The simplest way to invest may be the best

http://www.marketwatch.com/story/the-simplest-way-to-invest-may-be-the-best-2013-11-22
Jacobs recommended using a total stock market index fund, and a small-cap index fund, with the money split four-to-one between the two.

Motley Fool: Mutual Fund Pros Falter

This was publish in the Bee's business page today.  I've advocated investing in indexed funds for a long time.

I put $10,000 into the Vanguard S&P 500 index fund in July, 1996.  Today, that account is worth $32,465.63, after re-investing all the dividends.

When the tax law changed in 2000 allowing me to convert my IRA into a Roth, I did that.  And that account has grown by 58.01% in the 3 years, all invested in index funds, with about half of it in the Total Market Index Fund and the other half in the S&P 500 Index Fund.

My philosophy is to invest money I won't need for at least 10 years into index funds and just let it sit.  No one can time the market with consistent success.

If you change your investment strategy, however, beware of any potential tax consequence.

http://m.staugustine.com/news/business/2013-04-26/motley-fool-april-27-2013

Fool’s School
Beware of the Experts

Some have accused professional mutual fund managers of being no better at picking stocks than a dart-throwing chimp. That’s insulting to chimps, though.

In any given year, the majority of professional fund managers underperform their benchmark index — a virtual certainty given a limited amount of return to capture and an unlimited amount of fees to charge.

For example, in 2011, 84 percent of U.S. stock fund managers underperformed the S&P 500 index, according to Standard & Poor’s. That’s bad enough, but dig deeper and it gets far worse. It turns out that the overwhelming majority of professional fund managers focused on the minority of stocks that underperformed the market. It takes skill to be that bad.

(Per S&P Capital IQ data, the average stock that rose more than 2.07 percent returned 20.4 percent, while the average stock below that threshold fell 16.6 percent.)

This isn’t rare, and it extends beyond fund managers to Wall Street analysts. According to Bloomberg, “The 50 stocks in the S&P 500 with the lowest analyst ratings at the end of 2011 posted an average return of 23 percent (in 2012), outperforming the index by 7 percentage points.”

Meanwhile, fees make the situation worse. In one report, IBM concluded that global money managers overcharge investors by $300 billion a year for failing to deliver returns above a benchmark index. Vanguard cites data by the Financial Research Corp. showing that the single best predictor of a fund’s future performance is its expense ratio (essentially an annual fee).

A common rebuttal is that, while money managers underperform an index, they are better at managing risk and lowering volatility. But studies have shown that the average mutual fund closely tracks the ups and downs of the overall market.

Some professional managers can beat the market and earn their fees. The majority can’t. If you don’t have the time or inclination to manage your own money, you’re likely to do best buying a passive, low-cost index fund.

How Fees are Killing Your Savings

It's not just retirement money, I think investing in low-cost index funds beats most other investment options.

http://finance.yahoo.com/blogs/daily-ticker/retirement-gamble-fees-killing-savings-155036217.html

S&P 500 Index

This really shows no one knows where the market is heading.  That is why having someone manage your portfolio makes absolutely not sense.  Investing in index funds is a much better bet.

http://news.yahoo.com/wall-street-week-ahead-returns-mid-april-225930440--sector.html

Variable Annuities

I have been saying variable annuities are probably the world's worst investments for a long time.  Here is an article from Smart Money Magazine that says basically the same thing:
http://www.smartmoney.com/retirement/planning/whats-wrong-with-variable-annuities-9512/

And the Securities and Exchange Commission has various articles on variable annuities too.
http://www.sec.gov/answers/varann.htm
http://www.sec.gov/investor/pubs/varannty.htm

This Forbes article gives nine reasons why you need to avoid variable annuities:
http://www.forbes.com/sites/feeonlyplanner/2012/07/02/9-reasons-you-need-to-avoid-variable-annuities/

MetLife has scaled back the sale of these policies, read this November 19, 2012 article from the San Francisco Chronicle:
http://www.sfgate.com/business/bloomberg/article/Variable-Annuity-Sales-Fall-Most-Since-2009-as-4050978.php

