate financial needs. You get 30 days to repay back the loan amount and the terms of the loan contract are also easily explained in writing. Cheap rates and easy repayment terms make getting a cash advance loan an easy process. Most of the time, you can be approved for a loan till payday without having to fax any documents at all.
Browse through the internet and you will find many companies offering loans at easy terms and lower interest rates. The approval is fast and if you need to extend your loan till the next payday, it can also be possibly done. You just have to explain your situation to the lender. Cash advance loans can be the answer to your immediate needs and can be repaid in convenient installments.
People with bad credit can also apply for cash advance loans. So even if you have bad credit and you have been denied from getting a loan, you just need to look for an online cash advance loan. You can visit www.advanceloan.net if you need cash advance.
View the original article here
Sometimes the need of extra cash arises when you least expect it. You may need extra cash at times of emergencies like your home or car needs an immediate repair, medical or other emergencies. You might be running low on cash for several days to a week or more before your next pay check comes. Payday loan is an immediate solution at such times of crisis.
Applying for an online payday loan and getting approved for it has now become a lot easier due to the convenience of the internet. There are many online lenders who are offering cheap interest rates on the loan amount and the repayment period is up to 30 days. You just need to answer few simple questions, provide proof of your banking and employment information. Once you fax all the documents, you are approved for the loan and the cash deposited to your bank account within the same day.
Payday loans can solve many of your immediate financial needs. You get 30 days to repay back the loan amount and the terms of the loan contract are also easily explained in writing. Cheap rates and easy repayment terms make getting a cash advance loan an easy process. Most of the time, you can be approved for a loan till payday without having to fax any documents at all.
Browse through the internet and you will find many companies offering loans at easy terms and lower interest rates. The approval is fast and if you need to extend your loan till the next payday, it can also be possibly done. You just have to explain your situation to the lender. Cash advance loans can be the answer to your immediate needs and can be repaid in convenient installments.
People with bad credit can also apply for cash advance loans. So even if you have bad credit and you have been denied from getting a loan, you just need to look for an online cash advance loan. You can visit www.advanceloan.net if you need cash advance.
View the original article here
Friday, April 22, 2011
What Are Typical Mortgage Down Payments?
When buying a house for the first time the home buyers make a token amount of money as a mortgage down payments or down payments gifts.
Down payment gifts are heavily regulated. Since many first time home buyers are lacking funds, this makes down payment assistance programs useful. Without programs such as this, many first time home buyers would find it impossible to make that first purchase.
Lenders like to see the buyer have a state in the purchase. So in this brief article I want to help you understand how they work. Try to put yourself in the shoes of the lender. When using down payment assistance or down payment gifts the lender assumes 100% of the risk.
That is why the only proper way for this type of help to work is it has to be a gift. Now you may be wondering, how can I get a gift like this? If this type of mortgage down payment assistance was not regulated, there could become a lot of loan sharks out there.
All FHA loans allow for down payments assistance for the first time home buyers. The gift for down payment can come from anywhere it can be from any relative or friends or even from a charity. However the gift you would be using as down payment has to be documented to prove that this is a gift not a loan. This is just an assurance to the lenders that even you have a small amount of interest in the property. That interest of course is equal to the gift which was used as the down payment.
Now, what if you don’t get any help from your family members or friends for the down payment assistance, we can use a charity. However, it is not exactly the same as if you had gotten a gift from a family member.
There are charities out there that will use the seller’s proceeds as the down payment assistance for you. So then, if we do not have a family member that can help and if we have a problem finding the charity, we can ask the seller to offer the down payment assistance.
Now you must be wondering how does it work? The seller makes a donation to the charity and then the charity makes the down payment for you. Now you may wonder, how can this actually be? Do you mean that the seller is going to make my down payment? No, that is not actually what takes place. The seller makes a charitable donation and the charity makes a gift to the lender equal to the amount of your down payment.
I do not know any other way to explain this other than it is what I call a legal way to launder money! As the buyer of a home, you know you need to make a down payment, so this type of mortgage down payment assistance program is available to you.
View the original article here
Down payment gifts are heavily regulated. Since many first time home buyers are lacking funds, this makes down payment assistance programs useful. Without programs such as this, many first time home buyers would find it impossible to make that first purchase.
Lenders like to see the buyer have a state in the purchase. So in this brief article I want to help you understand how they work. Try to put yourself in the shoes of the lender. When using down payment assistance or down payment gifts the lender assumes 100% of the risk.
That is why the only proper way for this type of help to work is it has to be a gift. Now you may be wondering, how can I get a gift like this? If this type of mortgage down payment assistance was not regulated, there could become a lot of loan sharks out there.
All FHA loans allow for down payments assistance for the first time home buyers. The gift for down payment can come from anywhere it can be from any relative or friends or even from a charity. However the gift you would be using as down payment has to be documented to prove that this is a gift not a loan. This is just an assurance to the lenders that even you have a small amount of interest in the property. That interest of course is equal to the gift which was used as the down payment.
Now, what if you don’t get any help from your family members or friends for the down payment assistance, we can use a charity. However, it is not exactly the same as if you had gotten a gift from a family member.
There are charities out there that will use the seller’s proceeds as the down payment assistance for you. So then, if we do not have a family member that can help and if we have a problem finding the charity, we can ask the seller to offer the down payment assistance.
Now you must be wondering how does it work? The seller makes a donation to the charity and then the charity makes the down payment for you. Now you may wonder, how can this actually be? Do you mean that the seller is going to make my down payment? No, that is not actually what takes place. The seller makes a charitable donation and the charity makes a gift to the lender equal to the amount of your down payment.
I do not know any other way to explain this other than it is what I call a legal way to launder money! As the buyer of a home, you know you need to make a down payment, so this type of mortgage down payment assistance program is available to you.
View the original article here
Thursday, April 21, 2011
Should You Be Investing in Small-Cap Stocks?
Should you be investing in small-cap stocks? The answer is yes, but with some limitations.
First, consider that small-cap stocks have a strong, long-term track record. As a group, small-cap stocks have beat large-cap stocks fairly consistently for a number of years.
Small-cap stocks are generally considered to have a market capitalization of $1 billon or less.
That success alone makes them worth adding to your portfolio.
View the original article here
First, consider that small-cap stocks have a strong, long-term track record. As a group, small-cap stocks have beat large-cap stocks fairly consistently for a number of years.
