Education

Cash Flow Analysis

2010-12-16T02:03:09Z

Coming soon!

Financial Planning

2010-12-16T02:02:38Z

Coming soon!

The S&P 500

2010-09-29T04:20:10Z

What is the S&P 500?

The S&P 500 is an indicator. (S&P stands for Standard and Poor’s) it has been widely regarded as the best single gauge of what’s going on with the large cap (big companies that are worth more than $10 billion) U>S> equities market since the index was first published in 1957. Although we hear more about the Dow Jones Industrial Average (DJIA) from the evening news and of media, most knowledgeable investors rely on the S&P 500 as a true indicator. Why? Because even though the Dow Jones gives us information, and at one time the most renowned index for U.S. stocks, but because the Dow only contains 30 companies, most people agree that the S&P 500 (it reports on 500 companies) is a better representation of the U.S. market.

Advantage

Diversification is the name of the game. By tracking 500 different companies held in one index.

Click here to view the 500 companies currently held in the index.

How do Mutual Funds Work?

2010-09-29T04:18:06Z

Mutual Funds Basics

The word Mutual means to have something held in common. So, really a mutual fund is like a collection of individual investors from everywhere (around the world, cities, states etc) who pool their money together to create an investment fund to purchase stocks, bonds, and other investments. This fund is then managed by fund managers who are experts in fund management.

Advantage

The advantage for investing in a mutual fund is, purchasing the shares of mega companies like Google for example might be too expensive for an individual to purchase on their own. so, purchasing shares in a fund that already owns shares in Google will enable you to get on board for considerable less by pooling your money into the fund.

Mutual funds let the investor (especially beginner) invest in a range of companies and sectors with relatively small amounts of money. This strategy is known for helping investor diversify their investment and reduce the risk. Investing in mutual are still risky, but not usually as risky as investing in individual stocks on the market.

Mutual funds purchase the shares of over 200 different companies, so if one company fails or goes out of business, the entire fund doesn’t suffer a Hugh loss. Before you buy into a fund, checkout its fund managers as well as the goals and objective of the fund. Look at the funds track record and the cost of investing into the fund.

No free

Although there are some funds that would have you to believe that they don’t charge anything for their services. Please understand this, all funds charge some sort of fee and or expense, and not just one time, but an ongoing expense. And there shouldn’t be anything wrong with it as long as you the investor understand it. But if you think someone’s or some mutual fund is going to make money for you for nothing, I subjects you look elsewhere, service cost.

Types of Mutual Funds

Growth funds
Growth and income funds
Equity income funds
Balanced funds
International funds
Bond funds
Money market funds
Sector funds

Money market

2010-09-29T04:17:32Z

First of let’s be clear, a money market account is not an investment account. It’s a safe and secure place to park money very similar to that of a standard savings account offered by a bank, credit union, brokerage and other financial institutions. The main difference with a money market account is that it typically pays a slightly higher interest rate on deposits. The money market account is also insured by the FDIC (Federal Deposit Insurance Corporation) which basically means, if the financial institution goes belly up or bankrupt your money is safe and secured against loss. Money market accounts held at credit unions are insured by NCUA (National Credit Union Administration) and money markets held in brokerage houses are insured by SIPC (securities Investor Protection Corporation)

Interest paid

Interest is compounded daily and paid monthly unlike regular savings accounts.
In order to receive this higher rate, this type of account usually requires a larger deposit with the minimum anywhere from $1000 to $2500. Money market accounts are similar to checking account because you have the privilege of writing checks, but at a minimum usually 3-6 per month.

Advantage of money market account

No risk of loss of principle
Money is not invested in the market, deposits guaranteed by Federal agencies or the SIPC
Check writing privileges with higher interest rate return
A holding tank for money you’re not sure yet how you want to invest it
An emergency fund

Certificates of Deposit

2010-09-29T04:14:30Z

A Certificate of deposit is commonly referred to as a CD. A CD is a method of saving money. Unlike stocks or bonds, a CD is much more like a regular savings or money market account. A CD is wildly considered to be a safe place to stash your money and at the same time gain interest on it. Usually CD’s earn a higher interest than a savings or money market account.

When you purchase a CD, the money has to remain in the CD for a certain period of time unlike that of a regular savings or checking account. The time period for a CD can be anytime from 3 months to 20 years. And during that time period you are unable to access your money without paying a early redemption penalty. This penalty is usually equivalent to the forfeiture of 3 to 6 months of interest on the account.