And the Wall Street Journal chimed in with this May14, 2012 article:
http://online.wsj.com/article/SB10001424052702303916904577376193314287640.html

Timeshare Prices Plummet to $1

Variable annuities, in my opinion, are in general really bad investments and I think timeshares are closed seconds.

http://finance.yahoo.com/news/timeshare-prices-plummet-to--1.html

Unable to sell his parents’ ocean-front timeshare for the past year, David Suder became so fed up he offered to give it away. They paid $8,000 for the Orange County, Calif. unit a decade ago, but since there are no willing buyers, and his 81-year-old mother, now a widow, can no longer afford the monthly maintenance fees, Suder says he doesn’t have a choice. The San Diego-based real estate investor is offering the unit for free in the hopes that someone will take it before his mother dies. “I don’t want to inherit it,” he says. “I want it to go away.”

While real estate – and even vacation real estate – is starting to show signs of recovery, timeshares remain in freefall. During the first quarter, the number of for-sale-by-owner postings doubled compared to the same period a year ago on RedWeek.com, a popular resale site. Another site, SellMyTimeshareNow.com, says owner sales are up 20% during that period.

Experts say even in better times, most sellers never saw a return on their investment. “Very few timeshares increase in value,” says Alisa Stephens, executive producer at RedWeek.com. As values sink and desperation grows, the number of owners giving their timeshares away for $1 – or less — has doubled in the past year, says Brian Rogers, of Timeshare Users Group, an owner advocacy group. “There’s never been a worst time to try to sell a timeshare,” he says.

Typically found in resorts, timeshares allow multiple buyers to purchase rights to use a property, like a hotel room, suite or condominium, for one to two weeks per year over a long period of time. They appealed to buyers who believed the timeshare’s purchase price was lower than the total amount they’d spend for hotel stays on future trips. Timeshare owners could also invite family and friends to stay with them for free.

Those perks never materialized for many timeshare owners who had to cut back on travel since the recession. Others couldn’t afford their timeshares after losing their jobs. Up to 48% of timeshare owners are behind on their annual maintenance payments by at least a year – up from 37% in 2007, according to TimeshareResortCollections.com, which helps resorts to recoup past due payments. The company covers about 80% of the timeshare industry.

To make up for these losses, resorts have been increasing the maintenance fees on the individuals who continue to use their timeshares. Average annual maintenance costs hit an all-time high of $731 in 2010, up more than 8% from the year prior, according to the latest data from the American Resort Development Association. Experts say those costs are still rising. And for some owners, they’re a big reason to sell, says Lisa Ann Schreier, director of Timeshare Insights, a consultant to timeshare buyers and sellers.

Faced with rising medical bills, John Chase, 62, and his wife decided to sell their timeshare at a megaresort in Orlando. After the listing lingered on the market for two and a half years, the couple chose to give it away just so they could avoid the maintenance fees. Though they bought it for $4,000 in the late ‘90s, they ended up selling it for just $1. Chase says he never expected to sell so low, especially since the sales pitch he received when he purchased the timeshare led him to believe its price might increase.

For their part, resorts are changing their approach to timeshares. Howard Nusbaum, president and CEO of ARDA, says consumers should buy timeshares to use them – not as an investment. Resort developers, he says, are now marketing timeshares to a smaller group of high-income consumers who are more likely to be able to afford timeshares and who don’t need a loan to purchase them. Sales between resorts and buyers totaled $6.4 billion in 2010, according to the latest data, down 40% from their peak in 2007, according to ARDA. Experts say 2011 data isn’t expected to be much better.

The data is in stark contrast to vacation homes, where demand is rising. Roughly half a million vacation homes sold in 2011, up 7% from 2010, according to data released last week by the National Association of Realtors.

To be sure, some timeshares are retaining values better than others. Owners with timeshares at brand-name resorts are likely to recoup the most, especially if those locations are in areas where real estate supply is limited, like Key West or Myrtle Beach, says Jason Tremblay, CEO of SellMyTimeshareNow.com.

