Monthly Archives: July 2009
What Are REITs?
As an investment class, real estate offers several major advantages. Real estate is a great inflation hedge, meaning when inflation is high, the value of real estate investments usually increases dramatically. Second, real estate offers several unique tax advantages, such as the ability to deduct interest expense and depreciation. Third, few investors pay 100 percent [...]
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What Are Equity-Indexed Annuities?
An equity-indexed annuity is an annuity that’s value is linked to a stock or market index; the S&P 500 index is most common.
Equity-indexed annuities have a guaranteed minimum rate of return (also referred to as a floor). This guarantee is usually between 0 and 3 percent annually. In exchange for this guarantee, equity-indexed annuities [...]
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Defining Long-Term Investing
I wanted to share some work conducted by Bert Whitehead, M.B.A and JD. Bert is an advisor at Cambridge Connection and a NAPFA member:
“This year’s market bottom (so far) in March wiped out all the market gains in the Dow since 1996. That’s 13 years, and that’s a hard fact to swallow for a person [...]
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What Do I Need to Know About Variable Annuities?
Variable annuities enable investors to defer taxes on investment gains until money is withdrawn. Additionally, variable annuities have a death benefit guaranteeing the beneficiary a specified amount – usually the amount invested – upon the investor’s death. For a fee, most annuities offer “living benefits” guaranteeing a rate of return (usually 2 to 5 percent) [...]
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Why it is Important to Understand Your Tolerance for Investment Risk?
Risk tolerance is defined as an investor’s ability to handle declines in the value of his or her investment portfolio. Risk tolerance is a term that is commonly forgotten during periods of extended bull markets, such as the 1990’s, and prevalent during significant market downturns, such as the bursting of the tech bubble and the [...]
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What is the Value of Diversification?
Investing involves two basic elements: return and risk. Investors often focus on return because it’s pleasant, but spend relatively little time considering risk– the potential downside. Risk is most often measured by standard deviation, which is a measure of the variability of returns. An investment with a large amount of variability of returns (a high [...]
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What do the Various Stock Indices Measure?
The Dow Jones Industrial Average (known as the DOW) is an indicator of stock market prices based on the share values of 30 of the largest and most widely held blue-chip stocks traded on the New York Stock Exchange (NYSE). Each of the 30 Dow components influence the value of the index equally. Develop by [...]
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Are 529 Plans the Best Way to Save for College?
529 plans are great college savings tools because, although contributions are not deductible on a federal tax return, earnings withdrawn to pay for qualified higher education expenses such as tuition, books, and room and board are tax-free. The definition of “qualified higher education expenses” was expanded to include computers for 2009 and 2010.
Although contributions to [...]
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Why Roth Conversions Aren’t for Everyone
As mentioned in previous postings (Minimize Your Tax Bill and Recharacterizing a Roth Conversion), converting a traditional IRA to a Roth IRA is likely not beneficial for investors who believe they will be in a lower tax bracket during retirement than during their working years. After all, why pay taxes now at a higher tax [...]
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How Do Options Work?