Spring is here time to spruce up your house, get rid of clutter and get things organized. But this year, go beyond your home and yard when you do your spring cleaning and look for ways to rejuvenate your investment portfolio.
Of course, you dont have to take an out with the old, in with the new approach just for the sake of changing things up. But to consistently make progress toward your financial goals, you may need to make adjustments in response to changes in the financial markets, the economy and your personal situation. And springtime is as good a time as any to take a fresh look at your investment situation. So consider these suggestions:
* Dispose of things that arent working. Whether its a burnt-out computer, a non-vacuuming vacuum cleaner or a treadmill that lost its grip back when the Web was reserved for spiders, we all own things that are no longer useful. And the same may be true of some of your investments.
If one hasnt performed the way you had hoped, and youve given it adequate time, you may be better off by replacing it and using the proceeds to purchase another investment.
* Get rid of duplicates. If you went through everything in your house, you might find several items that do the same thing. Do you really need two toaster ovens? And how many radios can you listen to at one time? If you looked at your investment portfolio in this same way, you might be surprised to find some redundancies. For example, do you own several stocks issued by similar companies that make similar products? This might not be a problem when the stock market is booming, but it could be a definite concern if a downturn affects the industry to which these companies belong. Always look for ways to diversify your holdings. While diversification, by itself, cant guarantee profits or protect against loss, it can help you reduce the effects of volatility.
* Put things back in order. Over time, and inadvertently, the spaces in your home can get out of balance. Perhaps you have too many chairs in one corner, your flat-screen television is crowding out your family pictures, or your new desk takes up too much space in your home office. With some rearranging, however, you can usually get things back in order. And the same need for rearrangement may apply to your portfolio, which might have become unbalanced with too much of one investment and too little of another.
This situation could undermine your financial strategy, especially if the imbalance means you are taking on too much risk or, conversely, if your holdings have become too conservative to provide the growth you need. So look for ways to restore your portfolio to its proper balance one that reflects your risk tolerance, time horizon and longterm goals.
By giving your portfolio an annual spring cleaning, you can help make sure it reflects your current needs and is positioned to help you make progress toward your key financial objectives. And you wont even have to get near the dust cloths or furniture polish.
Provided by Glenn Cole
2123 Hwy 90 Ste 5
Crosby, TX 77532
Posts published in “Columnists – Financial Focus”
Your car could break down. You might need a new furnace. You have to pay for one last term of college for your child. Whatever the reason, you may someday need a large sum of money in a hurry. And as you look around for a source of funds, your eyes might come to rest on your 401(k) plan. Its there, its yours why not tap into it?
Actually, there are some pretty good reasons for not dipping into your 401(k). But before we get to those, lets see how you might access the money in your plan.
Some employers allow 401(k) loans only in cases of financial hardship, although the definition of hardship can be flexible. But many employers allow these loans for just about any purpose. To learn the borrowing requirements for your particular plan, youll need to contact your plan administrator.
Generally, you can borrow up to $50,000, or one-half of your vested plan benefits, whichever is less. Youve got up to five years to repay your loan, although the repayment period can be longer if you use the funds to buy a primary residence. So youve got some time to repay the loan, youre paying yourself back with interest, and the repayments are probably just deducted from your paycheck.
Sounds pretty good, right? What could be the problem with taking out a 401(k) loan? Since you asked, here are a few of them:
* Youll likely reduce your retirement savings. Your 401(k) plan is designed to help you build funds for one purpose: retirement. To encourage you to take advantage of your 401(k), the government defers taxes on your earnings and allows you to make contributions with pretax dollars. But when you take out a loan from your 401(k), you are removing resources earmarked for your retirement.
And even though youll repay the loan, you can never get that time back when your money could have potentially grown.
* Youll be taxed twice on the loan amount. As mentioned, you typically contribute pre-tax dollars to your 401(k). But when you repay the loan, youre doing so with after-tax dollars. When you withdraw the money at retirement, it will be taxed again.
* Youll have to quickly repay the loan if you leave your job. If you leave your job, whether voluntarily or involuntarily, youll generally be required to repay the loan in full within 60 days. If you dont repay it by then, the outstanding balance will be taxable and if youre under 59-1/2, youll also have to pay a 10 percent penalty tax.