Before selling at a huge loss, timeshare owners might want to consider some alternatives. Stephens suggests renting the timeshare to vacationers at a price that covers the annual maintenance fee but is cheaper than what travelers would pay to stay at a hotel. Or consider asking the resort if it will buy the timeshare back; the price it might offer won’t be near what the owner paid the developer originally but could be higher than what other buyers are offering.

Other sellers say they’ll hold out until a buyer comes along. Joe Cantu and his wife paid $15,000 for a two-bedroom suite at a high-end resort in Las Vegas seven years ago. They recently welcomed a new baby, and they’ve been trying to sell the timeshare. His asking price is $3,500, but despite the resort’s amenities, which include a putting green, sand-bottom pool and in-room massage services, he hasn’t received offers close to that in the eight months it’s been on the market. “I’ll just keep it posted as long as I need to,” he says.

U.S. stocks notch best first quarter since 1998

In first quarter, Dow gains 8.1%, Nasdaq Composite up nearly 19% and S&P 500 gains 12%.

This is why I always advocate investing in no-load index funds. And if you include dividends, the gain is even more. While this kind of performance most like won't repeat anytime soon, in my opinion, over a long period of time, it should beat most actively managed funds. Index funds are tax efficient too. They generally do not pay any capital gains dividends; therefore, the carrying cost is very low.

Warren Buffet is currently having a $1 million bet with some hedge fund managers that the S&P 500 will grow better than any of the hedge funds over a ten year period. See http://finance.fortune.cnn.com/2012/03/21/warren-buffett-hedge-fund-bet/

6 reasons why Wall Street hates LazyPortfolios

I have always advocated investing in no load index funds. Here is an excerpt of the article. To read the entire article, click on the link below.

http://www.marketwatch.com/story/everything-you-know-about-investing-is-wrong-2012-03-27
By Paul B. Farrell, MarketWatch

SAN LUIS OBISPO, Calif. (MarketWatch) — “America’s investors have been ripped off as massively as a bank being held up by a guy with a gun and a mask,” former Securities and Exchange Commission Chairman Arthur Levitt warned in an article in Fortune magazine a decade ago. That same year in his classic “Take On The Street,” Levitt lambasted the fund industry as “a culture that thrives on hype … withholds important information,” a “cutthroat business” that “misleads investors.” Today, it’s worse.

Lazy Portfolios give investors a far superior alternative than gambling retirement savings in Wall’s Street’s casino. Simple solutions: Just three to 11 no-load low-cost index funds, and zero trading . . . without brokers or advisers.

Follow six simple secrets and create your own Lazy Portfolio winner

1. Being average wins.
2. Buy and hold. Buy and hold. Buy and hold.
3. No market timing, no active trading. Never.
4. Not saving 10% for your retirement? Then you’re spending too much.
5. Forget short-term market swings.
6. Forget stock market news.

Stock Sale Tax Rules Force Make-or-Break Choices

http://www.accountingtoday.com/news/Stock-Sale-Tax-Rules-Force-Make-or-Break-Choices-57187-1.html
BY ROGER RUSSELL, SENIOR EDITOR, ACCOUNTING TODAY

The new cost basis reporting rules won’t affect this year’s returns, but they are already in effect.

Beginning on Jan. 1, 2011, it became mandatory for brokers and other financial intermediaries to report cost basis information on Form 1099-B to investors and to the Internal Revenue Service for equities acquired on or after that date. The new requirements, spelled out in the Emergency Economic Stabilization Act of 2008, also will cover mutual funds acquired on or after Jan. 1, 2012, and debt securities, options and private placements acquired after Jan. 1, 2013.

The rules take aim at the practice of deciding after the fact what stock was sold where an investor holds different lots of the same stock, each with a different cost basis. For example, an investor holds three lots, with a cost basis of $40 for the first lot, $60 for the second lot, and $100 for the third lot. If shares are sold for $90, the investor might decide at a later date which ones were sold—those with a high cost basis, creating a loss, those with a medium cost basis, creating a small gain, or those with a low cost basis, creating a larger gain.