Small-cap stocks are generally considered to have a market capitalization of $1 billon or less.
That success alone makes them worth adding to your portfolio.
View the original article here
Wednesday, April 20, 2011
Stock Choices That May Prosper on Obesity Epidemic
Companies that provide solutions to problems are often good choices for stock investors. Whether the problem affects a business or is personal in nature, there is money to be made in solutions.
One of the most talked about health care problems facing the U.S. is obesity. Regardless of how you measure it, the number of over-weight people is in the tens of millions.
Providing solutions to shedding pounds presents significant long-term opportunities.
View the original article here
One of the most talked about health care problems facing the U.S. is obesity. Regardless of how you measure it, the number of over-weight people is in the tens of millions.
Providing solutions to shedding pounds presents significant long-term opportunities.
View the original article here
Tuesday, April 19, 2011
Stock Investors Worry About Return on Savings
Investors in the stock market must also have a cash reserve for emergencies and near-term financial needs.
This means parking cash in savings accounts, money market mutual funds, short-term bonds and so on.
When interest rates are low, the return on these savings can be anemic.
What's a good strategy to boost returns on savings?
View the original article here
This means parking cash in savings accounts, money market mutual funds, short-term bonds and so on.
When interest rates are low, the return on these savings can be anemic.
What's a good strategy to boost returns on savings?
View the original article here
Monday, April 18, 2011
The Manual Method of Protecting Stock Profits
Sometimes the old-fashioned way works best for stock investors. This method of protecting stock profits requires you pay more attention to price changes.
The manual method of protecting stock profits is based on the theory that it is better to take several small profits rather than wait for a single big profit.
View the original article here
The manual method of protecting stock profits is based on the theory that it is better to take several small profits rather than wait for a single big profit.
View the original article here
Will You Have Enough Money to Retire?
For investors who have faithfully built a retirement fund using stocks and other investments, the most important question to answer is: Will it be enough?
That answer, of course, will be different for each investor, however it doesn't change the fact that the answer is almost impossible to predict.
View the original article here
That answer, of course, will be different for each investor, however it doesn't change the fact that the answer is almost impossible to predict.
View the original article here
Sunday, April 17, 2011
Why I’m Buying Boring Stocks
I remember the good ol’ days of the Internet Bubble in late 1999, early 2000. I bought Qualcomm (QCOM) at around $300 a share and watched it skyrocket to $800 a share in less than a year. Valuations didn’t matter, only the stories behind the stocks. I had lofty ambitions of early retirement and life of luxury. Warren Buffett was widely derided (amongst my friends) as an old fool who didn’t understand the new economy – this time it was surely different.
Sadly, no one told me the party was going to end and I rode that pony all the way back down the hill.
And then my brokerage called me and informed me that not only was my investment account worth zero, I also owed them an additional thousand dollars! Yeah, leverage works both ways.
That’s when I realized that investing isn’t about excitement, it’s about buying dull, income-generating stocks and as Buffett would say, sitting on your hands for extended periods of time.
I realized that I didn’t need to be invested in growth stocks that double every year. I just need to find stocks that generate 8-12% a year in capital appreciation and dividends, and I’ll be able to beat 90% of money managers on the planet.
So why am I bringing this up today? I recently read an article about how an investor was abandoning his position in Johnson and Johnson (JNJ), citing lack of growth as the main reason.
After holding it for a decade (like some of the readers claimed they did), should you sell it now in favor of a tantalizing growth stock, like maybe SalesForce (CRM) that sells for 260 times earnings?
The problem with growth stocks is that everyone knows they’re a growth stock destined for great things, and investors usually overpay for this privilege, or should I say, excitement.
Studies have shown that over the long run, growth (or glamour) stocks underperform boring, value stocks.
So are people correct in giving up on boring, no-growth JNJ?
Well, JNJ’s story sure isn’t getting any more interesting. In fact, the 100+ year-old stodgy company is so unexciting, I can’t even be bothered to read what it does on its profile page on Yahoo! Finance. I know it makes medicine and related products. It had a slew of recalls and maybe it even makes Splenda. But seriously, who cares?
I don’t need to be swayed by some BS management story. I went to business school, I know how those yarns are spun! Just show me the numbers…
JNJ has a market cap of $166B and it has zero net debt – always a good sign.
Over the past decade (2001 through 2010), income has almost doubled from $33B to $61.6B. Operating cash flow has almost doubled from $8.8B to $16.38B. And most importantly, free cash flow (or as Benjamin Graham
would say, the Owners Share of Income) also nearly doubled from $7.1B to $14B.
In terms of valuation metrics, the P/E fell from 32 to 12.7 over the same time period, and the P/CF fell from 20.5 to 10.3. Which meant that it went from being grossly overvalued in 2001 to being favorably-valued in 2010.
At today’s prices, the P/FCF is currently 11.84, which is quite cheap for a blue-chip stock and it has a projected yield of 3.6%, which incidentally, puts in on par with the yield of the 10-year US Treasury.
However, JNJ has been growing its dividend around 9-10% every year since 1972. In fact, it has increased the dividend every single year for 48 years!
If you had invested in JNJ 10 years ago, your entry price (adjusted for splits and dividends) would be about $37. It’s currently trading around $60.50, so while a 64% increase over a decade may not be the dreams that growth stocks are made of, at least your initial quarterly dividend payment of 0.16 cents has more than tripled to 0.54 cents.
And even though you made the wrong decision in buying an overvalued stock a decade ago, you’re still not doing too badly. At your entry price of $37, you’re almost making a 6% yield today.
Buying this boring, no growth stock today gives me an annual yield of 3.6%. If it repeats its performance over the next decade and the dividend triples again, I’ll be making 12% annual yield from the dividends, based on my purchase price. I can live with that sort of sub-par performance!
And if the P/E expands to growth-stock levels, causing the share price to soar and the dividend yield to drop back under 1% like it did 2001, I’ll be happy to sell it to some growth-story-chasing investor. But until then I’m happy eschewing the glamor stocks in favor of the cheap, boring, no-growth, value stocks.
View the original article here
Sadly, no one told me the party was going to end and I rode that pony all the way back down the hill.
And then my brokerage called me and informed me that not only was my investment account worth zero, I also owed them an additional thousand dollars! Yeah, leverage works both ways.
That’s when I realized that investing isn’t about excitement, it’s about buying dull, income-generating stocks and as Buffett would say, sitting on your hands for extended periods of time.
