Life Insurance Made Simple - Kiplinger
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Wednesday, May 26, 2010
Thursday, May 20, 2010
Guaranteed Retirement Income - In Any Market
Guaranteed Retirement Income - In Any Market
These days, the notion of running out of retirement income before your time runs out is a real threat. According to financial planners, a 4% rate of withdrawal on retirement assets is most likely to ensure that your income will outlast you. It sounds simple, but this also means that in order to collect $40,000 per year, you'll need to have $1 million in the bank.
Laddering annuities is an approach that alleviates the worries of relying on Social Security, pension plans and running out of money during retirement because this investment strategy can create income that's guaranteed for life.
Tuesday, May 18, 2010
Broke? Invest Anyway
Broke? Invest Anyway
It's natural that if you have some money saved or invested, you want to see it grow. There are many factors that can prevent this from happening, but for many people, one of the biggest obstacles is debt. If you have debt to deal with - be it a mortgage, line of credit, student loan or credit card - fear not, you can still learn how to balance your debt with saving andinvesting.
Types of Debt
Generally speaking, having debt can make it very difficult for investors to make money. In some cases, investing while in debt is like trying to bail out a sinking ship with a coffee cup. In other words, if you have a debt on your line of credit at 7% interest, the money you are investing will have to make more than 7% to make it more profitable than simply paying down the debt. There are investments that deliver such high returns, but you have to be able to find them knowing you are under the burden of debt.
It is important to briefly distinguish the different kinds of debt here:
Types of Debt
Generally speaking, having debt can make it very difficult for investors to make money. In some cases, investing while in debt is like trying to bail out a sinking ship with a coffee cup. In other words, if you have a debt on your line of credit at 7% interest, the money you are investing will have to make more than 7% to make it more profitable than simply paying down the debt. There are investments that deliver such high returns, but you have to be able to find them knowing you are under the burden of debt.
It is important to briefly distinguish the different kinds of debt here:
- High-Interest Debt - This is your credit card. High interest is relative, but anything above 10% is a good candidate for this category. Carrying any kind of balance on your credit card or similar high-interest vehicle makes paying it down a priority beforestarting to invest.
- Low-Interest Debt - This can be a car loan, a line of credit, or a personal loan from a bank. The interest rates are usually described as prime plus or minus a certain percentage, so there is still some performance pressure from investing with this type of debt. It is, however, much less daunting to make a portfolio that returns 12% than one that has to return 25%.
- Tax-Deductible Debt - If there is such a thing as good debt, this is it. Tax-deductibledebts include mortgages, student loans, business loans, investing loans and all the other loans in which interest paid is returned to you in the form of tax deductions. Because this debt is generally low interest as well, you can easily build a portfolio while paying it down.
Term of the Day... Absolute Return
Absolute Return
What Does Absolute Return Mean?
The return that an asset achieves over a certain period of time. This measure looks at the appreciation or depreciation (expressed as a percentage) that an asset - usually a stock or amutual fund - achieves over a given period of time.
Absolute return differs from relative return because it is concerned with the return of a particular asset and does not compare it to any other measure or benchmark.
The return that an asset achieves over a certain period of time. This measure looks at the appreciation or depreciation (expressed as a percentage) that an asset - usually a stock or amutual fund - achieves over a given period of time.
Absolute return differs from relative return because it is concerned with the return of a particular asset and does not compare it to any other measure or benchmark.
Investopedia explains Absolute Return
In general, a mutual fund seeks to produce returns that are better that its peers, its fund category, and/or the market as a whole. This type of fund management is referred to as a relative return approach to fund investing. As an investment vehicle, an absolute return fund seeks to make positive returns by employing investment management techniques that differ from traditional mutual funds.
Absolute return investment techniques include using short selling, futures, options, derivatives, arbitrage, leverage and unconventional assets.
Alfred Winslow Jones is credited with forming the first absolute return fund in New York in 1949. In recent years, this so-called absolute return approach to fund investing has become one of the fastest growing investment products in the world and is more commonly referred to as a hedge fund.
In general, a mutual fund seeks to produce returns that are better that its peers, its fund category, and/or the market as a whole. This type of fund management is referred to as a relative return approach to fund investing. As an investment vehicle, an absolute return fund seeks to make positive returns by employing investment management techniques that differ from traditional mutual funds.
