Archive for July, 2015

The Importance of Diversification of Your IRA Portfolio

Thursday, July 30th, 2015

diversificationWhether you’re new to the investing game or a novice, there’s something that everyone needs to learn, and that’s diversification of assets. Diversification is fundamental, not only for your portfolio’s sake, but also for your future retirement’s sake. When you have a self-directed IRA, and the investment options available to you are practically limitless, that’s when you really have to know what you’re doing.
Most regular IRA custodians limit your choices to easy-to-administer paper investments, even though the Internal Revenue Service’s rules give you broad latitude on what you can include in your retirement account.

It’s pretty much seen like this:

  • Stocks help your portfolio grow
  • Bonds bring in income
  • Real estate provides both a hedge against inflation, and it may rise when stocks fall
  • Cash gives you and your portfolio security and stability

Don’t box yourself in though, nontraditional investment choices vary from:

  • Commercial Real Estate
  • Oil and Gas Royalty
  • Business

Your limits are only set at the IRS rules, which should be practically tattooed into your mind by now.

Investopedia says to know when to get out. Buying and holding and dollar-cost averaging are sound strategies, but just because you have your investments on autopilot does not mean you should ignore the forces at work. Stay current with your investment and remain in tune with overall market conditions. Know what is happening to the companies you invest in.

Learning to invest is rewarding, and really getting into the swing of things, while taking a disciplined approach, and being good at investing is even better. Educating yourself and consulting with others that you trust is imperative to your financial growth and wellness, and if the right steps are taken, you’ll be on your way to a lovely retirement.

Upping Real Estate Value Through Your Self-Directed IRA

Thursday, July 23rd, 2015

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Purchasing property through your self-directed IRA is one of the most common types of investments one can make. The reason it’s such a popular investment choice is pretty obvious; for most, it’s the ability to control retirement funds not only in securities but in real estate, it’s definitely a more appealing option for those do-it-yourselfers. To top it off, with rates where they are, the ROI that real estate offers, and the fact that anyone is able to take advantage of it, the pros definitely outweigh the cons. You’ve just got to get familiar with the rules the IRS has set, and then you’re off!
After a property is purchased, depending on the type, your first priority might be to make some renovations, especially if it’s a family home. Whether your motivation for improvement is for resale value, or to be more appealing to potential buyers and renters, we’ll get you on the right track.

Solar

No one needs to be told why solar power is the way of the future. With potential savings for an average household of up to 30 to 40% on energy, a rough estimate of $7,000 for the unit and installation, and $2,100 back in green tax credits. A solar-powered water heater could save as much as 80% on water and heating bills for an average household.
Solar energy makes a house more desirable not only to potential buyers/renters, but also to appraisers, and other investors. Not to mention an ideal renter, someone who almost definitely is in tech, and will most likely take great care of your property.

The Flooring

Never ever underestimated the importance of flooring, 90-something percent of home renovation pros suggest new flooring, and that’s for good reason. And it doesn’t have to cost an arm and a leg, for example, for an estimated average investment of $700 to $1000, professionals say that the return value can almost double instantly.
Even less than that can be spent, a few well-placed nails can eliminate those awful floorboard squeaks. Also consider repairing broken tile instead of the entire floor, and replacing that worn down wall-to-wall carpeting that’s almost undoubtedly in the hallway.

Tech Upgrades

Depending on the area that your rental property is in, like in the city, you might be wanting to appeal to young professionals, and that’s simple enough to do. With small upgrades like replacing that old thermostat with a Nest smart thermostat, or the front door knob with a key-less entry pad, you can almost instantly bring your property into the 21st century.

A Fresh Coat of Paint

The paint that’s now on the walls doesn’t necessarily have to be chipping off of the walls to be unappealing to prospective buyers and renters, a dining room that’s dark red and a kitchen that’s a bright yellow is enough to send anyone running. Neutral colors like light grays or soft whites always fair best, and suite everyone’s liking.
If a little more money is in the budget, then additions like wainscoting and crown molding bring elegance and beauty throughout the house.

Common Concerns When Investing in Gold Today

Monday, July 20th, 2015

investing in goldIf you’re one to keep up with the news in the wonderful world of Wall Street, you’ll already be aware of the ups and downs that gold has been through lately. As of July 20th 2015, an ounce of gold was down $24.60, or 2.2%. Last week, gold tumbled more than 2%, dipped below $1,100 to $1,080 — its lowest level since February 2010, and was down 4.6% before recouping some of its steep losses.