I realized that I didn’t need to be invested in growth stocks that double every year. I just need to find stocks that generate 8-12% a year in capital appreciation and dividends, and I’ll be able to beat 90% of money managers on the planet.
So why am I bringing this up today? I recently read an article about how an investor was abandoning his position in Johnson and Johnson (JNJ), citing lack of growth as the main reason.
I am not suggesting that JNJ is about to collapse or slowly fade into the background. As I said, JNJ is a strong cash flow generator and the company does generate very strong returns on capital. With such a large amount of reinvestable cash, there will always be at least the hope of better days.Based on the 150+ comments, it seems like the investor and numerous readers were tired of the lack of stock performance of JNJ. How anyone would mistake a humongous, global conglomerate for a growth stock is another story, but is it really a dog of a stock?
The problem, though, is that JNJ just isn’t a dynamic player. If you want a company that will produce large amounts of cash, and send a fair bit of it back to shareholders in dividends and buybacks, JNJ is a fine choice. But if you really want to harness the growth potential of the healthcare market with a top-notch operator, JNJ simply does not fit the bill.
After holding it for a decade (like some of the readers claimed they did), should you sell it now in favor of a tantalizing growth stock, like maybe SalesForce (CRM) that sells for 260 times earnings?
The problem with growth stocks is that everyone knows they’re a growth stock destined for great things, and investors usually overpay for this privilege, or should I say, excitement.
Studies have shown that over the long run, growth (or glamour) stocks underperform boring, value stocks.
So are people correct in giving up on boring, no-growth JNJ?
Well, JNJ’s story sure isn’t getting any more interesting. In fact, the 100+ year-old stodgy company is so unexciting, I can’t even be bothered to read what it does on its profile page on Yahoo! Finance. I know it makes medicine and related products. It had a slew of recalls and maybe it even makes Splenda. But seriously, who cares?
I don’t need to be swayed by some BS management story. I went to business school, I know how those yarns are spun! Just show me the numbers…
JNJ has a market cap of $166B and it has zero net debt – always a good sign.
Over the past decade (2001 through 2010), income has almost doubled from $33B to $61.6B. Operating cash flow has almost doubled from $8.8B to $16.38B. And most importantly, free cash flow (or as Benjamin Graham
would say, the Owners Share of Income) also nearly doubled from $7.1B to $14B.In terms of valuation metrics, the P/E fell from 32 to 12.7 over the same time period, and the P/CF fell from 20.5 to 10.3. Which meant that it went from being grossly overvalued in 2001 to being favorably-valued in 2010.
At today’s prices, the P/FCF is currently 11.84, which is quite cheap for a blue-chip stock and it has a projected yield of 3.6%, which incidentally, puts in on par with the yield of the 10-year US Treasury.
However, JNJ has been growing its dividend around 9-10% every year since 1972. In fact, it has increased the dividend every single year for 48 years!
If you had invested in JNJ 10 years ago, your entry price (adjusted for splits and dividends) would be about $37. It’s currently trading around $60.50, so while a 64% increase over a decade may not be the dreams that growth stocks are made of, at least your initial quarterly dividend payment of 0.16 cents has more than tripled to 0.54 cents.
And even though you made the wrong decision in buying an overvalued stock a decade ago, you’re still not doing too badly. At your entry price of $37, you’re almost making a 6% yield today.
Buying this boring, no growth stock today gives me an annual yield of 3.6%. If it repeats its performance over the next decade and the dividend triples again, I’ll be making 12% annual yield from the dividends, based on my purchase price. I can live with that sort of sub-par performance!
And if the P/E expands to growth-stock levels, causing the share price to soar and the dividend yield to drop back under 1% like it did 2001, I’ll be happy to sell it to some growth-story-chasing investor. But until then I’m happy eschewing the glamor stocks in favor of the cheap, boring, no-growth, value stocks.
View the original article here
Friday, April 15, 2011
Hedge Funds Explained
A reader asks, "what are these hedge funds I read about in the news? It seems like the managers make millions, hundreds of millions or even billions."
A hedge fund is simply an agreement between a manager and investors. It can take several legal forms such as limited partnerships (perhaps the most common) or limited liability corporation.
The term hedge fund is really a generic description for the arrangement. There is no formal structure they all must follow.
View the original article here
A hedge fund is simply an agreement between a manager and investors. It can take several legal forms such as limited partnerships (perhaps the most common) or limited liability corporation.
The term hedge fund is really a generic description for the arrangement. There is no formal structure they all must follow.
View the original article here
Thursday, April 14, 2011
After Gain or Loss, Emotions Can Shape Stock Investment Decisions
Whether you have had a nice gain or suffered a heart-breaking loss, emotions can cloud your judgement just when you need to be your most rational.
We all want to think that buying and selling stocks is a cold, rational decision. Unfortunately, the truth is somewhat less flattering.
View the original article here
We all want to think that buying and selling stocks is a cold, rational decision. Unfortunately, the truth is somewhat less flattering.
View the original article here
Monday, April 11, 2011
4 Common Financial Issues We Battle With Everyday
As a human being we encounter common financial issues all most every day. If you know how to handle these common financial issues then you will have an upper hand then many other people who tend to pulverized when it comes to face these common issues. Realize these common issues in yourself and take control of your own life.
You know emotion run stronger than your thoughts, so one must know how to deal with this kind of situation. It is always difficult to make emotional decision and here we make mistake. Financial decision should be made by your brain rather than making it by heart. You may be offered a high return on the investment that you are making; however you should be intelligent enough to know the facts by making the right decision.
With facts there is fiction too, so you should be capable enough to distinguish between facts and fiction. If you are not expertise in the field of finance, then you tend to take suggestions from others which might not be the fact, perhaps it could be fiction. So it is necessary for you to know how to separate facts and fictions.
There is always a chance of you getting into a catastrophic financial risk. Many a times many people tend to get carried away by the high returns that are promised by the lenders. Do not take such financial risk be very sure about the program before you get into it. You should always keep your savings for emergency situation, there will be time when you will be tested with your intelligence on how you should use your savings make sure that you make use of your logical brain to tackle these kind of situation. It is very difficult in life to recover from any catastrophic financial failure.
