Source: sxc.hu

Shortly after Schwab started offering transaction free trading in it s proprietary line of Exchange Traded Funds, Fidelity has now rolled out free trading in iShares ETFs to its retail and advisor accounts. For an ETF investor, these appear to be a great news and no doubt in the coming months more brokerages will likely follow suit.

But just because you can trade some ETFs without paying any commissions, are you really getting a sweet deal?

Maybe not. Depends on the ETFs that you are using to construct your portfolio. If you are a Fidelity investor and use iShares ETFs, than yes, the ability to buy and sell without paying a commission is a great deal. But remember, you are still paying a fee in the form of the expense ratio of the ETF. It is quite possible that your commission free ETF carries a higher expense ratio compared to a similar ETF (with commissions) and over your holding period the extra percentage points in the expense ratio add up to more than what you save in commissions. Take for example, the iShares ETF EEM (Emerging Markets Index). The expense ratio on this ETF is 0.72% while the expense ratio of a similar ETF from Vanguard, VWO (Vanguard Emerging Market Stock ETF) only costs 0.27% in expense ratio. For most accounts, buying the Vanguard ETF would be substantially cheaper in the long run even if you have to pay a commission to buy it.

And then there is the question of discipline in investing

Maybe you are immune to the temptation. If you are, congratulations, but I would wager that most investors are not. Just that fact that you can trade some ETFs without incurring  a transaction cost, can drive up trading activity of most investors since the short term pain of paying commissions is now absent. This can lead to excessive trading, tax inefficient portfolio and a dilution of asset allocation strategy that can mean lower investment results over the long term.

Do a periodic review of your investment strategy and stick to it

As an investor, you need to stay on the course that you have charted for your portfolio. These short term temptations should not affect your long term portfolio strategy. If you are in a position to take advantage of these commission free ETFs while staying within your long term strategy, do it. I am all for saving money where we can. But, please, do not change your strategy just to take advantage of fee free trading.

Sounds pretty obvious as I write this but you would be surprised at how many investors stray with temptations like this.

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Commission Free ETFs May Not be Such a Great Deal

Another reason to stay away from the sodas.

photo credit: Tim Psych

A new study conducted over 60,000 subjects in Singapore finds that regular consumption of sweetened soft drinks dramatically increases the risk of pancreatic cancer. The risk is 87% higher among people who drink two or more soft drinks a week.

Pancreas makes insulin that helps in metabolizing sugar. Increased sugar intake requires increasing strain on the pancreas to metabolize the sugar. While this may be a major factor in the observed increase in the cancer risk, it is also possible that regular soda drinkers tend to have other unhealthy habits which may also contribute. Regardless, it is still healthier to stay away from soft drinks when possible. People who consume similar amounts of fruit juice instead of sodas do not have the increased cancer risk.

This study was published in the journal Cancer Epidemiology, Biomarkers & Prevention.

It is important to note that the 5 year survival rate of the patients diagnosed with pancreatic cancer is just 5%. Over 230,000 people globally are diagnosed with pancreatic cancer each year.

I say just stick to water or fruit juice as your regular beverage of choice. Much healthier and saves you money as well.

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Drinking Sugary Soft Drinks Increases Risk of Pancreatic Cancer

Source: sxc.hu Photo: abeall

Many people make financial New Year’s resolutions to get their finances in shape. How are you doing? One way you can keep your finances on track is to create monthly checklists, breaking things down in smaller portions in order to better manage your cash flow. Hopefully, you’ve managed to get a good start on your finances in January. Now that the year is solidly under way, and you might be slowing down in terms of financial resolutions, consider these 5 items that can keep you fiscally fit in February:

1. File your tax return ASAP: This is especially true if you have a refund coming. The sooner you file, the sooner you get your refund. If you have a fairly large tax refund, you might consider revisiting your W-4. Adjust your withholding so that you have more take home money, rather than relying on your tax refund as a savings plan that yields no return. A tax professional might be able to help you with this, as well as helping you figure out how to increase your tax efficiency in 2010. If you owe money, getting your taxes figured now can give you time to save up between now and April 15. Just because you file your tax return now doesn’t mean you have to pay now.
2. Complete a home inventory: You should regularly update your list of what’s in your home, and what’s of value. This is especially true after the holidays, when you may have additional gifts of value. Document these items, and store your inventory in a safe place. One of the best ways to do this is to email it to yourself and save it in a special folder in your email account, or pay for web-based date back-up so that if your home and computer are destroyed, you still have access to your inventory via the Internet.
3. Check your credit report: This is a good time to check your credit report for errors. Remember that you get one free credit report each year from each of the three major credit bureaus (that’s three reports a year). You can access this through www.annualcreditreport.com. You can also usually get a three-bureau report with credit score from each bureau of from MyFico.com for between $35 and $50. Look for errors and fraudulent accounts. This is a good time to clean up your credit report, double check your score and consider other credit implications.
4. Consider your property tax assessment: Is your county or city appraising your home too high in order to get more in property taxes? You can actually challenge this assessment. If you think that your property tax assessment is too high, find out how to file a grievance. You can normally go to the assessor’s office to get the necessary steps in your area. If you have a case, you could save money in property taxes.
5. Look for seasonal discounts: February is the time that small consumer electronics, furniture and treadmills often go on sale. If you have been planning on making certain purchases, consider this month as a good time to make them. However, don’t just head out and buy something because it’s on sale. Make sure that it’s something you were planning on purchasing anyway. In the end, you want to make sure you are actually saving money — not looking for excuses to spend more of it.

February really is a great time to take stock of where you are at right now, and provides some excellent opportunities to help you improve your financial situation. The key is to plan ahead, and then stick to that plan.

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February’s Financial Checklist

Source: sxc.hu Photo: intuitives

Sleep is an important part of physical wellness and mental health. Indeed, numerous studies have looked at the importance of sleep, and suggest that sleep is a vital part of health — and that there are very real consequences attached to a lack of proper sleep. Some of the problems that can arise from a lack of sleep include:

• Reduced immune system performance
• Impaired memory and concentration
• Heightened irritability
• Increase in your risk of accidents at home and on the road
• Difficulty in maintaining a healthy weight

As you might imagine, one or two nights of poor sleep probably won’t ruin your life. However, lack of sleep can add up to a sleep deficit that can turn into a real problem, affecting your physical, mental and emotional health, and even affecting your happiness. Most adults require between seven and nine hours of sleep each night, depending on their individual needs. Below are some ideas for helping you achieve better quality sleep:

1. Consider your sleep environment

Think about your room and your bed. Are there some things about it that impair your ability to sleep? Try to make your room a relaxing environment, conducive to sleep. This includes making your room a relatively quiet place, and keeping the room dark during sleeping hours. You can use a fan or soft, soothing sound recording to cancel out jarring noise that can keep you awake. Also consider room temperature and proper ventilation. Try and make your bed a place mainly for sleep and sex. Watching TV in bed can be an issue, and in many cases, people find they get better quality sleep without a television in the bedroom.

For your bed, consider whether you have enough room for comfort. Experiment with mattress toppers, different types of pillows, and different blankets, comforters and sheets to find a comfortable combination that allows you to sleep deeply, without being awakened by discomfort.

2. Relax during the day

Relaxation during the day can help you sleep better at night. It is especially important to relax before bed. Create a routine that helps you get ready for sleeping. This can include watching TV that doesn’t stimulate your thoughts too much, reading a light book, listening to soft music, having a light and warm snack (tea, milk, etc.), getting things ready for the next day or meditating.

Some people find that relaxation during the day, such as taking a 20 minute nap, half an hour to read, or 15 minutes of meditation can help them sleep better at night. Activities that help you de-stress during the day, keeping your overall anxiety level down, can help you at bedtime, since you won’t have as much built up tension in your body. If you do take a nap, keep it shorter than 30 minutes, and try not to do it less than five hours before you plan to go to bed.

3. Physical activity during the day

Part of making sure that your body is properly tired, and ready to experience quality sleep, is engaging in physical activity during the day. Vigorous exercise not only helps your overall health, but it can also encourage better sleep at night. Finish exercising at least three hours before you go to bed, though, to give your body time to wind down. You can simple stretching exercises or yoga an hour before bed, as part of your bedtime routine, as long as you don’t raise your body temperature. If you don’t have a 20 to 30 minute chunk of time for exercise at once, break up your activity into five to 10 minute periods. Exercise can relieve stress throughout the day, as well as ensure you are tired enough to sleep well.