“Starting this year investors have to decide what they’re selling, and communicate this to the broker immediately,” said Stevie Conlon, CPA, Esq., senior director and tax counsel at Wolters Kluwer Financial Services. “You can’t do it later. You have to identify lots that were sold no later than the settlement date of sale. Before this, people would look at the stock they had sold at the end of the year or at the end of every month and determine which were the best lots to have sold.”

“The final regulations are clear that the taxpayer must select the lot that was sold no later than the settlement date, which would be the date of the trade plus three days,” she said. “This is probably what the law was before, but the law and the new regulations make it specific. In the old days it wouldn’t be obvious to the IRS that you changed something later. Now, the broker must issue a Form 1099-B for the stock sold this year that was bought after January 1 of this year.”

“Next February investors will receive a Form 1099-B showing the cost basis under that rule,” she said. “It will show the cost basis that was communicated to the broker by the settlement date, or the broker will be required to use FIFO. If what you put on your tax return doesn’t match, it will be obvious that you picked a different method after the fact. There will be taxpayers that are unsatisfied with both their broker and their tax adviser.”

This is a momentous issue due to the way that taxpayers normally interact with their advisers, Conlon indicated. “It requires getting tax advice on a recurring basis, almost in real time. That’s very different from an adviser’s normal involvement with a client at year-end planning sessions and tax return time,” she said. “Under the new rules, you’re locked in by whatever you select. It forces you to make an analysis about what’s the right lot to sell on an ongoing basis. The adviser has to be involved at the time of the trade, and that’s significant.”

Conlon advised tax preparers to explain the new rules to their clients during tax season, if they haven’t already. “The sooner you can educate your clients about the new rules, the better it will be at the end of the year,” she said.

Stocks are safer than bonds, fund manager says

http://www.marketwatch.com/story/stocks-are-safer-than-bonds-manager-says-2010-05-23
Chris Davis: Investors should be worried about bond bubble
By Chuck Jaffe, MarketWatch

BOSTON (MarketWatch) -- The investment move that has made consumers most comfortable since the market crisis of 2008 is about to become the investment folly of the 2010s.

That's according to Chris Davis, head of the Davis Funds. He said recently that bonds are an emerging bubble, destined for a fall over the next decade, just as investors have been throwing virtually all of their available cash into bonds so that they could sidestep the pain in the stock market.

"The only real bubble in the world is bonds," Davis said, at the CFA Institute annual meeting. "When you look out over a 10-year period, people are going to get killed."

While Davis may not be a household name to many investors, he represents a long and storied brand in the fund business, a third-generation fund manager whose firm runs $65 billion in assets, and whose management acumen is widely hailed as being a model of sound thinking.

Thus, if you are one of the investors contributing to those record bond-fund inflows, his message should be terrifying.

Davis did not predict an immediate implosion in the bond market -- he said it might hold up well for up to two years -- but he said he believes a fall is inevitable.

"When you have deficits this high and rates this low, something has to give," he said, "and I don't think you can look at this and think the deficits are going to give any time soon."

Rising-rate environments are bad for bond funds because bond prices fall when rates go up. A bond fund must "mark to market" at the end of each day, meaning it prices its securities as if it was selling them. Thus, when bond prices fall, bond funds suffer.

That's hardly a new thought; in fact, plenty of attendees and experts at the CFA conference were thinking the same thing -- that there's way too much debt in the world and that it's time to pay the piper.
Stocks as safe haven

Davis's point, however, was a bit different. He suggested that the problem for most investors is that they are looking at bonds as a safe haven when, in current conditions, the safer place is actually stocks. He wasn't advocating a "buy, buy, buy" bull-market mentality -- he did not suggest average investors dump all bond funds or go whole-hog into stocks - but based his comments on the numbers, specifically on yields.

Davis said the current dividend yield on stocks is roughly 3%, about the same or a hair less than what an investor can get on bonds. Looking at your investment as "funding an enterprise," Davis urged looking at the "earnings yield," which goes beyond the dividend payout to include what the business itself keeps.

When examined that way, he said that investing in bonds when the government is so deep in the financial hole is much riskier than buying a stock like Nestle, "which has a 7.5% earnings yield, where it is reinvesting half of that money in the business and pays the other half to you in dividends."