Last but not the least do not focus too much of your time on money. Many people give the priority to the money than life, which is absolutely wrong. Just do the Wright thing in life an you will see that money is following you, in the long run you would see that people who run after money ends up with nothing. These kind of people end up spending money rather than making it because their focus is only money. They are different aspect involved in our life apart from money. I believe health and happiness comes first than any other things.
View the original article here
You know emotion run stronger than your thoughts, so one must know how to deal with this kind of situation. It is always difficult to make emotional decision and here we make mistake. Financial decision should be made by your brain rather than making it by heart. You may be offered a high return on the investment that you are making; however you should be intelligent enough to know the facts by making the right decision.
With facts there is fiction too, so you should be capable enough to distinguish between facts and fiction. If you are not expertise in the field of finance, then you tend to take suggestions from others which might not be the fact, perhaps it could be fiction. So it is necessary for you to know how to separate facts and fictions.
There is always a chance of you getting into a catastrophic financial risk. Many a times many people tend to get carried away by the high returns that are promised by the lenders. Do not take such financial risk be very sure about the program before you get into it. You should always keep your savings for emergency situation, there will be time when you will be tested with your intelligence on how you should use your savings make sure that you make use of your logical brain to tackle these kind of situation. It is very difficult in life to recover from any catastrophic financial failure.
Last but not the least do not focus too much of your time on money. Many people give the priority to the money than life, which is absolutely wrong. Just do the Wright thing in life an you will see that money is following you, in the long run you would see that people who run after money ends up with nothing. These kind of people end up spending money rather than making it because their focus is only money. They are different aspect involved in our life apart from money. I believe health and happiness comes first than any other things.
View the original article here
Sunday, April 10, 2011
5 Tips to Help You Succeed With Mutual Funds
A particular mutual fund investment’s failure or success does not depend on their previous or present performance. It may be very attractive to buy funds when they are doing well in the market; however you being the new investor it is not advisable to buy funds depending on their past performance. The reason behind this advice is because you as an investor would want to buy mutual funds when the rates are low and sell them at the maximum price as much as you can.
Funds that are currently established have limited number of stocks in the market. This makes easy to analyze which stock is doing well and which one is not doing well. The stock that is doing well puts a huge effect because of their size being small and it is easy to evaluate this smaller stocks. It is very hard to remain at the same or top position as far as the stock market is concerned, that is the reason why we feel the effect to be less when the stock market is growing.
If you want maximum benefits from your mutual fund investment then you need to follow religiously the expanses and the tax charges that are applicable on these mutual funds. Some fund’s fees would cost you more than the other ones; in this case you should be able to negotiate the price in the market or with the stock broker in order to get good returns as an investor. In the long run if your fees or taxes are increased even by smaller percentage then it could be that your hard earned returns is being enjoyed by someone else. Being an investor it is very important to learn how the government taxes are applicable on your mutual fund investment. So the best ways to know about all this taxation is by reading prospectus that are available at the firm offices.
To buy bonds securities and stocks, a mutual fund manager always finds different ways to pull information from different small investors. This means that your investment is being analyzed by different buyers and you need not make any more investment on that particular mutual fund. Well if you are planning to buy different type of stocks that are available in the market then the investment might be required. However if you have sufficient funds then you could even go for international funds, which would give you more returns than the domestic funds.
There is an element of risk taken by the fund managers in order to get healthy returns. At times you may not agree with fund manager’s risk taken on the investment since you may not be thinking as he is doing. As far as we know, all mutual fund investment bears a minimum risk which is important to acknowledge.
View the original article here
Funds that are currently established have limited number of stocks in the market. This makes easy to analyze which stock is doing well and which one is not doing well. The stock that is doing well puts a huge effect because of their size being small and it is easy to evaluate this smaller stocks. It is very hard to remain at the same or top position as far as the stock market is concerned, that is the reason why we feel the effect to be less when the stock market is growing.
If you want maximum benefits from your mutual fund investment then you need to follow religiously the expanses and the tax charges that are applicable on these mutual funds. Some fund’s fees would cost you more than the other ones; in this case you should be able to negotiate the price in the market or with the stock broker in order to get good returns as an investor. In the long run if your fees or taxes are increased even by smaller percentage then it could be that your hard earned returns is being enjoyed by someone else. Being an investor it is very important to learn how the government taxes are applicable on your mutual fund investment. So the best ways to know about all this taxation is by reading prospectus that are available at the firm offices.
To buy bonds securities and stocks, a mutual fund manager always finds different ways to pull information from different small investors. This means that your investment is being analyzed by different buyers and you need not make any more investment on that particular mutual fund. Well if you are planning to buy different type of stocks that are available in the market then the investment might be required. However if you have sufficient funds then you could even go for international funds, which would give you more returns than the domestic funds.
There is an element of risk taken by the fund managers in order to get healthy returns. At times you may not agree with fund manager’s risk taken on the investment since you may not be thinking as he is doing. As far as we know, all mutual fund investment bears a minimum risk which is important to acknowledge.
View the original article here
Saturday, April 9, 2011
You Don’t Have to Pay an Auto Insurance Premium Increase
If your auto insurance company is asking you to pay excessive money and you think that you have no other option than paying the insurance company than you are wrong. Well there is nothing wrong in continuing with the same provider as long as you are satisfied and the provider meets your requirement. If not than you have all the rights and option to move to a different provider with whom you would feel safe and satisfied.
If you are not satisfied or annoyed regarding your premium in that case you should immediately make an enquiry and question your company about the rising premium, in that case you will find that the rising premium is not actually affecting you which sometimes can be quiet intolerable. So in order to avoid intolerance you may make a decision say either by asking for a rebate or you can change your company.
When you have decided that you are buying auto insurance from a different insurance company, it would not be a bad idea to move to a different insurance provider, provided you have compared the quotation more than once with the other.
The motive of changing the insurance provider is that you want to save money as much as you can. Comparatively there is nothing to be surprised if you find out that there are various companies offering you the auto insurance deal at a lower price.
If there is a rise in your car insurance premium, then it is not compulsory to pay it. However the decision is yours what you want to do? Some people will stick with the same provider and others will make a move to for a good cause. I guess nobody likes increase in price, so people would love to change the insurance provider in order to save a huge amount of money in the long run.
View the original article here
If you are not satisfied or annoyed regarding your premium in that case you should immediately make an enquiry and question your company about the rising premium, in that case you will find that the rising premium is not actually affecting you which sometimes can be quiet intolerable. So in order to avoid intolerance you may make a decision say either by asking for a rebate or you can change your company.
