The Motley Fool has some wonderful articles on the basics of investing.  Here is an excerpt:

1. Doing nothing. There is no guarantee that the market will go up the first day, month, or even year that you invest in it. But there is one guarantee: Doing nothing at all will not provide for a comfortable retirement.
2. Starting late. Postponing your investing career is second only to not investing at all on the list of investment sins. You already know that the earlier you start the better off you are. (Take another look at the compound return example we gave above.) If you’re already past those formative twenties (you don’t look a day over 32 to us), we’ll reword this first pitfall to read: “Not starting now.”
3. Investing before paying down credit card debt. If you have money in yoursavings account and you have revolving debt on your credit card, pay it off. Many credit cards have an annual interest rate of 15% or more. Let’s say you have $5,000 to invest, but you also have $5,000 debt on your credit cards with an average annual interest rateof 18%. It doesn’t take an astrophysicist to figure out that you’re going to have to get an 18% return after you pay taxes just to break even on that $5,000. Pay the debt off first, then think about investing.
4. Investing for the short term. Only invest money for the short term that you’re actually going to need in the short term. Invest money in the stock market that you won’t need for at least three years, and preferably five years or longer. If you’ll need your cash next year for a down payment on a house or for the family Caribbean cruise, use one of the shorter term and safer havens for your cash, such as money market funds or CDs.
5. Turning down free money. You’d never turn down a dollar if it was offered with no strings attached. That’s what you’re doing if your company offers a 401(k) or similarretirement savings plan with an employer match and you’re not participating. Take advantage of all tax-advantaged, employer-matched savings programs.
6. Playing it safe. If you’re young, most of your investing dollars should be in the stock market. You have enough time to weather any dips in the market and to reap the rewards of long-term gains. Although you may want to transition into bonds later in life as you depend on your investments for income, stocks should make up a large portion of the portfolio of every investor.
7. Playing it scary. Not every investment is for everyone. Even if you’re a daredevil, you shouldn’t pour all of your money into something that could end up going down the drain.
8. Viewing collectibles or lottery tickets as investments. If old comic books, Barbie dolls, and abandoned exercise equipment could be used to fund retirements, do you think the stock market would exist? Probably not. Don’t make the mistake of thinking your jewelry, those Beanie Babies, or the lottery will provide for you in your latter years.
9. Trading in and out of the market. We believe the best approach to investing is the long-term one. Pick your investments well and you’ll reap greater rewards over thelong term than you had ever dreamed possible. Trade in and out of the market and you’ll be saddled with fees that chip away at your returns, and you’ll potentially miss out on gains that long-term investors enjoy with much less effort.

Click here to read the full article.

If you are one of the millions that receive a sizable tax refund every year, why not use the extra money to help out your personal balance sheet.  Here are some ideas for your refund that will be more beneficial than just spending it on whatever…

1. Use the cash to pay down your debt.  Reduce any high-interest credit card debt you may have, or pay down the principal on your mortgage.
2. Contribute to an IRA or a 529 plan for your children.
3. Want to have a vacation, set aside some of your refund for just that.  Setting up a separate account helps for just that.  You could even do this for your holiday shopping!
4. Have some smaller home improvements you want to make, use some of this money to do just that.
5. Have a stock you want to invest a little in, open up a brokerage account and do just that!
6. Do a check on your emergency fund to make sure there is enough in there in case you get laid off or hurt.
7. Maybe it’s time for some additional life insurance?

These and may more tips are available at kiplinger.com

If you are planning on giving all or part of your required minimum distribution from your IRA to a charity this year, you may want to hold off until toward the end of the year as Congress has not reauthorized the law that allows this tax break.  The law that allows people over 70 1/2 to make a tax free transfer of up to $100,000 directly from their IRA to a charity has not been passed for 2012, but Congress typically does not reauthorize tax breaks until toward the end of the year.

If this is something you are interested in, please be aware that the money must be transferred directly from the IRA to the charity.  If you take the cash out now, you will have to add those monies to your gross income.  Keeping it out of your adjusted gross income will help many people stay below the income limit for other tax breaks and avoid the Medicare high-income surcharge. 

For more information about RMD’s see Rules for Required IRA Distributions.

Kiplinger.com

Kiplinger.com has a terrific article on how to chose the right financial planner.  It is so very important to be working with someone you are comfortable with and that you are confident they understand you and your needs. 

Click here to read the article.

Call us today for any financial planning or investment management needs, we are here for you!

Effective January 1, 2012, Michigan requires Schwab to withhold state income tax on certain qualified pension and retirement distributions unless the participant is eligible to and elects out of withholding. As a result, beginning on March 19, 2012, Schwab will begin to withhold the mandatory 4.35% from all retirement distributions if the proper forms are not received from eligible clients.

On February 15, 2012, all impacted clients with an active tax withholding election and/or an active standing instruction on their account where the state taxes are zero or below 4.35% will be mailed notification from Schwab by letter of the Michigan state tax requirement. Instructions will be included on how to update tax withholding information. 

Additionally any payment(s) received as of January 1, 2012 may have the 4.35% withheld.

Please contact us if you receive these documents from Charles Schwab and you have questions or would like assistance in filling out the forms.

Ever wonder why it’s so hard for some people to part with their money while others can’t seem to stop spending? The answer can be summed up in two words: money personality. Everyone has a money personality – that defining attitude that helps us decide how we use our money. While there are many types of money personalities, these can all be grouped into two main categories: savers and spenders.

Where do you fit in? Meet the personalities and see which one reflects your own money attitude.

The Saver

Whether they’re putting away money for retirement or an upcoming trip, savers are patient planners who understand that all those small sums will eventually add up to something substantial. They’re also thoughtful shoppers who can resist the tug of the impulse buy.