4. Balanced diet

What you eat — and when you eat it — can affect how well you sleep at night. Try to avoid big meals within two hours of bedtime, and stay away from stimulants. Realize that caffeine can stay in your body for up to 14 hours, and that a diet high in caffeine can disrupt your sleep. A diet with lots of refined sugar and fatty foods can also affect your sleep, creating conditions in which your body does not deal well with what is inside of it, upsetting your sleep patterns. Some suggestions for bedtime snacks include a banana, hot tea, small bowl of whole grain cereal, half a turkey sandwich, half a peanut butter sandwich, or warm milk.

Other considerations for a good night’s sleep

Additional tips that can help you increase the quality of sleep you receive at night include:

• Have a set bedtime and a set waketime. Try to keep this schedule as much as possible so your body falls into expected patterns of sleep.
• Be careful about sleep aids. If used too much, or incorrectly, they can actually reduce the quality of your sleep.
• If you do wake up at night, try not to stress about it. Get comfortable again, close your eyes and breathe deeply. Concentrate on your breathing. This near-meditation can help you fall asleep. Even if you don’t fall asleep, the relaxation exercise can be of better benefit than fretting about your sleep.
• Stay away from liquids after 8 p.m. to reduce the chance that you will be up to use the bathroom in the middle of your sleep cycle.
• Don’t just keep the lights low in your room before bed; try to keep lights throughout the house dim a couple of hours before bed to cue your body that bedtime is coming.

If you still have trouble getting quality sleep, your physician or a local sleep center can help you pinpoint whether or not you have a more serious problem that is keeping you from getting the rest that you need.

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How to Sleep Better at Night

Warning: The following constitutes my opinion. Take it with a grain of salt. I’m not an economist. And I’m a progressive (without party affiliation).

photo credit: swanksalot

Last night, President Barack Obama delivered his first State of the Union Address. Acknowledging some of his own mistakes, reminding people that the mess he inherited could hardly be fixed in a single year, calling for bipartisanship and unity, and presenting an ambitious list of things he’d like done going forward — especially in terms of helping the economy, the President managed to restore a little of the old magic that got him into office. A CBS poll taken just after the speech showed an 83% approval rating of the State of the Union Address.

Even though people are revved up now, and even though all of the economic stimulus ideas sound nice, the real question is this: Will Obama’s policies help the economy?

What President Obama Wants to do for the Economy

Since jobs seem to be the thing on everyone’s mind, the President made an effort to address that very issue. He unveiled plans to help businesses by providing a tax incentive for new hiring, as well as for investment in new equipment and new plants. He also wants to take $30 billion of the money repaid by Wall Street banks and use it to help community banks so that they can extend more credit to small businesses that hire new employees or that raise wages. Helping small businesses, and providing more security for workers, would certainly help the economy. It would instill confidence, as well as encourage businesses and individuals to spend a little more. And we all know that the U.S. economy relies a great deal on the spending done by consumers and businesses.

Additionally, Obama highlighted the fact that rebuilding our infrastructure and developing alternative energy technologies should be priorities. He insisted that green jobs and an upgraded infrastructure would help the economy, since these items provide a need for employment. Not only would we be able to increase our efficiency, but green energy projects and innovation would reduce our dependency on foreign oil. Obama even included nuclear power in the clean technology category, and managed to get even Republicans to applaud that move (they didn’t applaud even the tax cuts). We do need an improved infrastructure, and being able to build one while putting people to work would certainly help the economy. But it will cost a lot of money, and the deficit is growing.

Obama once again reiterated his commitment to the middle class, but pointing out that he did cut taxes for middle class workers earlier this year, and that tax credits for things like homes and cars benefit the middle class as well. He expressed a desire to help the middle class, and insisted that would be his focus with education reform, health care reform and financial regulatory reform. Honestly, a little more help for the middle class is probably a good thing. But, once again, the immediate stimulating effects might be outweighed by the costs down the road. Sometime, someone is going to have to raise taxes to pay for the recent cuts and the spending.

And, finally, the President laid out plans for a spending freeze on certain areas of the government. With the deficit ballooning at a rapid rate (although much of the economic stimulus deficit spending took place before Obama’s administration, the current government has certainly been keeping the pace), Obama insisted that spending need to be brought under control. While a spending freeze is certainly a step in the right direction, Republicans make a valid point when they point out that the freeze doesn’t apply to the biggest spending areas of the government. $250 billion is hardly anything when laid next to the trillions in deficits we’ve got right now. But it’s probably better than nothing.