When you have decided that you are buying auto insurance from a different insurance company, it would not be a bad idea to move to a different insurance provider, provided you have compared the quotation more than once with the other.
The motive of changing the insurance provider is that you want to save money as much as you can. Comparatively there is nothing to be surprised if you find out that there are various companies offering you the auto insurance deal at a lower price.
If there is a rise in your car insurance premium, then it is not compulsory to pay it. However the decision is yours what you want to do? Some people will stick with the same provider and others will make a move to for a good cause. I guess nobody likes increase in price, so people would love to change the insurance provider in order to save a huge amount of money in the long run.
View the original article here
Friday, April 8, 2011
5 simple rules for investing in an IRA
Investing for retirement doesn't have to be complicated. One of the simplest and most effective approaches is to set aside money each year in an IRA, which offers tax advantages on retirement savings so you can potentially accumulate more money over time.
Here are 5 simple rules for managing your IRA assets:
How do I open a new IRA®?
Opening an IRA online is easy. In just a few minutes, your new IRA can be ready to go to work helping you meet your retirement investing goals. So why wait?
Start saving in a new IRA today.
The biggest mistake you can make with an IRA is not to contribute. For the 2010 and 2011 tax years, the maximum annual contribution amount is $5,000 if you're under age 50, or $6,000 if you're 50 or older. (If you earned less than these amounts, your contribution limit would be equal to your earned income for the year.) These limits apply to your combined contributions to all IRAs you hold. If you're married, your spouse can make an IRA contribution too, even if he or she doesn't have earned income.
And just because the calendar has flipped to 2011 doesn't mean you can't make a contribution for the 2010 tax year. You have until April 18, 2011, to do so, and you can go ahead and make a contribution for 2011 as well. Just be sure to specify the tax year for which you're contributing.
Choosing the right type of IRA hinges on the question of when you want to pay taxes—now or later.
With a traditional IRA, your contributions may be tax-deductible if you meet certain eligibility requirements.
Your earnings can then grow tax-deferred until you begin taking withdrawals, at which point you'd be taxed at whatever rate you're subject to at the time (which could be higher or lower than your current rate). With a Roth IRA you're contributing after-tax money, so you don't get an immediate tax deduction, but your earnings grow tax-free, assuming they meet certain requirements.
For many investors, the appeal of a Roth IRA is obvious: tax-free growth, no lifetime requirements for required minimum distributions (RMDs), and the opportunity for tax diversification. This comparison chart can help you decide.
If you can't contribute to a Roth IRA because your income exceeds the allowable limit, you may be able to take advantage of what's sometimes known as a "back door" Roth IRA.
It works like this: You fund a nondeductible traditional IRA and then immediately convert it to a Roth. You're essentially making a contribution to a Roth IRA, and there may be little or no tax impact from the conversion.
But be careful: This strategy works best if you don't have other traditional IRA assets, because federal law requires you to aggregate all your IRA assets (regardless of which assets you actually convert) for tax purposes. (For example, if you have $50,000 in total IRA assets and you want to convert the $10,000 in your nondeductible IRA, your conversion amount will be treated as though four-fifths of it—$7,500—comes from your pre-tax assets, and that amount will therefore be taxable.) So, if you have significant IRA assets that were funded with pre-tax contributions (from an employer plan rollover, for example), you'll want to consider the potential tax bite before taking any action.
For most investors, a nondeductible IRA no longer makes much sense as part of a long-term retirement plan. Although such an account may grow tax-deferred, contributions aren't deductible, and any earnings will ultimately be subject to taxation when you're making withdrawals.
As long as you're eligible to contribute, a Roth IRA is probably a much better choice. But if high income keeps you from contributing to a Roth and a back door Roth strategy (see item 3 above) isn't an option, consider tax-efficient investments in nonretirement accounts as an alternative to a nondeductible traditional IRA.
Market performance isn't the only thing that affects your IRA's bottom line. Investment costs can have a significant "drag" on your long-term retirement savings. And unlike market returns, which can be positive one year and negative the next, operating expenses keep eating away at your account in good years and bad.
That's why it's important to keep an eye on what you're paying your investment provider. Here's a very rough guideline: If your IRA costs you 1% of assets per year over 30 years, you'll end up "giving away" nearly 30% of what you would have had if those fees hadn't been deducted. (Learn more about why costs matter.)
View the original article here
Here are 5 simple rules for managing your IRA assets:
How do I open a new IRA®?
Opening an IRA online is easy. In just a few minutes, your new IRA can be ready to go to work helping you meet your retirement investing goals. So why wait?
Start saving in a new IRA today.
The biggest mistake you can make with an IRA is not to contribute. For the 2010 and 2011 tax years, the maximum annual contribution amount is $5,000 if you're under age 50, or $6,000 if you're 50 or older. (If you earned less than these amounts, your contribution limit would be equal to your earned income for the year.) These limits apply to your combined contributions to all IRAs you hold. If you're married, your spouse can make an IRA contribution too, even if he or she doesn't have earned income.
And just because the calendar has flipped to 2011 doesn't mean you can't make a contribution for the 2010 tax year. You have until April 18, 2011, to do so, and you can go ahead and make a contribution for 2011 as well. Just be sure to specify the tax year for which you're contributing.
Choosing the right type of IRA hinges on the question of when you want to pay taxes—now or later.
With a traditional IRA, your contributions may be tax-deductible if you meet certain eligibility requirements.
Your earnings can then grow tax-deferred until you begin taking withdrawals, at which point you'd be taxed at whatever rate you're subject to at the time (which could be higher or lower than your current rate). With a Roth IRA you're contributing after-tax money, so you don't get an immediate tax deduction, but your earnings grow tax-free, assuming they meet certain requirements.
For many investors, the appeal of a Roth IRA is obvious: tax-free growth, no lifetime requirements for required minimum distributions (RMDs), and the opportunity for tax diversification. This comparison chart can help you decide.
If you can't contribute to a Roth IRA because your income exceeds the allowable limit, you may be able to take advantage of what's sometimes known as a "back door" Roth IRA.
It works like this: You fund a nondeductible traditional IRA and then immediately convert it to a Roth. You're essentially making a contribution to a Roth IRA, and there may be little or no tax impact from the conversion.