Further, corporate yields tend to adjust automatically to inflation, through the price increases that big companies can pass along to customers, whereas bond yields lose ground if inflation returns to the market.

"If people got their statement and looked at the dividend yield and earnings yield, they might do things differently right now," Davis said. "But you have to be able to numb yourself to changes in stock prices, and most people can't do that."

Here's where his dire forecast for bonds comes back to roost. Most investors seek bond funds for safety, income and stability. While bonds will likely remain safe, bond funds that get hammered when the rate picture changes will not feel very stable or secure; instead, they will be acting more like stock funds. And since the income component from a bond fund is not likely to be any better than the dividend stream cast off by a fund buying high-quality stocks, there's a real case to be made that it will be stock funds, over time, that provide a lot of what investors are expecting when they buy bond funds.

Davis acknowledged that many observers are calling for the stock market to take a major and protracted downturn, so he brought up the idea of a worst-case scenario, another Great Depression, where the market basically had 25 years -- from 1929 to 1954 -- of "going nowhere."

Investors who simply made a deposit on the first of each year and rode it out, however, wound up with a 13% annualized gain over that period, thanks to dividend yields.

The problem with the flood of money to bond funds, Davis said, is that "it pushes people the way they want to go, and not the way the market might suggest they want to go. They feel better, but what they are doing is very, very dangerous."

Chuck Jaffe is a senior MarketWatch columnist. His work appears in many U.S. newspapers.

Wash Sale Rules

It is generally not a good investment tactic to time the market. But in today's volatile environment, investors are sometimes tempted to buy stocks back after they have sold them at a loss. The general rule is that you cannot recognize the loss if substantially the same security is repurchased 30 days before or 30 days after--within a 61 calendar day range--the sale.

The disallowed loss is added to the basis of the repurchase security.

Here is a good link for the rules:
http://www.fairmark.com/capgain/wash/index.htm

Fund vs Index

http://online.wsj.com/article/SB123111222434752379.html
A 10-Year Streak
Little-known Manning & Napier fund has beaten the S&P 500 each year for a decade
By KAREN DAMATO

Heading into 2008, 14 stock and balanced mutual funds had beaten the Standard & Poor's 500-stock index for nine years in a row and had a shot at extending their streaks to a full decade.

Now, just one of those funds has stayed ahead of that widely watched U.S.-stock benchmark. It's Manning & Napier Pro-Blend Maximum Term Series -- a relatively small fund that researcher Morningstar Inc. has called "one of the best funds most people have never heard of."

To be sure, investors in this $318 million fund are more likely to be bemoaning their losses for 2008 than toasting the fund's benchmark-beating record. Manning & Napier Pro-Blend Maximum handed investors a negative 35.4% return for the year. While that's better than the S&P 500's negative 37% return (including reinvestment of dividends), "we are not happy at all to be down over 30%," says Patrick Cunningham, a managing director of Manning & Napier Advisors Inc., the fund's management firm, headquartered near Rochester, N.Y.

Still, looking at the past decade as a whole, the fund delivered positive returns for investors while the S&P 500 was in the red. The fund returned an average of 5.4% a year, while the S&P was down more than 1% a year. That performance ranks Manning & Napier Pro-Blend Maximum in the top 2% of Morningstar's "large blend" category over the 10-year period.

Different Approach

Manning & Napier, an employee-owned firm that primarily manages money for institutions, is different from many other management firms in a couple of ways. For one thing, "we do not have portfolio managers per se," Mr. Cunningham says. Analysts recommend individual securities for purchase, and the decisions about which securities to add to portfolios are made by committee.

And while the firm, which was founded in 1970, is happy to highlight its success versus the S&P, its portfolio-building approach is "benchmark agnostic," the Manning & Napier executive says. That means there's no attempt to have the same industry weightings as the S&P 500 or any other index -- and also no concerted effort to beat a chosen index by overweighting and underweighting sectors or individual stocks in the benchmark.