To avoid putting yourself in the position of having to someday borrow from your 401(k), try to build an emergency fund containing six to 12 months worth of living expenses. Keep the money in a liquid account so that you can tap into it quickly. It can be tempting to borrow from your 401(k) today but if you can resist this temptation, youll almost certainly be glad tomorrow.
Aaron Cole, A.A.M.S.
Edward Jones Representative
6500 FM 2100, Suite 285
Crosby, Tx. 77532
If youre a college student, you may already be back on campus. If not, you dont have long to go before school starts again. And this year, in addition to whatever courses you may be taking, try to master some financial lessons, as well.
Of course, many students already have at least one foot in the real world, because, in addition to taking classes, theyre working many hours a week to help pay for school, rent and living expenses. But even if youre a full-time student, living on campus and paying for school through a combination of grants, loans, savings and help from your parents, you can learn some financial basics that can help you throughout your adult life.
Specifically, consider these suggestions:
##M[ Continue Reading ]## Dont overuse credit cards. Credit card marketers aggressively target college students, so youll need to be vigilant about all the offers that will bombard you. While it might not be a bad idea to carry a single credit card for use in emergencies, its very easy to over-use the plastic and rack up big debts. Youll need to discipline yourself to save for the things you want, rather than charging them.
Shop around for financial services. Youll find plenty of banks willing to give you a T-shirt or a frying pan for opening an account with them. But these places may not be offering you the best deal on checking or savings accounts or loans. It pays to shop around.
Keep track of your student loans. Make sure you understand all the terms of your student loans: how much youre expected to pay each month, when payments are due, what interest rate youre paying, what credits may be available for on-time repayment, etc. You might be able to achieve a more favorable repayment schedule by consolidating two or more loans. Once you start repaying your loans, do whatever you can to stay on track with your payments.
Never stop looking for financial aid. The aid package you may have received as an incoming freshman doesnt have to be the final word on financial assistance. Colleges offer some scholarships based on college-level academic achievement or real world experience both of which you may have accumulated since your freshman year. Study your colleges scholarships and be aggressive in going after them.
Estimate your future income. You may not know exactly what you want to do when you graduate, but if you have a career path in mind, try to learn what sort of salary you can expect during your first few years out of college. Once you have a realistic idea of how much youre going to earn, you may have the motivation you need to avoid bad financial practices, such as accumulating big debts.
College should be a learning experience in many ways. And if some of the knowledge you obtain during your college years can help you develop sound financial habits, so much the better.
Aaron Cole, A.A.M.S.
Edward Jones Representative
6500 FM 2100, Suite 285
Crosby, Tx. 77532
If youre an investor, you may have been disappointed with how the markets have been reacting this summer to the news of high oil prices and other short-term events. Nonetheless, your long-term financial goals dont have to be jeopardized by these losses if you know how to respond to them.
Here are a few moves to consider:
Stick to your investment strategy. Its almost always a bad idea to make long-term investment decisions in response to short-term market fluctuations. If you have built a diversified portfolio of quality investments, youre better off just staying the course during a market decline. (Keep in mind, though, that diversification, by itself, cannot guarantee or protect against loss.) If these investments were suitable for you before the market drop, theyll still be appropriate when the market turns around.
Dont try to time the market. It would be great if you could know when the market had reached its low or high points, or which days would be losers and which ones winners. If you hadthat foresight, you could always jump in and jump out of the market at the right times. Unfortunately, no one can make those predictions with any accuracy. And those people who do try to time the market in this manner end up jumping out at the wrong times and missing both short- and long-term market rallies. By staying invested through market ups and downs, you can make progress toward your longterm goals.
Look for buying opportunities. By definition, a market decline means that stock prices are lower which means you may find some good buying opportunities. Of course, youll want to know if the stocks price is low because of the effects of the broad-based market decline or because of other factors specific to the stock, such as poor management, non-competitive products or a decline in the industry to which it belongs.