But be careful: This strategy works best if you don't have other traditional IRA assets, because federal law requires you to aggregate all your IRA assets (regardless of which assets you actually convert) for tax purposes. (For example, if you have $50,000 in total IRA assets and you want to convert the $10,000 in your nondeductible IRA, your conversion amount will be treated as though four-fifths of it—$7,500—comes from your pre-tax assets, and that amount will therefore be taxable.) So, if you have significant IRA assets that were funded with pre-tax contributions (from an employer plan rollover, for example), you'll want to consider the potential tax bite before taking any action.
For most investors, a nondeductible IRA no longer makes much sense as part of a long-term retirement plan. Although such an account may grow tax-deferred, contributions aren't deductible, and any earnings will ultimately be subject to taxation when you're making withdrawals.
As long as you're eligible to contribute, a Roth IRA is probably a much better choice. But if high income keeps you from contributing to a Roth and a back door Roth strategy (see item 3 above) isn't an option, consider tax-efficient investments in nonretirement accounts as an alternative to a nondeductible traditional IRA.
Market performance isn't the only thing that affects your IRA's bottom line. Investment costs can have a significant "drag" on your long-term retirement savings. And unlike market returns, which can be positive one year and negative the next, operating expenses keep eating away at your account in good years and bad.
That's why it's important to keep an eye on what you're paying your investment provider. Here's a very rough guideline: If your IRA costs you 1% of assets per year over 30 years, you'll end up "giving away" nearly 30% of what you would have had if those fees hadn't been deducted. (Learn more about why costs matter.)
View the original article here
Thursday, April 7, 2011
6 timeless tips for successful investing
Whether we're experiencing a so-called flash crash or a raging bull, the markets can be turbulent. But no matter what's happening in the financial world, these enduring tips can help you achieve investment success.
Review your financial plan. It's important to revisit your financial plan from time to time to ensure your goals still align with your risk tolerance and time horizon. This is especially important if you've gotten married, bought a home, or made other significant life changes. Don't yet have a plan? Get started by learning the basics of financial planning.
Stick to your asset allocation. Keep your mix of stocks, bonds, and cash aligned with your investing goals. If the market's ups and downs have caused your allocation to shift, be sure to rebalance your portfolio.
Keep it simple. Rather than trying to beat the market, consider investing in broad-based index funds, which seek to track the performance of a market benchmark. It's an easy way to diversify your portfolio and keep your investing costs low. Low-cost investing lets you keep more of your returns—and over time that could translate into a net performance edge.
Control your taxes. Taxes can nibble away at your long-term investment returns, so learn how to be a tax-savvy investor and you can make the bite less painful.
Save as much as possible for retirement. Be sure to take full advantage of your retirement savings options. If you own an IRA, remember that you have until April 18, 2011, to make a contribution for 2010. And if you're age 50 or older, you can save up to $6,000 in your IRA for the 2010 tax year—that's $1,000 more than the standard contribution limit.
Manage your debt. Don't let excessive debt control you. Creating a budget based on what you have—not what you can borrow—and spending less can help you take control of your debt.
Follow these investing basics and you'll be better prepared to weather any market condition.
View the original article here
Review your financial plan. It's important to revisit your financial plan from time to time to ensure your goals still align with your risk tolerance and time horizon. This is especially important if you've gotten married, bought a home, or made other significant life changes. Don't yet have a plan? Get started by learning the basics of financial planning.
Stick to your asset allocation. Keep your mix of stocks, bonds, and cash aligned with your investing goals. If the market's ups and downs have caused your allocation to shift, be sure to rebalance your portfolio.
Keep it simple. Rather than trying to beat the market, consider investing in broad-based index funds, which seek to track the performance of a market benchmark. It's an easy way to diversify your portfolio and keep your investing costs low. Low-cost investing lets you keep more of your returns—and over time that could translate into a net performance edge.
Control your taxes. Taxes can nibble away at your long-term investment returns, so learn how to be a tax-savvy investor and you can make the bite less painful.
Save as much as possible for retirement. Be sure to take full advantage of your retirement savings options. If you own an IRA, remember that you have until April 18, 2011, to make a contribution for 2010. And if you're age 50 or older, you can save up to $6,000 in your IRA for the 2010 tax year—that's $1,000 more than the standard contribution limit.
Manage your debt. Don't let excessive debt control you. Creating a budget based on what you have—not what you can borrow—and spending less can help you take control of your debt.
Follow these investing basics and you'll be better prepared to weather any market condition.
View the original article here
Wednesday, April 6, 2011
Diversification has served bond investors well
If you were invested in the securities represented by the broadly diversified Barclays Capital U.S. Aggregate Bond Index during the past four years, you avoided some of the volatility experienced by the individual sectors that make up the index.
As the accompanying chart shows, the last four years have seen some fairly wild differences in returns for the four key sectors that make up the U.S. Aggregate Bond Index—Treasuries, government-related securities, corporate securities, and securitized bonds (generally, mortgage-backed and asset-backed securities).
But over those years, the return of the broad-based index (shown by the horizontal line) was relatively stable. In 2008, the performance of Treasuries helped to cushion the effects of the decline of corporate bonds. In 2009, things reversed, and the surge in corporates offset the decline of Treasuries.
"The lesson of the last four years is that broad diversification—whether in equities or in bonds—continues to be a valuable risk-management tool for investors," said Donald G. Bennyhoff, a senior investment analyst with Vanguard Investment Strategy Group. "Investors who tried to sidestep expected problems by forecasting changes in interest rates, inflation, or credit quality found it very hard to execute that strategy profitably."
In fact, Mr. Bennyhoff noted, "if you had allowed headlines to influence your investment choices, you might have avoided corporate bonds entirely prior to their 2009 rally. For most investors in taxable bonds, we believe that the best way to gain exposure to the asset class is by owning the total bond market though a fund or ETF."
View the original article here
As the accompanying chart shows, the last four years have seen some fairly wild differences in returns for the four key sectors that make up the U.S. Aggregate Bond Index—Treasuries, government-related securities, corporate securities, and securitized bonds (generally, mortgage-backed and asset-backed securities).
But over those years, the return of the broad-based index (shown by the horizontal line) was relatively stable. In 2008, the performance of Treasuries helped to cushion the effects of the decline of corporate bonds. In 2009, things reversed, and the surge in corporates offset the decline of Treasuries.