Many savers are afraid of risks and are happy to live on a meager budget in exchange for the security of a nest egg. As a result, some savers may go too far and deny themselves the right to enjoy their money. This aversion to risk could also cause savers to lose out on investment opportunities that could actually increase the size of their nest egg.

The Spender

In general, spenders are great optimists who shell out the cash or whip out the credit card confident in the knowledge that they can afford to pay for these purchases. For spenders, money is less about security and more about seeing tangible evidence of their financial success.

While spenders often have enviable lifestyles, their relaxed attitude towards money could put them at risk of spending more than they can actually afford. Many spenders know this and often feel guilty every time they go beyond their budget. Spenders who don’t save at all could also find themselves in deep financial trouble should they get seriously ill or lose their job.

Striking a balance between the two personalities

Regardless of your money personality, its important to strike a balance and find the sweet spot between being a spendthrift and a penny pincher. If you think you’re a saver who could benefit from loosening up a bit, talk to us about how you can increase your savings through investments. Knowing your money is growing is sure to make you feel more confident about spending a bit of it on yourself and on your family.

If you’re a spender, it may be time to look at putting money away on a regular basis. As a first step, look into setting up an automatic deposit into your brokerage account.  Start with small amounts, gradually increasing your savings as you become accustomed to this new habit. Soon you’ll even be budgeting to save – an achievement that should make you feel less guilty the next time you take out your wallet.

September 9th is National 401(k) Day!  This day is an annual celebration to promote the importance of participation in employer-sponsored profit sharing and 401(k) plans.  Ignoring these plans should  not be an option!  Do you stop for a coffee everyday?  Put that money towards your retirement instead!  Would you like to reduce your income taxes?  Participate in the retirement plan and do just that as the contributions are deducted before your taxes are calculated (except for Social Security taxes).  Does your employer offer a match?  If the answer is yes, realize you are throwing free money away by not  participating!  Do you have an old 401(k) from a previous employer?  Most employers allow you to roll your 401(k) balance into their plan and if they do not, you can open an IRA to capture those assets. 

Contact us today to discuss these options or for any assistance you may need!!

Respect the price action but never defer to it.
Our eyes are valuable tools when trading but if we deferred to the flickering ticks, stocks would be “better” up and “worse” down and that’s a losing proposition.

Discipline trumps conviction.
No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always attempt to define your risk and never believe that you’re smarter than the market.

Opportunities are made up easier than losses.
It’s not necessary to play every day; it’s only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.

Emotion is the enemy when trading.
Emotional decisions have a way of coming back to haunt you. If you’re personally attached to a position, your decision making process will be flawed. Take a deep breath before risking your hard earned coin.

Zig when others Zag.
Sell hope, buy despair and take the other side of emotional disconnects (in the context of controlled risk). If you can’t find the sheep in the herd, chances are that you’re it.

Adapt your style to the market.
Different investment approaches are warranted at different junctures and applying the right methodology is half the battle. Identify your time horizon and employ a risk profile that allows the market to work for you.

Maximize your reward relative to your risk.
If you’re patient and pick your spots, edges will emerge that provide an advantageous risk/reward profile. Proactive patience is a virtue.

Perception is reality in the marketplace.
Identifying the prevalent psychology is a necessary process when trading. It’s not “what is,” it’s what’s perceived to be that dictates supply and demand.

When unsure, trade “in between.”
Your risk profile should always be an extension of your thought process. If you’re unsure, trade smaller until your identify your comfort zone.

Don’t let your bad trades turn into investments.
Rationalization has no place in trading. If you put a position on for a catalyst and it passes, take the risk off—win, lose or draw.

By: Todd Harrison

Terrific video from Morningstar regarding the current bond trends.

Many parents, especially the older ones, assume it is wise to add a child’s name to their house deed in case something should happen to them. On the contrary, it is probably the worst thing that can be done. By doing so, the parent creates a host of problems.

• Gift Tax Issue – For gift tax purposes, adding a child to the title constitutes a taxable gift of the ownership interest in the home to the child. If the value of that gift exceeds the annual gift tax exemption ($13,000 for 2011), then a gift tax return must be filed. No gift tax will probably be due if the total of the current and all former gifts is less than $1,000,000, since that is the current lifetime gift exemption for an individual. (The limit increases to $5,000,000 for 2011 and 2012.) However, the law requires that the return be filed so that the IRS can track all of the gifts in excess of the annual exemption that an individual makes during his or her lifetime.
• Home Sale Gain Exclusion – Current tax law allows homeowners who meet certain ownership and occupancy requirements to exclude from taxable income up to $250,000 ($500,000 for most married couples) of home sale gain. Thus, if a home deeded to a child is subsequently sold, the home gain exclusion will not apply to the child’s portion unless the child lived in the home for two of the prior five years. This can result in a substantial tax liability, depending upon the value of the home and the child’s ownership portion. Should the parent place the entire property in the child’s name, then generally none of the gain would be excludable and even worse, the parent is at the mercy of the child should the child decide to sell the home. There is no guarantee that the child will continue to care for the parent.
• Debt Liability – Since property is subject to the debts of its owners, and if a child is a part owner, a debtor might file a lien on the property for the child’s debts.
• Medicaid – Gifting the home to a child could, under certain circumstances, be considered a gift for Medicaid qualification purposes, making the parent ineligible for Medicaid benefits in the event of a long-term health crisis.

There are additional issues to consider as well, including the tax ramification to the child based upon the home being a gift or ultimately inherited. Please call us at (989) 772-1209 or email us to discuss these issues in detail before placing your home in any of your children’s names.