Absolute return investment techniques include using short selling, futures, options, derivatives, arbitrage, leverage and unconventional assets.
Alfred Winslow Jones is credited with forming the first absolute return fund in New York in 1949. In recent years, this so-called absolute return approach to fund investing has become one of the fastest growing investment products in the world and is more commonly referred to as a hedge fund.
Monday, May 17, 2010
Choosing An Advisor: Wall Street Vs. Main Street
Choosing An Advisor: Wall Street Vs. Main Street
Looking for professional investment advice can be confusing and frustrating. One of the biggest stumbling blocks is the array of titles used by financial-services professionals - such as "broker", "advisor", "financial planner", "coach" and so on. Traditionally, brokers sold stocks for a commission and advisors gave advice for a fee. These days, the lines between these positions has become increasingly blurred. There are brokers who provide excellentfinancial planning services and people calling themselves financial planners who do little more than sell stocks and bonds. But once you get beyond the titles, the real choice begins. Do you choose an advisor from a Wall Street firm or do you work with an independent advisor? Let's go over the differences and how they may affect your decision. (For further reading, see Shopping For a Financial Advisor and The Alphabet Soup of Financial Certifications.)
Cut Your Tax Bill With Permanent Life Insurance
Cut Your Tax Bill With Permanent Life Insurance
Proper tax planning should do two things: reduce your taxes while you are alive, as well as after you die. Permanent life insurance gives you the potential to cover these two bases at once - you can transfer your assets income tax and estate tax free to beneficiaries and also build up tax-deferred growth of cash inside the policy.
Read on to discover how to make the most of this important tax planning tool.
Read on to discover how to make the most of this important tax planning tool.
8 Financial Tips For Young Adults
8 Financial Tips For Young Adults
Unfortunately, personal finance has not yet become a required subject in high school or college, so you might be fairly clueless about how to manage your money when you're out in the real world for the first time. If you think that understanding personal finance is way above your head, though, you're wrong. All it takes to get started on the right path is the willingness to do a little reading - you don't even need to be particularly good at math.
To help you get started, we'll take a look at eight of the most important things to understand about money if you want to live a comfortable and prosperous life.
To help you get started, we'll take a look at eight of the most important things to understand about money if you want to live a comfortable and prosperous life.
Thursday, May 13, 2010
Term of the Day... Asset Allocation Fund
Asset Allocation Fund
What Does Asset Allocation Fund Mean?
A mutual fund that provides investors with a portfolio of a fixed or variable mix of the three main asset classes - stocks, bonds and cash equivalents - in a variety of securities. Some asset allocation funds maintain a specific proportion of asset classes over time, while others vary the proportional composition in response to changes in the economy and investment markets.
A mutual fund that provides investors with a portfolio of a fixed or variable mix of the three main asset classes - stocks, bonds and cash equivalents - in a variety of securities. Some asset allocation funds maintain a specific proportion of asset classes over time, while others vary the proportional composition in response to changes in the economy and investment markets.
Investopedia explains Asset Allocation Fund
Asset allocation mutual funds come in several varieties. Generally, a "balanced fund" implies a fixed mixed of stocks and bonds, such as 60% stocks and 40% bonds. "Life-cycle" or "target-date" funds, which are often used in retirement plans, usually have a mix of stocks, bonds and cash equivalent securities that starts out with a higher risk-return position and gradually become less risky as the investor ages and/or nears retirement. So-called "life-style," or actively-managed asset-allocation funds provide the active management of a fund's asset classes in response to market conditions.
Asset allocation mutual funds come in several varieties. Generally, a "balanced fund" implies a fixed mixed of stocks and bonds, such as 60% stocks and 40% bonds. "Life-cycle" or "target-date" funds, which are often used in retirement plans, usually have a mix of stocks, bonds and cash equivalent securities that starts out with a higher risk-return position and gradually become less risky as the investor ages and/or nears retirement. So-called "life-style," or actively-managed asset-allocation funds provide the active management of a fund's asset classes in response to market conditions.
Wednesday, May 12, 2010
Term of the Day... Return on Investment - ROI
Return On Investment - ROI
What Does Return On Investment - ROI Mean?