The good news in all of this (yes, there is some good news), is that the reason that gold is taking a bit of a dive, is due to the state of the U.S economy. When the economy does well, it takes away some of gold’s value and reputation as a big player in hard economic times, and now that the U.S dollar is rising the fastest it has in 40 years, again, unfortunately for gold, that means its value is decreased even further.
The reason that we brought out those statistics is that we want to talk about the very active life of gold, and some of the concerns that play a huge role in your decisions to invest in it.

Concern #1. The fate of gold and the Stock Market are bound together

This is a big concern that’s been around for a long time that people hear a lot of, that when gold is doing well, that’s when the Stock Market is taking a tumble. But what we want to know is if there’s merit to these claims. According to Investor Place, there has been an unreliable correlation between gold and stocks over time. Since the beginning of 2005, the SPDR Gold Shares (GLD) has had a correlation of 0.14 with the S&P 500 Index. Correlations run from 1.0 to -1.0, with 1.0 indicating two securities move in tandem, -1.0 showing that they move in completely opposite directions, and 0.0 showing no correlation at all. As a result, the 0.14 number underscores the lack of a consistent relationship between stocks and gold.

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Image credit to InvestorPlace.com

Concern #2. Gold is foolproof

As we stated earlier in this article, gold is really at a low at the moment. And unfortunately for the gold enthusiasts, it’s most definitely not a safe bet, or foolproof. It’s quite the contrary. Gold has a low expected return, high volatility, as well as terrible tax treatment, as it’s taxed as a collectable at a 28% capital gains tax.

Concern #3. It has no long-term value

Markets move. There’s a reason for the old saying, “what goes up, must come down”. And vice versa. There is a time for every move in the market, based purely on cyclical and technical factors. So if you get stuck to any one particular theory, i.e. that gold will never make it back as a driving force in the market, then you could get caught out of the game, and with your proverbial pants down.

Regardless of the concerns listed above, there are a million reasons that you would or would not want to invest in gold. With any investment, you have to be willing to take a bit of a gamble, and worst case scenario, you have to be willing to be lose money. That is just a fact of investing. What this all means for you, as an investor in gold, is all up to you.

Retirement ins and outs as a Small Business Owner

Thursday, July 16th, 2015

Retirement businessAs a small business owner, it’s pretty common that you’re going to be the one wearing many, many hats. While you’re busy running your business on one hand, and juggling everyday life on the other, your thoughts might rarely turn to your retirement. One thing that you might not be taking into consideration is the fact that there are people that heavily depend on you for their future financial health. Investing in small business retirement plans is not only an investment in your employees and business, but also yourself.

On the other side of the spectrum, there’s your financial wellness as a business owner. More and more small business owners plan to rely heavily on the success of their business to fund their retirement, which can be risky. Unfortunately nearly half of small business owners don’t feel well prepared for retirement. It has been found that those who do have a plan in place have larger and more successful businesses, and report higher revenues. Bottom line is that to truly succeed, you have to plan correctly.

First Thing’s First

There are a few initial steps that everyone should take to get going on the right path.

  • Find and work with a financial advisor
  • Read books and articles about saving for retirement, absorb all the information you can. Information is power
  • Shop around for an administrator that is best for you and your business

Let’s Talk About Options

Employer-sponsored IRAs work for small business owners who would like to offer retirement benefits to current employees, or to potentially attract new hires through benefits packages. There are two options for employer-sponsored IRAs:

  • Simplified Employee Pension IRAs (SEP IRAs)
  • Savings Incentive Match Plan IRAs (SIMPLE IRAs)

SEP IRAs allow employers to make contributions to their employees’ retirement accounts of up to 25 percent of the employee’s compensation, or a maximum of $52,000 (in 2014), whichever is less. They are also funded 100% by the employer; employees do not contribute. The employer is not required to make a contribution every year, but must contribute the same percentage for employees that they may contribute for themselves in a given year. SEPs are the easiest plans to set up, and offer business owners the greatest flexibility in when and how much they contribute.

401k’s. Maybe the most well-known type of retirement plan, a traditional 401k allows employees to contribute a portion of their wages to individual accounts. Employers have the option to make and/or match contributions on behalf of plan participants, and have the right to reclaim those contributions if an employee leaves the company before a set time. Additionally, employers who sponsor traditional 401k plans are subject to an annual qualifying test by the IRS.
Unless employees contribute to a Roth 401k account, money is taken out of an employee’s wages pre-tax and therefore reduces the amount of income tax they have to pay. Because of this, the IRS places a cap on how much an employee can put into a 401k account each year.

Not only should you be taking precautions for your own retirement, but giving your employees the opportunity to invest in themselves is crucial, which is why looking into an affordable plan to offer your employees will not only benefit you, but also those that are so important to you.