Maturity dates

All CDs will have a maturity date; the maturity date is the date when you can access your money without paying a penalty. The longer the maturity date, the greater the interest rate you’ll receive on your CD. In other words, the lending institution generally pays you more money, the longer you let them keep your money. Why? Because the longer you keep your money in a CD, the longer the bank or lending institution can lend out your money in the form of loans to the general public and charge them a higher interest rate than they are paying you. CDs are one way banks, credit unions, brokerage and other financial institutions make money. They lend your deposits to others and charge them a higher rate.

Taxes

The interest that’s earned on CDs is fully taxable. Regardless of when the CD matures, taxes are due on all interest received during the calendar year. It doesn’t matter whether you withdraw the earned interest or leave it in the CD; taxes are still due every year on interest earned on CDs.

FDIC Insured

CDs are insured and guaranteed by a federal program called FDIC (Federal Deposit Insurance Corporation) therefore CDs are 100% safe.

Who should buy CDs?

Anyone, who is afraid to take risk with their money,
Anyone who wants a guarantee of principle
Anyone who has money that they will not need for a certain period of time

How does a 401K Work

2010-09-22T14:55:07Z

A 401k plan is a tax deferred retirement plan offered by your employer. Unlike many other retirement plans available to individuals, only employers can sponsor and offer a 401k plans to their employees. You, the employee decide how much of your pay check you wish to deposit into the plan based on whatever you can afford and the IRS strict regulations that limit your amount of contribution. The amount that you decide to contribute to the plan is then deducted from your pay check (pre-tax) in other words, you able to invest and made contributions before Uncle Sam (the IRS) takes his cut and deposit it into the plan. Often times the employer will match your contribution up to a certain percentage, although your employer is not required to do so.
Since the any money contributed into a 401k plan is tax deducted and it’s invested before taxes, it will lower your present tax liability. However, when it comes time to withdraw your money, you’ll have a tax liability to pay. In other words, pay now or pay later, with the 401k plan, you pay later.

Responsibility: it’s your employer’s responsibility to administer the plan in accordance with current laws and regulations. They determine who is eligible for the plan and how much they can contribute. The 401k plan is a great way to begin preparing for retirement especially if you’re not someone who is disciplined enough to save on your own. If you currently have no planned retirement and your company offers a 401k plan, it’s a good idea to seriously consider. The sooner you start the better and the more you’ll have when it’s your time to retire.

401k drawbacks: one of the biggest drawbacks is accessing your money in a hurry. Unfortunately the 401k plan doesn’t work like a traditional checking or savings account. Accessing money could be difficult and costly, and besides, it’s not designed for you to have easy access in the first place, that’s why it’s called a retirement account and not an emergency account. Make sure you have another account set up for emergencies. However, some plans do allow you to access your money in the event of hardship and other dire needs. Check with your employer before you invest.

The Traditional IRA

2010-09-22T02:17:13Z

What is a traditional IRA? It’s the original tax deferred savings plan that was set up back in 1974 to provide a means for employees that didn’t have a pension plan to have a tax deferred means of saving for their retirement. Since then employees with pension plans have been allowed to open IRAs.

The big difference between the traditional IRA and the Roth IRA is any money withdrawn from the traditional account is subject to income tax at the time of the withdrawal. When money is withdrawn from the Roth (after 5 years of holding it,) absolutely no money is taxed.

Restrictions: the traditional IRA has more restrictions and withdrawal requirements. It allows penalty free withdrawals only after the age of 59 ½ and requires mandatory withdrawals after the age of 70 1/2. However, there are exceptions to these restrictions, and early withdrawal can be made without penalty in the event of:

Extreme medical expense
Health insurance premiums
Death
First time home buyers
Higher education (in certain circumstances)
Equal distributions based on expectancy

The amount of withdrawal is based on your life expectancy. And get this, under current law, if these withdrawal are not made a 50% penalty will be charged on the amount that should have been withdrawn. Wow! What a racket, and yes, they will do it.

The good news: the good news is contributions into the traditional IRA are tax deductible with limits at $5000

Investment vehicles available for traditional IRAs

Stocks, Mutual Funds, ETFs, Bonds, Annuities, REITs, CD’s, Gold, Silver, Real Estate, Currencies, Commodities, oil and gas.