Reality Check

If implemented, many of President Obama’s ideas could probably help the economy. In fact, if many of Obama’s ideas had been implemented at the beginning of the year, in the form he wanted them implemented, we’d probably be much further along with economic growth. (We’d have a bigger deficit, too, though. Of course, down the road the economic growth might have outweighed that. Or not. Maybe we’d just have more debt with crushing interest payments and an economy in worse shape long term. That’s for the economists to hash out with their often conflicting theories.)

The reality is that there is a limit to what any president can do. He can offer policy ideas and try to get those implemented, but most of it is out of his hands. Health care reform is a good example. The “reform” bill that has been dubbed “Obamacare” looks almost nothing like what the President wanted while he was campaigning and bears very little resemblance to what he asked for at the beginning of summer 2009.

A smaller example is the economic stimulus package. Obama wanted more job creation in that package, but settled for a compromise that cut the total cost of the bill, leaving out job creation but leaving in plenty of pork. And that’s the rub. Instead of just creating legislation that does one thing, Congress likes omnibuses with riders, cramming in as much pork as possible. The truth is that even if spending bills for helpful things are passed, they will probably be inflated with the kind of pork that gets individual Congresspeople re-elected while adding to an already-dangerous deficit. And, unfortunately, Obama has been going along, supporting the legislation once it’s passed, and doing his best to sell it to the American people.

In reality, we are a nation crippled by our own inconsistencies about money. People expect government to alleviate more of their problems (provide jobs, fix the health care system, offer Social Security, provide an education, etc.), but they don’t want to pay for it with tax dollars. (Make no mistake. Taxes are going to have to be raised at some point. Heaven help whatever President and Congress get to make that decision.) They want the deficit to shrink, but they applaud Senators and Representatives who bring pork barrel projects to their areas, infusing districts with federal funding.

No matter what the President says, and no matter what he may like to have happen, the bottom line is that Washington is set up to maintain the status quo. All the ideas and eloquence in the world won’t change that, and Obama is likely to find himself a frustrated president unable to do much of real impact for the economy while partisan bickering continues as each party worries more about taking the other down than actually attending to the people’s business.

What do you think? Does any president have the ability to help the economy? Can Barack Obama’s ideas help the economy?

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State of the Union: Can Barack Obama Kickstart the Economy?

Source: sxc.hu Photo: gossamerLL

We have a complex tax code that can be quite confusing. Trying to tote up credits and deductions, and working on getting an advantage, can be time consuming work. It is not surprising, therefore, that a number of assumptions about tax filing turn out to be incorrect. And, while some filing assumptions (such as the myth that using the provided address label will mark you out for an audit) are relatively harmless, there are some false assumptions that could end up costing you. Before you give in to assumptions about tax filing, do a little research — and consult with a trusted tax professional. Here are 5 tax filing assumptions that could result in large costs:

1. Tax Filing is Voluntary

This is a nice thought. The idea that paying income taxes is voluntary floats around out there, and comes from IRS statements and a Supreme Court case from 1960 that state that our tax system is based upon “voluntary assessment and payment…” Unfortunately for would-be tax avoiders, the courts and the IRS have been at pains to explain that it’s the assessment that is voluntary, not the payment. The reason that the assessment is voluntary is because tax payers are responsible for figuring out the amount of their obligations and then offering (volunteering) that information to the government. Of course, this is why there are audits — they are meant to double check that your voluntary assessment is accurate.

If you don’t pay your taxes, you are subject to penalties. There is a penalty for failure to file (and it’s heftier than the failure to pay penalty), and there are interest charges on the amount that you owe. If you aren’t careful, the fees and penalties can add up, costing you quite a bit.

2. No 1099? No Need to Report

Many of those who earn income from a side business, home business or contract work believe that if there is no 1099-MISC submitted for their income, there is no need to report it. There are a couple considerations here. Sometimes, someone who hires you will send a 1099 to the government, but forget to send you a copy. That makes catching your perfidy fairly simple. Others think that since your employer doesn’t have to send in a 1099 when s/he pays you less than $600 in a year, you don’t have to report that income. Not true. All income is taxable. No matter how little you make, and whether or not someone sends in the 1099. If you are audited and the discrepancy is discovered, it could mean back taxes and penalties.