While making these moves can help you get past the market decline, it doesnt mean that a severe price drop cant affect you. If you need money to pay for an unexpected cost, such as a major car repair, youll likely take a hit if you have to sell stocks when the market has fallen substantialaly. But you can avoid this problem by putting three to six months worth of living expenses in an emergency fund, preferably in a cash or cash equivalent account.
Nobody likes to see big declines in the stock market. But if youre a long-term investor, youve built an emergency fund and youve rebalanced your portfolio to fit your risk tolerance, youll be in a much better position to withstand these market drops and youll be well prepared for an eventual recovery.
Aaron Cole, A.A.M.S.
6500 FM 2100, Suite 285
Crosby, Tx. 77532
Just as your life changes over time, the market also sees its fair share of change. And fluctuations in the market can affect your investments. So the best way we know to be confident that you have a current and complete picture of your financial situation is to schedule a regular portfolio review with your Edward Jones financial advisor.
Aside from market fluctuations, new events in your life can also signal that its time for a portfolio review. For instance, new tax laws may be taking effect. You might be looking to buy or sell a home. The kids could be headed off to college, or perhaps youre getting ready for diaper duty. Whatever the situation may be, the changes in your life are probably as unique as the goals youve set for your future.
For all of these reasons, its important to review your investment portfolio every year. Its the easiest way to make sure your investments and goals are headed in the same direction. Because like it or not, it doesnt take much to find them a little off track.
The good news is, even if adjustments to your investment strategy are necessary, a free Edward Jones portfolio review will help find out if your money is working hard for you.
These are just a few topics you may want to discuss:
* Do I have the potential to earn more from investments?
* Do I have the potential to pay less in taxes on my investments*?
* Am I investing enough to reach my financial goals?
And because your situation deserves more than just a cookie-cutter solution, we believe you deserve individual attention. And its one of the main reasons why we think its important to meet with you face-to-face.
To schedule a free portfolio review, please contact your local financial advisor.
*Edward Jones does not provide tax or legal advice. You should contact your tax or legal advisor regarding your particular situation.
Retirement isnt merely a goal you reach its a journey that can be very rewarding. With that in mind, we offer the following principles as a road map to serve as a guide along the way.
1. Map out your goals. When preparing for a journey, a map can be invaluable. It can help you avoid wrong turns that can cost precious time. Although the word retirement means something different to each person, everyone shares the need to enter retirement with a road map, or strategy, in place.
2. Plan for a long and fulfilling retirement. Retirement should be one of the most rewarding stages of your life. Unfortunately, many people dont plan for a long retirement and can run the risk of outliving their money.
3. Start smart with your spending. As the saying goes, its not how you start but how you finish. But in retirement, how you start is very important. Withdrawing too much in the early years could put you in a difficult position down the road.
4. Inflation doesnt retire. All of us remember a time when our purchases cost a lot less. Thats inflation at work. Inflation influences what you can spend and how your money is invested, especially in retirement.
5. Prepare for the unexpected. Life is full of uncertainty. Even with a well-designed road map, there can be unexpected events that have the potential to derail your long-term plans. While you cant predict the future, you can prepare for it.
6. Dont reach for yield. High-yield bonds or stocks paying an abnormally high dividend often attract investors looking for more income. However, remember the saying, Theres no such thing as a free lunch. If it sounds too good to be true, it probably is.
7. Maintain a healthy portfolio. Health care costs continue to rise, which can have harmful side effects for your finances. However, there are ways to help deal with rising health care costs.
8. Keep retirement from being taxing. As you consider how much money to withdraw, dont forget about taxes. Every dollar you pay in taxes is one less dollar you can spend.
9. Define your legacy. Preparing for life in retirement is important. It can be just as important to prepare your legacy. One thing is certain: If you dont have a strategy for your estate, the courts or government will.
10. Remember your annual checkup. A trip to the doctor each year can provide vital health information and help identify issues before they become more serious. The same can be said for annual financial reviews.
Contact your financial advisor today for your annual financial review.
Edward Jones, its employees and financial advisors do not provide tax or legal advice. Clients should review their specific situations with their tax advisor or legal professional for information regarding their particular situation.
