Personal Finance Wealth 2015 Creation Strategies

Personal Finance Wealth 2015 Creation Strategies 

Saving is starting to become something many more of us think about. To make sure you are financially secure for your future, there are many wealth creation strategies you can use.

Ideally, combining several wealth creation strategies will offer you the best opportunity to putting your money to work for you. If you combine several strategies you can maximize your return while minimizing your risk.

Here is a list of some of the most commonly used methods to save for retirement and for overall wealth building:

IRA’s and 401k’s are two very common ways to put money away for retirement. When you put money into these two vehicles it is put away pre-tax. You don’t have to include the money you put into these accounts when figuring out your taxable income. The money you place in these funds will then be invested in stocks and mutual fund. Hopefully, by investing in these underlying investments your retirement account will continue to grow tax free. You will have to pay taxes on the money when you use it during retirement. For a full description of how this works, talk with your accountant or investment professional.

Investing directly in stocks and mutual funds.

This is one of the most common ways of getting more savings for your retirement. Many people think that investing in the stock market is like gambling and that it is very risky. The truth is, if you are willing to take some time to learn a little bit about the process (no one is expecting you to become an expert, just know enough to ask questions and be informed) you will greatly eliminate much of the risk. Risk comes from making poor choices and making poor choices usually comes from lack of knowledge and just following along and taking advice from someone who often knows little more than you do. Mutual funds are professionally manged and you can find various funds to invest in. Again, knowledge is power. Even if you work with a financial consultant, having some knowledge of how your money is being invested is just a smart thing to do… after all, it is your money. No one is going to care about your money as much as you do!

Real estate. Again, many people will think investing in real estate is risky, but if you know what you are doing you will greatly reduce the risk. There are a few ways to invest in real estate one of the most common is to buy rental properties and rent them out. This provides you with an ongoing cash flow. That cash flow than can be invested in still other ways to ensure it’s continual growth. I personally feel it is a mistake to just turn your money over to some “professional” and hope for the best. I think it makes more sense to learn a few basic skills so you can be a partner in all wealth creation strategies. This is the best way to ensure your money grows the way you want it to.

How to Build Your Million Dollar Stock Portfolio From Zero! 2015 Latest

How to Build Your Million Dollar Stock Portfolio From Zero! 2015 Latest

There is a system that made Nicolas Darvas rich in the 1950s. You may be thinking “that was then but this is now.”

I am here to prove to you with my own savings that the basic system Darvas used at the middle of the last century works just as well today as it did then.

How Portfolio Concentration Has Blossomed Her Account

In January of 2008 my sister in law approached me for help. She had $25,000 in savings to invest.

I had her open a regular trading account at TDAmeritrade plus a Roth IRA. She placed $5,000 in the Roth and $20,000 in the regular trading account.

Today that money is worth $75,180.81.

This return came from shares of stock protected with simple stop-loss orders. The stop loss orders are adjusted every few months or so as the stock rises into critical price consolidations.

What is most important to understand is that the account has never been exposed to great risk. Stop loss orders have protected her portfolio.

It never takes more than 10 minutes a year for me to help her manage the account. Here is how I do it.

The Pesky One Stock Portfolio that Outperformed

I asked myself, “what is the best stock I know of in the market today?” After a few days of thinking I reached a conclusion.

Then I placed the entire $5,000 in that one stock. The stock rose and rose and rose even as others fell.

Eventually it petered.

I pulled her out for a hefty gain. I have rolled her entire account through 4 fast rising stocks over the last 6 years.

Each time I put her in low before the analysts caught on.

I am very much wealthier today from what I learned transforming $5,000 into $15,235.38 for my sister-in-law for a whopping 205% return.

The investment produced a return on account few people I know have seen over the last few years.

Let’s face it. You hear marketers bragging about two hundred percent returns on a recommendation.

You never hear about a two hundred percent return on an entire account!

The reality is that business schools, investment advisors, investment newsletters, and investment marketers all drub diversification into the mind of the common Joe Main Street investor. They make diversification out to be a sort of life vest.

As long as they keep you diversified they know that they will earn the highest fees. They also know that they will not lose in NASD arbitration by treating you as a “prudent investor.”

The prudent investor rule of breaking up your savings into a bunch of smaller stock investments keeps their commission protected from any arbitrator. And it forces your portfolio returns to the mediocre middle.

When Diversification Destroys

Finance professors from top schools have pointed out that diversification does not protect you from major market drops. Blind diversification creates investors who are apathetic to the very serious risk of major crashes.

Nonetheless solutions to evading major market drops are never seriously discussed in all of the noise and hype rifling through the market. Marketing magicians of Wall Street focus your attention in one direction (ham-fisted diversification) as if the other direction does not exist (intelligent concentration).