Mr. Cunningham believes not being tied to a benchmark actually helped Pro-Blend Maximum beat the S&P 500, the most widely used benchmark for U.S.-stock funds: "The key, I think, to beating it in bull markets, bear markets and sideways markets is the flexibility to move where the opportunities are," he says.

Manning & Napier manages a total of about $16 billion, with a little more than a quarter of that in 25 mutual funds. Pro-Blend Maximum is the most aggressive of a series of four "lifestyle" funds that hold a mix of stocks and bonds and are mostly marketed as offerings for 401(k) plans. The fund typically keeps 70% to 95% of its assets in a widely diversified portfolio of stocks; that figure was 91% as of Sept. 30.

Reducing Risk

Manning & Napier aims to buy the shares of attractive businesses when the stock-market value of such a company is no more than 70% or 80% of what a rational buyer would pay for the whole operation.

About 30 "bottom up" stock analysts search for companies (from large companies to small, and around the globe) that fit the firm's criteria. They get input from 10 "top down" economists and analysts who study, for instance, which countries are most promising. Separately, a half-dozen fixed-income analysts research individual bonds.

The stock and bond analysts present their buy recommendations to a senior research group made up of five bottom-up and two top-down staffers, which decides on the securities that go into the firm's portfolios.

"If you buy a good business and you buy it when it is undervalued, you have taken out the majority of the risk of owning that stock," Mr. Cunningham says. "That is, assuming you don't have a credit crisis," he adds with a rueful chuckle.
—Ms. Damato is a news editor for The Wall Street Journal in South Brunswick, N.J.

Write to Karen Damato at karen.damato@wsj.com

Mutual Funds & ETF's

Due to the drop in the stock market, many investors decided to sell their holdings in mutual funds. Not having enough money in cash reserves, many mutual fund managers were forced to sell some of the stocks in the funds to generate cash to pay the redeeming investors. Many of these stocks had been held for a long time with low cost basis, thus generating long-term capital gains. Those phantom long-term capital gains are now being "distributed" to the remaining mutual fund owners.

In order to avoid the income tax on these capital gain distributions, an investor will need to sell the mutual funds before the distributions are made. Investors should find out how exposed they are to the capital gains by contacting the fund companies.

For investors who hold “short” exchange traded funds (ETF’s), these funds sell short in various indexes and industries. While the performance has been great in this bear market, the ETF’s are now distributing capital gain dividends – some as high as 40% of the net asset value. And because the funds hold short positions, the capital gains are almost entirely short-term capital gain dividends that fall under the same rules as a mutual fund – the short term capital gains are taxed as ordinary income. So, not only does this tax the dividend at ordinary income rates, but the investor has no opportunity to offset the short term capital gain dividend with capital losses.

Money managers prepare for Obama's tax policies

http://pittsburgh.bizjournals.com/pittsburgh/stories/2008/11/17/story1.html?b=1226898000^1732986
Friday, November 14, 2008 | Modified: Monday, November 17, 2008 - 6:00 AM

Money managers prepare for Obama's tax policies
Pittsburgh Business Times - by Patty Tascarella

President-elect Barack Obama vowed during the campaign that he would cut taxes for the middle class but raise them for the affluent.

With roughly six weeks left in the year to come up with strategies for clients’ 2008 tax filings, financial professionals are scrambling to guess what changes are likely to be enacted once Obama takes office in January.

They don’t doubt there will be changes. Obama outlined a comprehensive plan that raises capital gains and estate taxes, rewards corporate R&D and job creation efforts stateside, and repeals special breaks for oil and gas companies and those who create jobs overseas at the expense of employment in the United States.

But many believe the roller coaster spins and turns of the stock market over the past couple months will impact the new president’s agenda.

“The economy is the wild card,” said Douglas Kreps, managing director at Fort Pitt Capital Group, Green Tree. “It seems like the rhetoric coming out of the Obama transition team has softened on taxes. The economy is in a fragile state, and they don’t want to be seen as raising taxes and further damaging the economy.”