With thousands of mutual funds on the market, how can you choose the ones that are right for your individual needs? For starters, you need to know the objective of each mutual fund in which you plan to invest.
Lets take a look at the investment objectives of some of the most popular types of mutual funds:
Growth funds – These funds invest in the stocks of growing companies, with the goal of providing investors with capital appreciation. In plain English, you invest in these funds for the potential to make your money grow. If you invest in these funds, you will almost certainly experience the ups and downs of the market, but if you hold your funds long enough, and they are well managed, you may increase your investments potential return.
Growth-and-income funds – As its name suggests, a growth-and-income fund is structured to provide the potential for both growth in value and current income payments, in the form of dividends. Generally speaking, these funds are less risky than growth funds yet offer lower growth potential. But if you are interested in adding an income stream to your portfolio, these funds may be suitable for your long-term investment goals. Dividends can be increased, decreased or totally eliminated at any time without notice.
International funds – You can choose from several types of international funds: global funds, which invest in both U.S. and international stocks; international funds, which invest primarily outside the U.S.; country specific funds, which focus on one country or region; and emerging market funds, which concentrate on small, developing countries. These funds generally invest for growth, but they involve special types of risk, such as currency fluctuations and the prospect of investments being affected by political or economic turmoil.
Bond funds – When you invest in a bond fund, you are seeking current income, in the form of interest payments, and the chance to help stabilize a portfolio that might be heavily weighted toward stocks. You can choose from municipal bond funds, corporate bond funds, mortgage-backed securities funds and U.S. government bond funds. Although bonds funds generally contain less investment risk than stock funds, they carry a different type of risk: purchasing power risk. In other words, the interest payments you receive from your bond funds may not always keep up with inflation. Keep in mind that bond funds are subject to interest rate risk and fund values may decline as interest rates rise.
Money market funds – These funds invest in short-term debt instruments and are managed to maintain a stable net asset value of $1 per share, however the value of fund can fluctuate and its possible to lose money. Many people invest in money market funds if they want to park funds for a short time before investing it elsewhere. You might also use a money market fund as an emergency fund containing six to 12 months worth of living expenses. While these types of mutual funds have some obvious differences, they also share two important traits in common. First, financial professionals choose the investments, which is obviously a benefit to you. Second, mutual funds, by owning many different types of securities, offer the advantage of diversification. (Diversification, by itself, cannot guarantee a profit or protect against a loss in a declining market).
A financial advisor can help you choose those mutual funds that are appropriate for your needs. But its still your responsibility to know about the funds in which you invest – so, before writing a check, read a funds prospectus which can be obtained from your financial advisor. The prospectus contains more complete information, including the funds investment objectives, risks, charges and expenses that should be carefully considered.
Fathers Day is almost here. If your father is handy around the house, you might be considering giving him tools of some kind. Of course, drills, sanders, saws and screwdrivers make excellent gifts, but this year, why not give Dad something that can help him build his future? Specifically, why not give him a financial toolkit?
What could go into this toolkit? Here are a few suggestions:
* Stocks – You may want to give shares of a company that produces products or services that your father uses.
If youre going to give some of your own shares, youll need to know what you originally paid for the stock, how long youve held it and its fair market value at the date of the gift. Your father will need this information to determine gains or losses if he decides to sell the stock.
* Bonds – If your father is at or near retirement age, he might benefit from the interest payments provided by bonds. If you give your father a municipal bond, the interest is free from federal taxes, and if the municipality that issues the bond is located in your fathers state, the interest also may be exempt from state and local taxes.
However, some municipal bonds – particularly airport and housing bonds – might be subject to the alternative minimum tax (AMT), so youd want to be pretty familiar with your fathers tax situation before giving him an AMT-susceptible bond.
* IRA contribution – As long as your father is working, he can contribute to a traditional or Roth IRA – and he should, because an IRA offers tax advantages and a wide array of investment options.
Your father can put in up to $6,000 to an IRA if hes 50 or older, or $5,000 if hes under 50. While you cant make a deposit into your fathers IRA, you can give him some money for that purpose.
* Education – Even if your father has been investing for a while, he could probably still benefit from some additional knowledge.