"The lesson of the last four years is that broad diversification—whether in equities or in bonds—continues to be a valuable risk-management tool for investors," said Donald G. Bennyhoff, a senior investment analyst with Vanguard Investment Strategy Group. "Investors who tried to sidestep expected problems by forecasting changes in interest rates, inflation, or credit quality found it very hard to execute that strategy profitably."
In fact, Mr. Bennyhoff noted, "if you had allowed headlines to influence your investment choices, you might have avoided corporate bonds entirely prior to their 2009 rally. For most investors in taxable bonds, we believe that the best way to gain exposure to the asset class is by owning the total bond market though a fund or ETF."
View the original article here
Tuesday, April 5, 2011
Get to know some RMD basics
You've probably spent a good chunk of your life working and setting aside money for retirement through IRAs and tax-advantaged employer-sponsored plans—such as SEP-IRAs, SIMPLE IRAs, 401(k)s, 403(b)(7)s, or qualified plans. These types of investments allow you to postpone paying income taxes on such assets until you reach age 70½.
At that point, the IRS requires you to start drawing down those assets and paying the appropriate taxes by taking required minimum distributions (RMDs). There are two important exceptions. First, any Roth IRA you hold is exempt from RMD regulations during your lifetime. Second, if you're over 70½ but still working, you may not be required to begin taking RMDs from your employer's plan until you stop working (unless you're a 5% owner).
The IRS penalty for failure to take your proper RMD amount by December 31 each year is stiff—50% of the amount not taken. For example, if you were required to withdraw $1,000 from your IRA but failed to do so, the penalty would be $500. RMDs are generally taxed as ordinary income and reported on IRS Form 1099-R.
You can calculate how much you need to withdraw from your traditional IRAs and employer plans each year. Take your year-end account balance for each IRA or employer-sponsored plan account and divide the balance by your applicable life expectancy divisor—a number that you can get from IRS Publication 590 (Individual Retirement Arrangements). If you have several IRAs, you must calculate your RMD separately for each; however, you can aggregate the total RMD amounts and take a distribution from one or more of the IRAs.
Note that you must take RMDs from IRAs and employer plans independently; you can't aggregate the required amount and take a distribution from only one account type. For more about RMDs from your employer plan, contact your plan administrator.
A reminder: If you're planning to roll over assets from your employer plan or convert from a traditional IRA to a Roth IRA, you must take your RMD first.
If you turn 70½ in a given year, you may opt to delay your first RMD until April 1 of the following calendar year. If you choose to hold off, you'll then need to take your second required distribution by December 31 of the same year. You'll also have two tax liabilities—one for the prior-year amount and one for the current-year amount withdrawn.
For example, suppose you turned 70 on November 15, 2010. That means you'll be 70½ on May 15, 2011. You may take your 2011 RMD by December 31, 2011, or wait until April 1, 2012. If you defer, you must take a second distribution—for 2012—by December 31, 2012.
View the original article here
At that point, the IRS requires you to start drawing down those assets and paying the appropriate taxes by taking required minimum distributions (RMDs). There are two important exceptions. First, any Roth IRA you hold is exempt from RMD regulations during your lifetime. Second, if you're over 70½ but still working, you may not be required to begin taking RMDs from your employer's plan until you stop working (unless you're a 5% owner).
The IRS penalty for failure to take your proper RMD amount by December 31 each year is stiff—50% of the amount not taken. For example, if you were required to withdraw $1,000 from your IRA but failed to do so, the penalty would be $500. RMDs are generally taxed as ordinary income and reported on IRS Form 1099-R.
You can calculate how much you need to withdraw from your traditional IRAs and employer plans each year. Take your year-end account balance for each IRA or employer-sponsored plan account and divide the balance by your applicable life expectancy divisor—a number that you can get from IRS Publication 590 (Individual Retirement Arrangements). If you have several IRAs, you must calculate your RMD separately for each; however, you can aggregate the total RMD amounts and take a distribution from one or more of the IRAs.
Note that you must take RMDs from IRAs and employer plans independently; you can't aggregate the required amount and take a distribution from only one account type. For more about RMDs from your employer plan, contact your plan administrator.
A reminder: If you're planning to roll over assets from your employer plan or convert from a traditional IRA to a Roth IRA, you must take your RMD first.
If you turn 70½ in a given year, you may opt to delay your first RMD until April 1 of the following calendar year. If you choose to hold off, you'll then need to take your second required distribution by December 31 of the same year. You'll also have two tax liabilities—one for the prior-year amount and one for the current-year amount withdrawn.
For example, suppose you turned 70 on November 15, 2010. That means you'll be 70½ on May 15, 2011. You may take your 2011 RMD by December 31, 2011, or wait until April 1, 2012. If you defer, you must take a second distribution—for 2012—by December 31, 2012.
View the original article here
How to protect your savings
Defined benefit ("DB") retirement plans—often referred to as pension plans—are not as common as they once were. And some plan sponsors are expected to terminate their plans in the near future.
If this happens to your pension, you'll probably be offered a lump-sum payout from your plan sponsor as an alternative to the plan's annuity benefit. And you'll face an important decision: What should you do with the money?
If you find yourself in this situation—whether because your pension plan was terminated or for a different reason, such as retirement or changing jobs—you generally have three options:
Put the money to work. To keep your savings earmarked for retirement, you could invest your pension assets through a rollover into a traditional IRA or a 401(k) plan sponsored by your employer. Either approach can keep your money working tax-deferred through a variety of investment options. This option can be particularly beneficial if you're in the early stages of your working career. (See "Rollovers made easy" below for more information.)
Select an annuity. An income annuity may be an attractive option if you're looking for cash flow in retirement and you're concerned about outliving your savings. But annuities aren't for everyone, and the decision to invest in an annuity is generally irreversible. Your existing DB plan will probably offer annuity options, which usually require you to take your entire distribution as an annuity. Another option would be to consider rolling your distribution into an IRA and allocating a portion of your funds toward the purchase of an annuity. Learn more about lower-cost annuity options available through Vanguard.
Take a taxable distribution. It may be tempting to receive your money immediately. But be warned: A lump-sum payout that isn't rolled over will be taxed as income. If you spend it now, it'll reduce your income in retirement. Even if you invest it in a nonretirement account, it will no longer grow tax-free.
"There are advantages and disadvantages to each approach," said Evan Inglis, chief actuary in Vanguard's Strategic Retirement Consulting group. "However, the tax consequences of taking an immediate distribution mean that it's usually not advisable. That's why we generally suggest that pension plan participants roll over their assets or select an annuity."
