Author Archives: steven

About steven

see web page

Investment Planning: fear index and your asset allocation

Posted on by

Recent world events (China, banking regulations, Haiti, etc.), and corresponding market moves, have lead investors to become concerned about US stocks. The VIX index, also known as “the fear index”, is about as low as it was when Lehman Brothers collapsed in 2008 – a very low number.

Is this indicator rational and should act or should you continue to stick to your long-term investment strategy, and your asset allocation?

First, on volatility, there are hedges that some can buy but many are currently over-priced. That is, you can attempt to replicate the VIX Index and benefit from its contrary motion against the stock market as a form of “portfolio insurance”. However, because so many investors are concerned, they have over-bought this index, or its components, so it is not favorably priced, making this a bad time to buy.

Second, on stocks and ultimately on your asset allocation, does the index still tell you that you need to sell stocks? If you did, you always have the timing issue of when to buy back in (see the quotation below). Also, the fear index could, in fact, be a contrary indicator, indicating that you should not sell, just as when individual investors buy or sell, you should sell or buy.

Third, the worry is that the recent upswing means that stocks are over-priced now. However, the P/E ratio is neither as high as 2000 nor as low as the long-term average of 18. So the index does not necessarily sound a warning bell for mass sale of stocks.

A better response for arguing that you should adhere to your allocation is summarized by John Coumarianos, who is a mutual fund analyst with Morningstar: “Investors tend to time their allocation shifts poorly, doing themselves much harm along the way. That’s largely because they make such moves based on emotion rather than hard facts. For example, many investors abandoned stocks at the depth of the crisis in 2008, missing the big comeback in 2009. Our statistics on Investor Returns are grim. They prove that most investors do an awful job of timing the market, consistently selling low and buying high.”

He goes on to argue that you need to rely on mutual fund and other investment managers to go into cash when appropriate and then move back into stocks, based on their expertise and analysis, which is totally independent of the fear index.

As I have often said, having a long-term strategy and sticking to it is the key to achieving good returns over time. This often requires ignoring what others say, what the press or information like the fear index says, and your own sense of anxiety. A good portfolio will have both ups and downs, but it will work for you if you let it.

Thanks,

Steven

Identiy Theft – financial planning tips on protecting your computer

Posted on by

On line usage is up, but so is identity theft.

One example we hear of often is an e-mail purporting to be from the IRS regarding a refund. The IRS has said categorically that they do not send out e-mails, so this is clearly a scam to get personal information.

So, as a financial planning matter, what do to protect your computer and your personal information?

Here are several good tips from WebRoot, a software company that provides related software, worth applying to your computers:

1. Keep Your Security Software Up to Date: At a minimum, your PC should have current antispyware, antivirus and firewall protection.
2. Watch Out for Email Scams: Never click on links sent in unsolicited emails, even if it appears to be from a legitimate source [the IRS example above is but one….].
3. Use Strong, Unique Passwords: Create passwords that are difficult to guess, and use different passwords for each of your accounts.
4. Shop and Bank on Secure Connections: Hackers can intercept data sent over unsecure wireless connections, so exercise caution when performing sensitive online transactions in public places.
5. Erase Cookies: Get in the habit of clearing cookies off your hard drive after you browse the web. Some privacy protection software can automatically do this for you

Be sure you have applied all of the tips to any computer not already protected. And, let me know if you have questions or concerns

Thanks,

Steven

Tax planning: donations for Haiti

Posted on by

Under a new rule, donations for the Haiti earthquake relief made in January and February of 2010 can be deducted on 2009 tax returns. The contributions that count include cash, check, credit card and cell phone text messages. The donation must be made to U.S. charities.

Be sure to let your tax preparer know if you made a contribution in 2010. The issue will be whether 2009 or 2010 is the best year to take the deduction.

Let us know if you have questions or comments. Thanks,

Steven

Tax planning: 2009 tips and traps, and 2010 changes

Posted on by

Tax law changes for 2009 will require you to submit more information to your tax preparer to ensure that you get the most of tax credits and deductions. If the person working on your tax returns does not have all the proper information, you could pay too much or your return could be rejected.