Consider giving him a subscription to a magazine that focuses on financial issues. Or you might want to give a book on investing, such as Dr. Jeremy Siegels Stocks for the Long Run, generally considered one of the most valuable and user-friendly books for both new and experienced investors. A word of caution, though: Stay away from those books that seem to promise huge investment success if readers follow the techniques described by the author.
* Games – You can find a variety of investment-related games that are both fun and informative. These games often use real-life scenarios to depict the various factors that go into investment decisions and the equally various results that can follow. You can also choose games that focus on other financial issues, such as managing cash flow. You can find these games in the old-fashioned board game format and as computer software. A quick search on the Internet will turn up plenty of these games.
Put some of these suggestions to work to create a financial toolbox for your dad this Fathers Day. Hell likely appreciate your generosity – and hell be able to put the tools to good use.
June is one of the most popular months for weddings. This may be due, in part, to June being named for Juno, the Roman goddess of women and marriage. Of course, Juno and her husband, Jupiter, probably had very little trouble with money, but if you are getting married this month, you and your spouse will need to work together on your finances – which means, among other things, that you will have to reconcile your investment styles.
As you set up a household together and establish common long-term financial goals, you will need to make investing a priority. But you and your spouse may well have different attitudes about investing, and some of those differences may be due to your respective genders. A major, long-term study by researchers at the University of California found that women trade stocks less often than men, do more research before making an investment decision, and tend to stick with their investments longer.
The results? Women investors portfolios outperformed those of men by 1.4 percent a year, according to the study. So, one might conclude that womens buy-and-hold investing style can pay off in the long run.
While it may be useful for you and your spouse to keep these gender-based tendencies in mind, you will still have to work out some common ground as you create investment strategies to meet your objectives. The key is open and frequent communication. Talk to each other and learn what the other is thinking. Ask yourselves these types of questions: Do we both want to save for a house? If so, when do we want to buy it? If we have children, do we want to help them pay for college? Do we want to retire at about the same time? What do each of us want to do during retirement?
Once youve started talking about these and other issues, youll be able to start creating appropriate investment strategies. And after you begin investing, you may well find that you can discover ways to complement each others tendencies and preferences – that is, your aggressive choices can balance your spouses conservative ones, or vice versa.
However – and this is an important however – both you and your spouse still need to be aware of the potential dangers of staying too much in your comfort zone. If you are an aggressive investor, willing to take greater risks with your principal in exchange for potentially higher returns, you still could get burned by chasing after too many hot stocks, many of which will have already cooled by the time you invest, and, in any case, may not be suitable for your needs. On the other hand, if your spouse is a conservative investor and consistently favors conservative investments such as bonds and Certificates of Deposit, he or she might not get the growth potential needed to help you achieve your joint goals. Furthermore, fixed-rate investments can incur inflation risk – the risk that their returns may not even keep up with the inflation rate.
As newlyweds, its important for you and your spouse to learn to adapt to each others personal styles in many ways – and its just as important to accommodate each others investment styles. It can take some work, but its well worth the effort.
The investment world can be complex – and trying to navigate it by yourself is a daunting task. Thats why you may want to work with a professional financial advisor – someone with the experience and resources to help you reach all your important financial objectives.
Your first task, then, is to find a financial advisor with whom you will be comfortable. Ask your friends, relatives and co-workers for referrals, and dont be shy about interviewing a few financial advisors. When youre talking to prospective financial advisors, look for someone who stresses comprehensive financial strategies, rather than individual transactions. Ideally, you will want someone who asks questions such as these:
* What are your goals? Youll need a financial advisor who shows considerable interest in your short- and long-term goals. After all, youll want this person to help you accomplish a variety of things – saving for a new home, sending your children to college, attaining a comfortable retirement lifestyle and so on. Every single recommendation a financial advisor makes should be based on your goals.
* What does your family situation look like? A financial advisor will ask you a lot of family-related questions: How many children do you have? Do you plan to send them to college? If so, how much do you hope to contribute to their education? Does your spouse have a retirement plan at work? Will you have aging parents that may require some type of assistance from you? By eliciting this type of information, a financial advisor can help you create a family-friendly investment strategy.
