This week's theme is life lessons.
"Education is what remains after one has forgotten what one has learned in school." Albert Einstein
"Be more concerned with your character than your reputation, because your character is what you really are, while your reputation is merely what others think you are." John Wooden
"Our character is what we do when we think no one is looking." Anonymous
"A word of encouragement during a failure is worth more than an hour of praise after success." Anonymous
"You can tell whether a man is clever by his answers. You can tell whether a man is wise by his questions." Naguib, Mahfouz
"Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world." Albert Einstein
The greatness of our country is you can work hard and become successful, by moving yourself into a place where you provide services to other people.
This week we get to go through the process of making sure we are all squared up with our personal obligation to our fellow citizens in the area of taxation and most of us pay a lot for that privileged.
Paying our obligations is a privileged we can be thankful for, but being wise about how you became successful is also important.
Tax Wise Investing
The deadline is looming. I think this is my number one most painful part of the year. Just thinking about how much of my earnings and investment growth is going to pay taxes, I don't want to think about.
Services are important, don't lose sight of that. Our government officials and service personnel provide valuable support to all of us.
At times people complain about having capital gains and dividend income, on which they need to pay taxes. I jokingly tell people that, we could lessen their return and they could pay less tax.
Getting less on your investments is not the solution. Never selling an investment that has become overvalued is not the answer either.
Many people hold on to investments that no longer are going to produce the needed effect on their investment portfolio, simply to avoid realizing the gain. They dislike paying taxes to the point that they don't look objectively at the investment.
To be wise about taxes and investing at the start use tax deferred investment accounts. Money you are investing for long term goals should first be directed to workplace retirement accounts, Individual
Retirement Accounts, and Roth IRA Accounts. Most of these accounts you cannot withdraw without penalty before age 59 ½. There are a few exceptions, make sure you consult your adviser. Max out these types of accounts first.
If you have a long term goal to pay for college expenses a 529 college savings plan could help you defer taxes on investment gains and may be tax free if paying for qualified expenses. If you use the Iowa Savings 529 plan you may also receive a state tax deduction.
When investing outside of these tax advantaged accounts there are three strategies to keep in mind. If investing in bonds, or higher dividend and income producing assets.
- First, use tax exempt bonds outside of tax deferred accounts.
- Second, put most of your higher income producing assets in your retirement plans.
- Third use tax efficient investment products like Exchange Traded Funds. Capital gains may be deferred until you sell and unlike annuities your gains will be taxed at capital gains tax rates rather than ordinary income rates.
A combination of these strategies is best.
The S and P 500 index trended up this week. +1.70%
The Dow Jones World Index trended up this week. +1.86%
The 10 year Treasury Yield index trended up this week.
The US Dollar index trended up this week. +1.97%
The CRB Commodities index trended up this week. +.48%
The Gold Index trended up this week. +.47%
Inflation Linked Bonds trended up this week. +1.20%
US Aggregate Bond Index trended down this week. -.20%
The International Aggregate Bond Index trended down this week. - 1.79%
The NCREIF Index is aggregated and reported quarterly and is a total return broad representation including rents and appraisal of non-traded Commercial Real Estate.
2014 1st qtr + 2.74%
2014 2nd qtr + 2.91%
2014 3rd qtr + 2.63%
2014 4th qtr +3.04%
It pays to stay diversified and not chase prior winners!
Many investors take the wrong approach looking primarily at recent return.
Overall risk measures and managing downside risk play an increasing role in end results.
Investors instead should be focused on managing Dynamic Beta exposure, evaluation of Active Share, Sharpe ratios, Sortino ratios and Alpha.
The above is for informational purposes only and not an offer or recommendation to buy or sell. Past performance is no guarantee of future return. Decisions on making any investment should be made only subsequent to a thorough professional analysis of the overall individual financial picture and the goal for the investments. This writing is not to be construed as an offer of personal advice or an offer to follow any recommendation. Any investments should only be entered into after a thorough analysis from your personal Adviser and related to your current financial picture and goals.
Please forward this on to anyone who you think may be
The above is for informational purposes only and not an offer or recommendation to buy or sell. Past performance is no guarantee of future return. All decisions about investments should be made within parameters of risk, time frame, financial position and overall asset allocation.