3 Ways to Simplify Your Financial Life 2015

3 Ways to Simplify Your Financial Life 2015

When life gets busy it’s easy to become more passive about managing your bank accounts and credit cards by letting receipts, bills and statements pile up. Even if you regularly keep up with your finances, it can be beneficial to take a fresh look at them. Simplify your financial life with these three strategies.

1. Go paperless.

It’s easier than ever to access financial documents online. Choosing paperless convenience will not only make your life more efficient and clutter-free, it’s also environmentally friendly.

A good place to start is by requesting electronic statements and opting out of printed ones from the companies who send you regular bills. Consider going paperless with your bank, credit card companies, your cell phone and cable providers or your electric company. You’ll then receive an email when your statement or bill is ready each month. This gives you the option to download and store your statements electronically and also to print as needed and file if needed.

If you’re not already enrolled in direct deposit with your employer, make sure to get this set up. It saves a trip to the bank on pay day and you get to enjoy the fruits of your labors sooner. While you’re at it, go ahead and request electronic receipts at the store when they’re offered in lieu of stuffing them in your pockets or purse.

2. Consolidate where you can.

There are several corners of your financial life that can be simplified through consolidation. Retirement accounts are one of those areas. If you’ve worked for several employers during the course of your career, you’ve probably acquired a few retirement accounts along the way. Accumulated assets left in a former employer’s retirement account are still yours, but they sometimes offer less investment flexibility. If you like the idea of having fewer accounts to keep track of, or if you prefer to actively manage your retirement dollars, consider consolidating stray 401(k) and IRA dollars by rolling them into a centralized retirement account. There’s a lot to consider when it comes to rollovers so it’s important to weigh all of your options carefully. (Consider a direct rollover, as withholding tax and tax penalties may apply for cash withdrawals.)

Credit cards and debt are two other areas where consolidation may be wise. Is it time to chop up the card that carries a hefty annual fee? Are you carrying a credit card balance that is snowballing due to high interest rates? It may be financially advantageous to pay off the cards with the highest interest rates and either close the account or put it away for emergency use only. It’s a relief to have fewer cards to manage, along with a plan for extinguishing debt.

3. Turn to the professionals.

As you sort through your financial choices, enlist the right team of professionals to assist you. Helpful professionals may include a tax advisor or an accountant, who can provide guidance on how to put you in the best tax situation, and a lawyer who specializes in estate planning. Also consider consulting a financial advisor who can help you streamline your financial life and accelerate your financial goals by recommending specific strategies based on your individual situation. Each of these professionals can share their expertise with you and help you eliminate unnecessary financial clutter.

A Financial Boost 2015 for Americans With Disabilities

A Financial Boost 2015 for Americans With Disabilities 

Saving for future expenses can be challenging, and saving for disability-related expenses adds another piece to the puzzle. Many families with a disabled family member need to save for significant out-of-pocket expenses and build up a decent balance while continuing to qualify for access to government programs such as Social Security Disability Insurance (SSI).

Families facing this savings challenge may benefit from a new law enacted in late 2014 – the ABLE (Achieving a Better Life Experience) Act. Designed to work much like a 529 college savings plan, the law allows an ABLE account to be funded on behalf of individuals with a physical or mental disability that occurred before age 26, regardless of their current age. The individual also must meet one of two requirements. They must either be:

· receiving Social Security Disability Income benefits; or

· file a disability certification with the IRS to demonstrate qualification.

A tax-advantaged savings opportunity

Families can currently set aside up to $14,000 per qualified person each year in an ABLE account. Money accumulated can be used to pay current and future expenses, so tax benefits can be extended over the life of the covered individual. Earnings grow tax deferred, and funds used to meet qualified expenses for the benefit of that person can be withdrawn on a tax-free basis.

The term “qualified expenses” is broad in scope, and can include health care costs, assistive technology, personal support services and housing. It also can apply to education-related expenses such as special education services and the costs of paying a tutor. Even legal fees, financial management services, funeral and burial expenses can be paid for out of an ABLE account using tax-free proceeds.

An asset protection strategy

Families may face the challenge of managing their ability to save while continuing to receive federal benefits through programs like Social Security Disability Insurance (SSI). Previous laws made it difficult to save significant sums for disability-related expenses without risking the loss of federal benefits. Under the new law, as long as the ABLE account does not exceed $100,000 in value, full qualification for SSI benefits continues. If the account should exceed $100,000, those benefits may be suspended, but not terminated. Eligibility for SSI coverage is retained and resumes once the balance of the account again falls below $100,000. The amount of assets held in an ABLE account does not impact eligibility for Medicaid coverage.