* What are your attitudes toward investment risk? A conscientious financial advisor will determine if you are a conservative investor – someone who favors investments that offer a greater likelihood of preservation of principal – an aggressive investor – someone who is comfortable taking greater risks in hopes of greater returns – or a moderate investor – someone who falls in between the other two groups. While a good financial advisor will, of course, tailor recommendations to your risk tolerance, he or she may, on occasion, need to push you a bit out of your comfort zone to help you achieve your goals.
* What investments do you currently own? For a financial advisor to do his or her job, and to provide the best chance of showing these possible benefits to you, he or she will need a complete understanding of your current holdings: your IRA, 401(k), stocks, bonds, government securities, Certificates of Deposit (CDs) – everything. Once a financial advisor knows what you already have, he or she can identify any potential gaps in your portfolio and make appropriate recommendations for filling them.
* What are your feelings about leaving a legacy? For many people, the issue of leaving a legacy is highly emotional. Thats because so many of us, almost instinctively, want to leave something behind for our families and those charitable organizations we support. A good financial advisor will probe your attitudes toward leaving a legacy and help develop strategies that support your goals in this area. Eventually, your financial advisor may have to work with your other financial professionals, including your tax advisor and your attorney, to carry out your strategies of leaving the legacy you desire.
As you work toward your financial objectives, youll have a lot of questions. Just make sure your financial advisor does, too.
If youre a small-business owner, you put your heart, soul – and most of your time – into your business. Unfortunately, sheer hard work doesnt always translate into financial security – so youll need to take some additional steps.
Here are a few to consider:
Protect your business against the loss of a key employee. If you have an employee with valuable management or sales skills, and this person were to die unexpectedly, your business could suffer. Thats why you may want to write a key-person life insurance plan on this employee. In its simplest form, key-person coverage pays cash to your company, which is usually the policy beneficiary, when the designated employee dies or becomes disabled. Key-person insurance also can be structured to fund deferred-compensation arrangements or buyout agreements between partners.
Avoid raiding business coffers to pay for personal expenses. Try to keep six to 12 months worth of living expenses in a liquid account. Once you have established this emergency fund, youll be less likely to tap into your business income or assets to pay for unexpected personal expenses, such as a new appliance, a costly car repair or a large medical bill.
Create a retirement plan for yourself. As a business owner, youre responsible for establishing your own retirement account. Fortunately, you have some attractive choices, including the following:
*SEP-IRA – You can contribute up to 25 percent of your compensation – as much as $46,000 – to a SEP-IRA. Your contributions are tax deductible and your earnings have the potential to grow tax-deferred until withdrawn. This plan offers you significant flexibility in making contributions for yourself and your employees. Plus, as an employer, you can generally deduct, as business expenses, any contributions you make on behalf of your plan participants.
* SIMPLE IRA – You can put in up to $10,500 – or $13,000 if youre 50 or older – to a SIMPLE IRA. As is the case with the SEP-IRA, your earnings have the potential to grow tax deferred. You can match your employees contributions dollar for dollar, up to three percent of compensation, but no more than $10,500 (or $13,000 for employees 50 and over). Alternatively, you could contribute two percent of each eligible employees compensation each year, up to a maximum of $4,600, regardless of whether the employee contributes or not. Contributions to your employees are tax deductible.
* Owner-only 401(k) plan – If you have no employees other than your spouse, you can establish an owner-only 401(k) plan. Between salary deferral and profit sharing, you can contribute up to $46,000, in pre-tax dollars, to your owner-only 401(k), or $51,000 if youre 50 or older. Like a SEP-IRA and SIMPLE IRA, a 401(k) provides the potential to accumulate tax-deferred earnings. But if you open a Roth 401(k) your earnings have the potential to grow tax free, provided youve had your account at least five years and you dont start taking withdrawals until youre at least 59-1/2. (However, you make Roth 401(k) contributions with after-tax dollars.)
Your tax or financial advisor can help you decide which retirement plan is right for your business. But dont wait too long to choose one, or to make the other moves necessary to help you make progress toward your financial goals. When you own a business, time flies – so make the right moves today.