A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.
The return on investment formula:
Return on investment is a very popular metric because of its versatility and simplicity. That is, if an investment does not have a positive ROI, or if there are other opportunities with a higher ROI, then the investment should be not be undertaken.
A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.
The return on investment formula:
Return on investment is a very popular metric because of its versatility and simplicity. That is, if an investment does not have a positive ROI, or if there are other opportunities with a higher ROI, then the investment should be not be undertaken.
Investopedia explains Return On Investment - ROI
Keep in mind that the calculation for return on investment and, therefore the definition, can be modified to suit the situation -it all depends on what you include as returns and costs. The definition of the term in the broadest sense just attempts to measure the profitability of an investment and, as such, there is no one "right" calculation.
For example, a marketer may compare two different products by dividing the revenue that each product has generated by its respective marketing expenses. A financial analyst, however, may compare the same two products using an entirely different ROI calculation, perhaps by dividing the net income of an investment by the total value of all resources that have been employed to make and sell the product.
This flexibility has a downside, as ROI calculations can be easily manipulated to suit the user's purposes, and the result can be expressed in many different ways. When using this metric, make sure you understand what inputs are being used.
Keep in mind that the calculation for return on investment and, therefore the definition, can be modified to suit the situation -it all depends on what you include as returns and costs. The definition of the term in the broadest sense just attempts to measure the profitability of an investment and, as such, there is no one "right" calculation.
For example, a marketer may compare two different products by dividing the revenue that each product has generated by its respective marketing expenses. A financial analyst, however, may compare the same two products using an entirely different ROI calculation, perhaps by dividing the net income of an investment by the total value of all resources that have been employed to make and sell the product.
This flexibility has a downside, as ROI calculations can be easily manipulated to suit the user's purposes, and the result can be expressed in many different ways. When using this metric, make sure you understand what inputs are being used.
Choose Your Monthly Mortgage Payments
Choose Your Monthly Mortgage Payments
Have you decided on a new home that you're going to make an offer on? Or maybe you are planning on refinancing an existing mortgage, and are deciding what you want your monthly mortgage payment to be. Choosing how much to pay each month is a good place to start. It's one of the first questions a car salesman will ask when you walk on to his lot, and with all the new types of mortgages, it's now a question that can be asked by many mortgage lenders.
Innovative mortgage products, sometimes called exotic mortgages, have features that allow borrowers to minimize their monthly payments early in the life of the mortgage in exchange for higher payments down the road. Most borrowers believe they will refinance their mortgage or move before those higher payments set in. However, a misunderstanding of the risks associated with these mortgages can lead to financial stress - or even disaster. (To read more about shopping for a house, see Understanding the Mortgage Payment Structure,Shopping For A Mortgage and Make A Risk-Based Mortgage Decision.)
Innovative mortgage products, sometimes called exotic mortgages, have features that allow borrowers to minimize their monthly payments early in the life of the mortgage in exchange for higher payments down the road. Most borrowers believe they will refinance their mortgage or move before those higher payments set in. However, a misunderstanding of the risks associated with these mortgages can lead to financial stress - or even disaster. (To read more about shopping for a house, see Understanding the Mortgage Payment Structure,Shopping For A Mortgage and Make A Risk-Based Mortgage Decision.)
Friday, May 7, 2010
Great Company Or Growing Industry?
Great Company Or Growing Industry?
It is no accident that companies within a particular industry move in lock-step with one another. Companies in a single industry are forever bound by the type of product or service that they provide, and they are constantly competing with one another for market share, consumer acceptance and technological leadership in their particular sub-sectors. These competitive and consumer forces shape an industry's corporations and determine the status of the industry as a whole. These forces have followed roughly the same patterns over time. Here we take a look at these stages and how they affect the companies that follow them.
Term of the Day... Risk
Risk
What Does Risk Mean?
The chance that an investment's actual return will be different than expected. This includes the possibility of losing some or all of the original investment. Risk is usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment.
Many companies now allocate large amounts of money and time in developing risk management strategies to help manage risks associated with their business and investment dealings. A key component of the risk mangement process is risk assessment, which involves the determination of the risks surrounding a business or investment.