3. A Canceled Check Works as Documentation for Donations

When you give to charity, whether it’s cash or goods, you need to have some sort of documentation, whether it’s a receipt or a canceled check if you want to itemize for the deduction. For donations of under $250, this works just fine. However, once you reach that $250 mark, you need a donor acknowledgment letter specifying how much you gave, and/or describing the property you donated. If you received goods or services from the charity in exchange, that has to be in the letter as well. And this includes donations and tithes given to your church. My congregation issues a yearly letter that itemizes donations, and clearly states that the only benefits I receive are intangible, and associated with my faith. You can see Publication 526 from the IRS for more information. Claim something you shouldn’t, and you could owe that amount — plus interest.

4. Unless My Parents Live with Me, I Can’t Claim Them as Dependents

Many people provide support for their parents, even though they don’t live with them. If you aren’t claiming the dependent-care exemption for parents you support, you could be missing out on tax savings, paying more than you should. There are some caveats, though. You and your siblings must pay at least 50% of their living expenses, and only one of you can claim the exemption each year. Some families rotate who gets the exemption, while others just provide it to the sibling that offers the most day to day support (even if it isn’t the most financial support). You do have to provide at least 10% of total support if you want to take the exemption, though. Check IRS Publication 501, or consult a tax professional for more information.

5. If You’re Married, It’s Best to File Jointly

Most people just assume that if they are married they should file jointly. However, there are some situations that may warrant filing separately. When the kids leave home, and the dependent exemption is no longer available, or if there has been a big change in income, couples may actually do better with separate filings. Sometimes, these savings are more apparent with state taxes. See if your tax professional will run a comparison between the two options, including state and federal taxes. You could save money, using it for you, rather than handing it over to the government.

Bottom Line: It’s best to rethink your assumptions about filing your taxes, and see if you could save a little more — or at least avoid common pitfalls that could cost you a great deal.

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5 Income Tax Filing Assumptions that Could Cost You Big

Beginning investing

Let’s assume you have no more credit card debts; you make regular student loan payments and you’ve already got your emergency fund in place.

In fact, you’ve been ready to invest for the last six months or so, but you’ve hesitated – perhaps wisely – because you know the market’s already gone up 60% since March of 2009. You’ve also been hearing talk of a double-dip recession and you’re worried about the escalating federal debts.

But you’re supposed to get started investing as soon as possible, right? Time is on your side.  And you know you shouldn’t market time, so what’s the matter with just jumping in?  Aunt Sally’s doing well with her PowerShares China fund – maybe you should just put some money in that and ride it out while you figure out what you should really be doing with you money?

There will always be mixed messages in market news.  This is how markets function – one party thinks it’s the right time to sell a stock, while another party thinks it’s the right time to buy.  The important thing is to focus on what you need and what value you can get for your money today.

With all those caveats out of the way, here are my suggestions for anyone just looking for a smart, sensible way to get started in investing now. We will assume that you are starting with $10,000 to invest. If your capital is different, the advice should still hold.

Starting Investing With $10,000

$10,000 can be a lot of money.  Since some Canadian mining stocks (to take one example) rose 100, 200 and 300% (and more) off the March 2009 lows, you can imagine what $10,000 could do if invested in the right vehicles.  I’m not suggesting you look at Canadian mining stocks, however.  That story’s already finished.

What you need to do is figure out

1. asset allocation
2. the sectors to invest in and
3. the vehicles for investing in them

This means figuring out what portion of your portfolio should be in fixed income vs. growth, whether you will invest in the entire market or just key sectors like healthcare, and whether you will use mutual funds, ETFs, or buy shares directly through a broker.

For simplicity’s sake, and for just getting started, I’d recommend that, for now, you just limit your portfolio to ETFs.

Protect your portfolio

You want some portion of your portfolio in investments that are not very volatile and have little downside risk.  Usually this is bonds, but recently there is growing hesitation over bonds since their rally might also be done (it’s called a “crowded trade”).  Investments such as Money Markets, GICs or CDs (Certificates of Deposit) aren’t helpful right now either, since they pay next to no interest.

I’d take your age, turn it into a percentage figure, and then use that as a guideline for what % of your $10k to put in this category.  It’s not a hard and fast rule, so if you have reason to believe you’re comfortable taking on a bit more risk, you can lower the amount.  So if you’re 30 years old, you might think about allocating anywhere from 25-35% of your portfolio here.

My suggestions right now: low-beta (i.e., low volatility) healthcare or pharmaceutical stocks like Johnson & Johnson, that pay good, rising dividends.  You might also still consider a corporate bond fund, since these pay higher yields.  Don’t put all your money in a “high-yield” bond fund, however, without knowing what it’s made of – it could be largely “junk” bonds (bonds with low credit ratings), or it could include quite a few decent corporate bonds, too.