Discuss your options

While the ABLE Act was passed by Congress and is a federal law, implementation is managed on a state-by-state basis, similar to a 529 plan. Individual states may have different regulations regarding ABLE accounts when they begin to offer them. The ABLE account must be purchased from the state where the disabled person is a resident. If the state of residency chooses not to offer an ABLE account that state may contract with another state, and then that state program becomes one the disable person must use. There’s a lot to consider with this new law. Make sure you fully understand the rules of the road. Discuss your options with a financial advisor who can help you understand how the ABLE Act could apply to your situation.

The World’s Worst Stock Investment Advice 2015 Latest

The World’s Worst Stock Investment Advice 2015 Latest

Debunking the 2% and 5% Prudent Investor Allocation Rule

My wife and I grew frustrated over the years watching index funds in our employee sponsored 401(k) plans grow but not fast enough. As a solution we decided to invest in single stocks in self directed Roths and additional individual 401(k) plans external to our employer sponsored retirements.

The problem we then faced was finding the right single stocks.

If you watch a popular investing T.V. show or subscribe to a typical investment newsletter you will receive the advice to never put more than 2% or 5% into any single investment – or something similar. Then the advisory service will work to spoon feed you a large menu of recommendations.

You are expected to pick between 20 to 50 different stocks.

I discovered a study by New York University Stern finance professor Andrew Metrick in 1999 entitled “Performance Evaluation with Transactions Data: The Stock Selection of Investment Newsletters” published in the #1 rated Journal of Finance.

Professor Metrick concluded that investment newsletter editors lost against a simple equity index fund. My frustration was heightened. I kept thinking…

There Must Be Another Way!

Insights and breakthroughs came overtime.

The most important was after I had been trading and monitoring a large number of advisory recommendations from many sources. This was before, during and right after the 2007-2008 crash. The silence of the newsletter editors was painfully disingenuous.

Each advisory services blindly recommended “buying opportunities” during the entire collapse. Not one recommended sitting it out in cash.

That told me that investment advisory services were completely out of touch with the major trend of the stock market in aggregate. It became clear to me that the blind guided main street in the investment advisory industry.

If you can’t trade you can always recommend.

The Land of Frequent & Bad Small Bets

Our accounts were now filled to the brim with lots of stocks enthusiastically certified “fantastic” by Wall Street investment newsletter services listed in the Mark Hulbert’s Financial Digest. I was also in contact with a lot of other subscribers due to my stature in finance.

Each complained about lackluster results from advisory service recommendations.

Ironically I was watching the accounts I helped steward with my sister-in-law double and triple in one stock after another. I didn’t have energy to frantically churn each account as the newsletter editors I followed recommended.

I was eagerly reading each new recommendation and hassling with lots of complicated buying and selling in small amounts.

Gains almost covered losses. It was like playing slots strapped to a treadmill in a dark and dingy downtown Vegas casino.

The whole time I was directing her entire account into whatever I felt most strongly was the best stock in the market at that time. When the share price up-trend weakened over time stops would scrape her out with a hefty profit every other year or so.

Her returns beat ours by a long mile. This did not please my wife.

She began demanding that I concentrate her portfolio. But I resisted.

Then the bomb fell. I had been working on an extensive study of newsletter returns.

I remember the day when professor Eric Powers of the University of South Carolina gave me the bad news. Our study also showed that investment newsletters did not beat the market.

The reason investment newsletters can never beat the market is because of prudent diversification. Let me explain.

Where Prudent Is “Stupid” and “Naive” is Smart

Advisory service editors are under the scrutiny of the SEC.

Their attorneys are terrified of the federal financial red eye of Sauron. Any investment newsletter editor that recommends that you invest 40% in one stock would be fired.

Yet this is exactly what Warren Buffet did with American Express stock in the 1960s. That concentrated investment became a blockbuster profit for Berkshire Hathaway shareholders.

Prudent diversification is a cocoon for incompetent mutual fund money managers with spotty stock picks. Even more peculiar is that it facilitates that a bad stock picking analyst or broker can become an excellent advisory service editor on Wall Street; with sufficient sales charisma.

Recommending lots of stocks spread out in small bets makes the bad blend out over time in average but harshly attenuated long-run returns.

It became painfully imperative to stop chasing 20 to 50 advisory recommended stocks that combined would never beat the averages. The constant churn bled my accounts in transaction costs and I really felt it.

I was better off naively diversifying in 500 stocks in one fell swoop.

Naive diversification is best accomplished by simply purchasing 1 indexed mutual fund. A good example is the Vanguard 500 Fund (VFINX).

It has low turnover and low fees. And it generates naive diversification across more than enough stocks to achieve full averaging.

In an employer sponsored 401(k) with no self-direction naive is smart diversification.

The 3 Stock Portfolio of Infrequent & Good Big Bets

My best advice to any family financial steward seeking high returns is to concentrate on no more than 3 stocks in your Roth and individual 401(k). But get the best of both worlds. Make sure you index your employer sponsored 401(k) – ours have grown surprisingly large despite the boredom.