Performing a rollover couldn't be simpler or more straightforward. At Vanguard, you'll get hands-on guidance from an experienced rollover specialist who can help you get started, answer your questions, and offer ongoing support for your financial goals.
View the original article here
If this happens to your pension, you'll probably be offered a lump-sum payout from your plan sponsor as an alternative to the plan's annuity benefit. And you'll face an important decision: What should you do with the money?
If you find yourself in this situation—whether because your pension plan was terminated or for a different reason, such as retirement or changing jobs—you generally have three options:
Put the money to work. To keep your savings earmarked for retirement, you could invest your pension assets through a rollover into a traditional IRA or a 401(k) plan sponsored by your employer. Either approach can keep your money working tax-deferred through a variety of investment options. This option can be particularly beneficial if you're in the early stages of your working career. (See "Rollovers made easy" below for more information.)
Select an annuity. An income annuity may be an attractive option if you're looking for cash flow in retirement and you're concerned about outliving your savings. But annuities aren't for everyone, and the decision to invest in an annuity is generally irreversible. Your existing DB plan will probably offer annuity options, which usually require you to take your entire distribution as an annuity. Another option would be to consider rolling your distribution into an IRA and allocating a portion of your funds toward the purchase of an annuity. Learn more about lower-cost annuity options available through Vanguard.
Take a taxable distribution. It may be tempting to receive your money immediately. But be warned: A lump-sum payout that isn't rolled over will be taxed as income. If you spend it now, it'll reduce your income in retirement. Even if you invest it in a nonretirement account, it will no longer grow tax-free.
"There are advantages and disadvantages to each approach," said Evan Inglis, chief actuary in Vanguard's Strategic Retirement Consulting group. "However, the tax consequences of taking an immediate distribution mean that it's usually not advisable. That's why we generally suggest that pension plan participants roll over their assets or select an annuity."
Performing a rollover couldn't be simpler or more straightforward. At Vanguard, you'll get hands-on guidance from an experienced rollover specialist who can help you get started, answer your questions, and offer ongoing support for your financial goals.
View the original article here
Monday, April 4, 2011
Paying too much for your annuity? Here's an easy way to find out
A variable annuity can be a smart way to build extra savings for retirement. That's because the annuity lets you put more money away than other tax-favored retirement savings accounts, such as IRAs or 401(k)s.
As you've probably heard, variable annuities also can have their downsides—many of them have high costs that eat away at your investment returns. Those costs, which can include commissions, investment expenses, and withdrawal penalties, can offset the benefit of additional tax-advantaged savings that you get with an annuity. And it can be tough to figure out how much you're really paying because of the complicated terms of your annuity contract.
Vanguard offers one of the lowest-cost annuities in the industry.* If you own a variable annuity outside of Vanguard, you've now got a quick way to cut through the complexity and find out if you may be paying too much. Answer 3 simple questions and our new online calculator will show you how your current annuity's annual costs compare with those of the Vanguard Variable Annuity.
"We're excited to offer a simple-to-use calculator with cost information for nearly 1,500 annuities," said Tim Holmes, who leads Vanguard Annuity and Insurance Services. "In less than a minute, you can enter information about your current annuity to see how much you might save with the Vanguard Variable Annuity. Why not make sure you're saving all you can for retirement?"
What you can do if you think you're paying too much
You may be able to pay a lot less by making a tax-free transfer (called a 1035 exchange) to a Vanguard Variable Annuity. The Vanguard Variable Annuity's average annual costs are about 75% less than the industry average.*
Before you transfer your annuity, keep in mind that your current provider may impose withdrawal penalties, known as surrender charges.
View the original article here
As you've probably heard, variable annuities also can have their downsides—many of them have high costs that eat away at your investment returns. Those costs, which can include commissions, investment expenses, and withdrawal penalties, can offset the benefit of additional tax-advantaged savings that you get with an annuity. And it can be tough to figure out how much you're really paying because of the complicated terms of your annuity contract.
Vanguard offers one of the lowest-cost annuities in the industry.* If you own a variable annuity outside of Vanguard, you've now got a quick way to cut through the complexity and find out if you may be paying too much. Answer 3 simple questions and our new online calculator will show you how your current annuity's annual costs compare with those of the Vanguard Variable Annuity.
"We're excited to offer a simple-to-use calculator with cost information for nearly 1,500 annuities," said Tim Holmes, who leads Vanguard Annuity and Insurance Services. "In less than a minute, you can enter information about your current annuity to see how much you might save with the Vanguard Variable Annuity. Why not make sure you're saving all you can for retirement?"
What you can do if you think you're paying too much
You may be able to pay a lot less by making a tax-free transfer (called a 1035 exchange) to a Vanguard Variable Annuity. The Vanguard Variable Annuity's average annual costs are about 75% less than the industry average.*
Before you transfer your annuity, keep in mind that your current provider may impose withdrawal penalties, known as surrender charges.
View the original article here
Friday, April 1, 2011
Check Your Tax Withholding
Are you doing your taxes and surprised at the amount you owe or will be getting back as a refund? A large refund or tax bill is a sign you didn't have the correct amount withheld from your paycheck. One of the easiest things you can do to maximize how much you bring home with each paycheck and avoid paying Uncle Sam too much is to adjust your?tax withholding. ?Sure, it's always nice to get a refund check in the spring, but you're really just giving the IRS an interest-free loan when you could have been making use of those extra dollars. That could mean more money in your pocket each month to put towards everyday expenses, pay down debt, or tuck away for retirement.
Having proper withholding isn't just for controlling refunds, but it is even more important if you find yourself on the other side of the coin and need to write a check to the IRS come April. Nobody likes shelling out more money for taxes, so having your withholding set up appropriately can prevent this. It is a fine line to walk in order to put as much money in your pocket without having to pay up at the end of the year. Luckily, the IRS can help you determine how to set your withholding. Check out the IRS withholding calculator.
View the original article here
Having proper withholding isn't just for controlling refunds, but it is even more important if you find yourself on the other side of the coin and need to write a check to the IRS come April. Nobody likes shelling out more money for taxes, so having your withholding set up appropriately can prevent this. It is a fine line to walk in order to put as much money in your pocket without having to pay up at the end of the year. Luckily, the IRS can help you determine how to set your withholding. Check out the IRS withholding calculator.
View the original article here
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