The chance that an investment's actual return will be different than expected. This includes the possibility of losing some or all of the original investment. Risk is usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment.
Many companies now allocate large amounts of money and time in developing risk management strategies to help manage risks associated with their business and investment dealings. A key component of the risk mangement process is risk assessment, which involves the determination of the risks surrounding a business or investment.
Investopedia explains Risk
A fundamental idea in finance is the relationship between risk and return. The greater the amount of risk that an investor is willing to take on, the greater the potential return. The reason for this is that investors need to be compensated for taking on additional risk.
For example, a U.S. Treasury bond is considered to be one of the safest investments and, when compared to a corporate bond, provides a lower rate of return. The reason for this is that a corporation is much more likely to go bankrupt than the U.S. government. Because the risk of investing in a corporate bond is higher, investors are offered a higher rate of return.
A fundamental idea in finance is the relationship between risk and return. The greater the amount of risk that an investor is willing to take on, the greater the potential return. The reason for this is that investors need to be compensated for taking on additional risk.
For example, a U.S. Treasury bond is considered to be one of the safest investments and, when compared to a corporate bond, provides a lower rate of return. The reason for this is that a corporation is much more likely to go bankrupt than the U.S. government. Because the risk of investing in a corporate bond is higher, investors are offered a higher rate of return.
Thursday, May 6, 2010
Cramer's 'Mad Money' Recap: A Playbook for Market Insanity
Cramer's 'Mad Money' Recap: A Playbook for Market Insanity
NEW YORK (TheStreet) -- "We need a new playbook to deal with this roller coaster of a market," Jim Cramer told the viewers of his "Mad Money" TV show Wednesday.
He said investors can't afford to get caught up in the day-to-day gyrations of markets, they need to stick with stocks with great long-term secular growth stories.
According to Cramer, the markets have just gotten too hard for anyone other than the nimblest of day traders to tackle on a daily basis. He said that his viewers need to stick with stocks that are working, and that means stocks that are uniquely domestic, have strong growth, or do well when the rest of the market panics.
For example, Cramer said the generic drug makers, stocks like Teva Pharmaceuticals (TEVA), a stock which he owns for his charitable trust, Action Alerts PLUS, will do well in this market since governments are still trying to save on health care costs.
Term of the Day... Callable Security
Callable Security
What Does Callable Security Mean?
A security with an embedded call provision that allows the issuer to repurchase or redeem the security by a specified date. Since the holder of a callable security is exposed to the risk of the security being repurchased, the callable security is generally less expensive than comparable securities that do not have a call provision.
A security with an embedded call provision that allows the issuer to repurchase or redeem the security by a specified date. Since the holder of a callable security is exposed to the risk of the security being repurchased, the callable security is generally less expensive than comparable securities that do not have a call provision.
Investopedia explains Callable Security
The conditions of the call provision are established at the time the security is issued. Callable securities are commonly found in the fixed-income markets and allow the issuer to protect itself from overpaying fordebt
.
For example, a bond issuer may choose to redeem a certain issue when the current market rate falls below the coupon rate of the bond by a set amount. This allows the issuer to reissue the bonds at a lower rate and avoid paying a higher interest rate.
The conditions of the call provision are established at the time the security is issued. Callable securities are commonly found in the fixed-income markets and allow the issuer to protect itself from overpaying for
For example, a bond issuer may choose to redeem a certain issue when the current market rate falls below the coupon rate of the bond by a set amount. This allows the issuer to reissue the bonds at a lower rate and avoid paying a higher interest rate.
Monday, May 3, 2010
Vary Your Options With Variable Insurance
Vary Your Options With Variable Insurance
Traditional insurance and annuity products are rapidly becoming a thing of the past. While many traditional products still have their uses, a relatively new breed of insurance products in the marketplace contain features and riders that make even their recent counterparts look like ideas from the dark ages. In other words, say goodbye to limited choices, market risk, inflexible payout options and separate policies for each kind of risk.
Traditional insurance and annuity products are rapidly becoming a thing of the past. While many traditional products still have their uses, a relatively new breed of insurance products in the marketplace contain features and riders that make even their recent counterparts look like ideas from the dark ages. In other words, say goodbye to limited choices, market risk, inflexible payout options and separate policies for each kind of risk.
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