Here is an overview of tax changes to consider when gathering your information:

* Making Work Pay Credit (“MWPC”), is a $400 credit to offset a reduction in withholdings enacted early in 2009. It is phased out for higher income and offset by the Economic Recovery Payment, described below. You could end up owing taxes if the credit does fully offset the reduction in withholdings (affects 2009 and 2010).
* Economic Recovery Payment (“ERP”) is a payment received as part of your social security benefits (for 2009 only), and affects the MWPC so that failing to report it could result in your tax return being rejected. The payment itself is not taxable.
* Government Retiree Credit (“GRC”) is for those not receiving social security, but affects the MWPC (2009 only). The new Schedule M reconciles the MWPC, ERP and GRC so you need all the information.
* First Time Home Buyer’s Credit is a $8,000 credit that applies to first time buyers purchasing between certain dates and requires a paper filing (electronic filings will not get the credit). If you buy the home in 2010, you have the option of amending your 2009 taxes for the credit. Note that this credit gets repaid over time on future tax returns beginning in 2010.
* Tax credit for long term home owners buying a new home, between certain dates, also requires a paper filing to avoid being rejected.
* American Opportunity Tax Credit (an expanded Hope Credit) allows use of the credit for two year more years than the Hope Credit, covering junior and senior years of college when the Hope Credit was not available.
* New Vehicle Purchase sales tax deduction (2009 only) is an additional Schedule A item, so long as your are not taking the general sales tax deduction.
* Energy Credit for solar power, fuel cells and certain energy efficient improvements are Schedule A deductions. There are two types of credit depending on what improvements were made to your home and taking the deductions requires you to have documentation.
* The Cash for Clunkers voucher is not considered income (2009 only).
* A tax refund can be used to buy U.S. Series I bonds.
* There is an AMT patch which helps for 2009, but falls back for 2010.
* There is an increased casualty and theft loss limit that helps for 2009.
* Note that a dependent child’s income is taxed when it exceeds $1,900.
* The Tuition and Fees Deduction applies to 2009.
* Unemployment Compensation has $2,400 excluded from taxable income (2009 only).
* Educator’s Expense enhanced for 2009.

Note that not all states accept the IRS changes, so the information and outcome could be different.

For 2010, some old provisions return and some new changes require action now:

* 2010 conversion to a Roth IRA has no income limit and two years to pay the taxes (please see To convert or not traditional IRA to Roth IRA).
* Certain changes lost for 2010 worth repeating (see What to watch out for in 2010 – investing, taxes and more):
* AMT patch falls back;
* Casualty and theft loss limits fall back;
* Educator and tuition and fees deductions against adjusted gross income are not available;
* Deduction of state and local sales taxes ends;
* Exclusion of $2,400 of unemployment income ends; and
* Exclusion of income from qualified distributions from IRAs to charities ends.
* The estate tax still has not been enacted retroactively, as expected (see Estate Planning – will we have a new tax law in time).

As we said before, tax planning involves a multi-year view to optimize what you end up paying (please see More Strategies – Three Year Planning…., Tax Credits and all Continued, and What to watch out for in 2010 – investing, taxes and more)

Let us know if you have questions or comments. Thanks,

Steven

Check out and manage your on-line reputation

Posted on by

If you search the web, your name will undoubtedly show up.

The question is, with all that information be favorable?

A client of mine recently found his name associated with a criminal case in Massachusetts. He asked me to try to correct the mistake. I did a Google search and there, in with many references to work he had done, was reference to someone else, with the same first and last name, who had been tried on criminal charges and is about to be sentenced.

What do you do about misinformation and mistaken identities? How do you manage your on-line reputation?

Here is a summary of the key steps to take:

* 1. Do a search on your name to see what you find – use Google, Bing and Yahoo search as each may turn up different information. Also try Pilp.com.
* 2. What did you find? Try to clean it up if you can by contacting the source.
* 3. In the end, the more information you have about you on-line, the better. Shutting down a site you have does not save you because the Internet never forgets; publishing more does help, as you get your name out there first, with correct information and in the best light.
* 4. Manage your reputation with your own postings – set up a web site, set up a Google profile, sign up for LinkedIn and other networking sites, and even start a blog.
* 5. Continue to manage over time by checking with new searches and updating your profile and web site.

The on-line information about you, also called “branding”, can be checked by friends, business associates, potential clients or employers, etc. You do not want to leave what they may find to chance – you need to manage your brand.

If you do have a web site, make sure that it shows you in the best light. A Facebook page should portray you in the complimentary way that you want anyone doing a search of your name to see you. So take down the pictures of you dancing with the lamp shade on your head.

As with a job interview, where you put on your best suit, your on-line postings should put the most favorable image about you first. If there is anything negative that you cannot correct, then you want to bury it with postings that you control.

For more on how to set up content for LinkedIn, Facebook and other sites, check out How to build and manage an online reputation.

Let me know if you want input from me on your on-line branding and other.

Good luck

Steven

Let us know if you have questions or comments. Thanks,

Steven