Buy an ETF focusing on “income” or “fixed income.”  It should pay you distributions at least quarterly.  Make sure the MER is low, preferably close to 0.5% or lower.

Allocate about $2500 to this portion of your portfolio.

Domestic Growth

Because you know your own country best, you have an advantage over international investors because you are familiar with many of the companies and you might have access to better research about them.  It’s also easier to buy companies’ stock listed on domestic exchanges.

Depending on where you live, I’d advise you to have a bit less or more in this category than usual.  If you’re in the U.S., you should definitely (in my opinion) be “underweight” (i.e. own much less than usual) American equities.  The economic fundamentals just aren’t supporting U.S. growth anytime soon.  That said, there are several U.S. companies that do most of their business abroad (think IBM and Coke) and these could be good choices.

If you live in Brazil or Vietnam, however, you can afford to be heavy on your own market because your own domestic economy is experiencing good growth and will be for some time to come.

Buy an ETF that tracks the main index of your country.  In Canada, this is the S&P/TSX 60 – so you want the iShares ETF that replicates this index (XIU).

Depending on where you live, I’d allocate about $2000-$4000 to this portion of your portfolio.

International Growth

Right now foreign equities should be the bulk of your portfolio.  Pick a mix (say, 50-50) of companies with a history of paying out good dividends and increasing them on a frequent basis and combine these with a handful of companies poised for heavy growth – some tech stocks, telecommunications stocks, health care stocks and pharmaceuticals (all industries that are expected to do well over the next year).

Because you’ll be less familiar with international stocks, I’d buy them through ETFs which help diversify your growth and currency risk.  Visit the websites of iShares, Vanguard, Barclay’s and PowerShares to get a sense of the ETFs available.  Check their expense ratios and try to get the cheapest ones possible for the ETF class you’re interested in.

Buy one ETF that tracks the “total world index” (Vanguard has one of these), or buy two ETFs – one for international dividends, one for pure international growth.

I’d allocate about $5000, or around 50% of your portfolio here. For Americans, I’d probably go with about $6000.

Everyone Has To Start Somewhere

You won’t get investing “right” your first time around.  It takes time to learn everything and you need to allow yourself chances to make mistakes.  But I wouldn’t wait on the sidelines until you think you “know enough” to jump in.  Put some money in and just start learning.  The options mentioned here are all conservative choices that will do you well if you keep a few things in mind:

1. Buy and hold – the quickest way to start losing money is to start timing and trading.  Don’t do this if you’re a beginner.
2. Keep fees low – go with ETFs that have very low Expense Ratios, like 0.3% or 0.5%
3. Buy passive ETFs only – don’t buy “actively managed” ETFs, don’t buy leveraged ETFs.  The original ETFs were simple and just tracked indexes.  This is what you want to do, too.

Another option, for someone who really just wants to cautiously dip their toes in the water, would be to pick a stock you know well and think should do well – and just open up a brokerage account and buy a few shares of it.  This allows you to learn about the process of using a brokerage and tracking your stocks/ETFs without laying a lot of money on the table yet.  You can get comfortable with the feeling of having some money in the markets without yet putting it all in.

Once you’re comfortable that you know what you need to know, then invest your $10,000 in two or three stages.  For example, on February 1 you might put $5000 into two ETFs.  On March 1, you might put in the other $5000.  This will also allow you to benefit (or take advantage of) from changes in the direction of the market (if the market drops in February, you can buy it cheaper in March; if the market rises in February, at least you got half of your portfolio in at the lower price).

If you have any questions about getting started, feel free to ask me here or email me through my blog.  There are some other options for you, too.  I look forward to hearing from you!  I am not a registered investment advisor so make sure you consult your financial advisor and conduct your own diligence.

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How to Invest Now With Little Money to Start

Source: sxc.hu Photo: MaxCarnage

Much of the technology that we take for granted today is indistinguishable from what our ancestors would call magic. In the future, things like wireless electricity are likely to see close to magic in our eyes. We have advanced so far in the last 100 years, that it almost constitutes a miracle. Technological advances continue all the time, making our lives more convenient and entertaining. As we move forward, though, there is plenty of technology that will fall out of use and be relegated to the dust bin of history (or to the Smithsonian). Here are 4 relatively recent technologies that are on the verge of extinction:

1. Landline Telephones

photo credit: StephenMitchell

The landline telephone is practically a technological dinosaur. It has been around for more than 120 years, and in wide use in homes for almost a century. The landline was a fixture in just about every home until less than 10 years ago. In fact, the cell phone revolution didn’t really pick up speed until around 5 years ago. But since then, the effect on the landline phone has been devastating. Almost no one under the age of 30 even bothers with a landline anymore, preferring cell phones that can be outfitted with cheap plans, or deciding to get their phone service over the Internet at a steep discount from landline or cell phone prices.

2. DVDs

photo credit: C.P.Storm

When DVDs started get popular in the early 2000s, it seemed like they would enjoy the long popularity of VHS. DVDs are compact, in comparison, and of infinitely better quality. They are easier to use tham VHS, and quickly came down in price, ensuring that that the discs and their players became affordable.

Now, though, DVDs are already falling out of favor. Blu-ray is of better quality and can hold more information than DVD. And it’s not just the disc format competing with DVD: The ability to download and stream video from the Internet is also hastening the demise of the DVD. In fact, Blu-ray may only last a little longer itself as people become interested in the versatility of completely digital media. We don’t want to carry our music around on discs, so why would we do that with movies? Only those enamored of the idea of hard proof of media ownership will still be interested in discs of any kind after the next few years.

3. Cable-like TV

photo credit: rick

DVDs aren’t the only media likely to lose ground to blazing fast download speeds and Internet streaming. Cable and satellite TV could soon be losing ground. Cable is losing to satellite, and satellite could easily lose ground to online sources of television programming and entertainment. Especially since so much of it is free. Even though Rupert Murdoch is pushing to start charging subscription fees for Hulu, it is still free right now, and there is a chance that the move could backfire, since we’re all very used to the idea that Internet content should be mostly free. As long as the up and coming generation is more interested in being able to access their entertainment from anywhere via a laptop, cable-like TV is in danger.

4. GPS Devices

photo credit: William Hook

Huh? Aren’t GPS devices brand new and popular? That they are. And this past holiday season, many GPS manufacturers were desperate to sell units and marked them down dramatically. This is because with the entrance of Google in the market, it seems clear that GPS capability is going to be standard on smart phones. You can already use maps and other helpful GPS-like applications on a wide array of smart phones, and integrating full-service GPS will only encourage the decline of standalone devices. Why would you buy an extra gadget when your phone can fulfill the same function?

With the advancement of technology, it seems clear that some things will fall by the wayside. What gadgets do you see disappearing in the next few years?

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4 Technologies on the Verge of Extinction

Source: sxc.hu Photo: YM

Ah, the tax season!

While you are gathering up your information for the tax preparer and considering what sorts of deductions and credits you are eligible for your 2009 taxes, it is also a good time to start planning ahead for the coming year. One of the best things you can do for your finances in the coming year is to actually consider your options, and make tax wise plans for 2010. You can even discuss your possibilities with your tax professional when you go in to have your 2009 tax return prepared. Here are 5 tax moves to consider for 2010 (and we give you a bonus at the end which you may or may not be too keen on):

1. Buy a Home

This is a big one. The first time home buyer tax credit was extended by six months, so if you haven’t bought a home before, it could be worth a tax credit of up to $8,000. For those who are thinking that it’s about time to trade up, the government added an expansion worth up to $6,500 for those who have lived in the same place for five of the last eight years. While the $6,500 tax credit may not be worth deciding to buy a home out of the blue, it could be worth it if you have been planning to move in the next one to three years.

2. Upgrade the Energy Efficiency of Your Home

The government is offering a tax credit for green home improvements made through 2010. You can claim up to 30% of the first $5,000 you spend making energy upgrades to your home. There are bigger tax credits available for those who decide to install a solar home heating system or make other major overhauls. You can also combine these federal tax breaks with state and local tax breaks that may be available.

3. Enjoy Low Capital Gains Rates

If you have some investments you have been holding on to for a while, 2010 might be the year to sell them. Right now, the top rate on long term capital gains is 15%. However, starting in 2011, the top rate will return to 20%. If you have been thinking about cashing in on some of your investments, and you are in a higher tax bracket, it might be worth it to consult a financial and/or tax professional to see whether it is in your best interest to sell this year and avoid the higher tax rate.

4. Roth IRA Conversion

This has been generating a lot of interest lately. For 2010, the income restrictions associated with rolling over a traditional IRA to a Roth IRA are being lifted. (Realize that this only applies to rollovers; income restrictions on contributions to Roth IRAs remain in place.) In a Roth IRA, your money grows tax free, and you aren’t taxed when you take distributions. However, you should realize that you will be taxed on previously un-taxed amounts that you convert to the Roth IRA. Luckily, you can divide up these costs between your 2011 taxes and your 2012 taxes. Carefully consider whether this is the right move for you, consulting with a financial planner, since the Roth conversion doesn’t make sense across the board.

5. Consider Making Large Money Gifts to Your Grandchildren

Gift taxes are paid for by the giver. Everyone has a lifetime gift tax exclusion of $1 million, allowing them to avoid gift taxes on that amount. If you want to skip a generation, though, the tax exemption has been at $3.5 million. But next year things change, and that exemption returns to $1 million. But 2010 is a special year: There is no limit to the exemption. So you could give as much as you want this year, and take advantage of the Generation Skipping Tax Exemption. On top of that, other gifts that go beyond your exemption are taxed at a top rate of 35%, rather than next year’s 55% top rate. As you might imagine, if you are going to be generous, this is the year for it.

And finally,

Die in 2010

This year is a good year to die. For your heirs, at any rate. 2010 is the magical year of no estate tax. The estate tax exemption, which has been at $3.5 million for some time, is reverting back to $1 million in 2011. But for this year, there is no limit to the estate tax exemption, effectively eliminating estate taxes for 12 months. There are already some predictions that December 2010 could see an uptick in deaths as those bent on passing on their estates attempt to make sure that half of the value isn’t lost to a 55% top rate. Of course, there is a very real possibility that legislation could retroactively instate the estate tax for 2010.

Taxes: Planning Ahead

You can benefit from planning ahead. Understand what your options are, and think about the moves you can make throughout the year. Whether it is contributing to a 529 plan for a state tax break, keeping track of mileage traveled while doing charitable work, keeping track of possible itemizations, or paying points on a mortgage loan, if you think ahead and engage in proper planning, you can increase your tax efficiency each year.

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5 (plus 1) Tax Moves to Consider for 2010

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As the rest of America is waiting for the final passage of the health care reform bill, health insurers are coming up with ways to make their systems faster and cheaper. With cuts to insurers and 30 million new possible leads, insurers are going to have to find ways to maintain the new load and make the purchasing phase easier. In a recent article, the Chief Executive of AHIP Karen Ignagni, suggested: “Making sure [insurance companies] have the capacity for online sales and knowing how to present a product to consumers.”

Many insurance agents already use online tools to help accelerate processing consumers. It is obvious that agents who having been using these online tools will have an easy transition and a great advantage over agents who have yet to engage these online tools on their websites. Consumers also search for health insurance quotes online. As more people start to look for insurance, all of these online tools will be necessary for consumers to make decisions.

How does the online process work

By using health insurance quote engines, consumers can find cheaper prices and compare policies to make the best decision for them. Customers can opt to not have an agent contact them and can continue the process completely online on certain sites. This is great for consumers who hate hassle and yell at anyone who calls their home.

Consumers can talk to insurance agents online or purchase insurance through an agent’s site. Agents are most knowledgeable about insurance and can provide materials and the perfect policy. Agents typically work with many companies and will pick the company that best fits their client. Use agents wisely! They are there to help you, not take your money and run. Insurance agents try to build lifelong customers so keep that in mind. They have more to offer then just health insurance.

The health insurance market will have to reach new demographics in a short time period, and these new consumers are going to vary greatly in age. Younger adults who just graduated from college and older adults who could not acquire policies will all be required to obtain health insurance. The health insurance market is going to have to reach these groups in a positive way to get lifetime consumers.

How are the health insurance companies responding

Companies like GoHealthInsurance.com have been using social media as a way to reach younger audiences. Social media used to only reach younger populations but recently older populations have become involved in the craze. It is not uncommon to see Grandma’s photographs of when you were a baby on Facebook or her Tweets about the cookies she just made.

Humana has been making efforts to reach younger demographics in crumpleitup.com, an edgy Blue’s Clues version of health care information. However, more efforts by the health insurance industry are necessary to reach these groups of people.

People cannot expect agents to find them but must find the agents. Contacting an agent and researching online are the best ways to understand how the reform will affect your policy and help you find the best policy. Informed buyers are usually the happiest.

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Health Care Reform Will Make Health Insurance more Accessible Online