David B. Root Jr., CEO of Downtown-based D.B. Root & Co., isn’t sure “how much room (Obama) is going to have to increase marginal tax rates in the way he communicated during his campaign because we’re in a recession and have no idea” how long it will last.

“We’re encouraging our clients not to overreact,” Root said. “However, at the same time, we’re suggesting it makes sense to be aware that certain tax items or tax rates may and probably will go up, namely capital gains and possibly dividend rates.”

BEST GUESSES
Root believes it’s “more than likely” the new president will take “some steps” with capital gains, specifically raising the rates from the current 15 percent to 20 percent for those in the upper income brackets.

“In which case, from an investment standpoint, anything we can do to enable our clients’ portfolios to become more tax efficient going into next year will only help,” Root said. “That may mean possibly harvesting capital gains this year and offsetting those with losses that may have occurred over the past two or three months.”

He’ll make sure clients are “maxing out on retirement plans” and taking advantage of over-50 catchup contributions, which aren’t taxed until the investor cashes out.

“A lot of times, those get overlooked,” he said.

Smithfield Trust Co. CEO Robert Kopf is counseling clients to concentrate on their overall game plan.

“I have heard because of the problems in the economy that those tax increases in capital gains may be delayed or deferred, so we’re not getting too worked up,” Kopf said. “What we are doing is counseling customers to harvest losses they may have realized in this bear market and use those losses to offset earlier gains occurred in 2008. They can carry forward losses that would offset capital gain liability in 2009.”

Kreps pointed out that many investors’ gains “have evaporated” with the plummeting stock market.

“The tax planning needs to be revisited this quarter,” he said. “Investors need to come back to the fundamentals with the investments they own and worry a little less about taxes. If your portfolio makes sense long-term, let’s try not to make a short-term decision based on gambling with the tax system when we don’t know what will happen.”

Kreps said the capital gains tax increases likely won’t occur in the current year, but could be implemented in 2009 or 2010.

“Congress and the president-elect will have way more important issues to address with regard to the economy than trying to change the tax code right out of the gates,” Kreps said. “The guy’s boxed in.”

David Hunter, chairman of Hunter Associates Inc. and a former chairman of the National Association of Securities Dealers, is less concerned over the new administration’s potential tax changes than in nudging clients back into the stock market.

“We’ve been more conservative for over a year now than we normally would be, but we’ve got to buy stocks to restore the equity portion of (clients’) portfolios,” Hunter said. “The truth is, they don’t want us to at the moment, and we do this slowly, but stock prices are down a lot more than earnings will be down at many good companies. We’ve got to buy stocks when they’re at these levels if we’re going to be winners long-term.”

The Obama Plan
President-elect Barack Obama’s proposed tax changes include:
The creation of a new “Making Work Pay” tax credit of up to $500 per person or $1,000 per working family
No tax increases for any family making less than $250,000
Repealing a portion of the Bush tax cuts for families making more than $250,000
Returning the top two income tax brackets to their 1990s levels of 36 percent and 39.6 percent
Creating a new top capital gains rate of 20 percent for those in the top two income tax brackets.
Eliminating all capital gains taxes on startup and small businesses to encourage innovation and job creation
Cutting corporate taxes for firms that invest in jobs in the United States
Making the R&D tax credit permanent
Eliminating special tax breaks for oil and gas companies
Repealing tax loopholes that reward corporations that retain their earnings overseas
Source: www.BarackObama.com

ptascarella@bizjournals.com | (412) 208-3832

Safe Investment

Here is a link to an article, entitled "3 safe places to stash your cash":
http://biz.yahoo.com/hmoney/081006/100608_safe_havens_moneymag.html?.&.pf=banking-budgeting

Buy & Hold, Sleeping Well at Night

http://online.wsj.com/article/SB121347710385475213.html
According to this Wall Street Journal article, the three requirements are:
A. a well-diversified investment plan,
B. invested in low-cost index funds,
C. with a long-term outlook.

I totally concur.

Credit score

http://www.latimes.com/business/la-fi-credit30-2008may30,0,1312903.story
Consumers will soon know the (credit) score
In the biggest class-action suit settlement ever, TransUnion promises access to data kept under wraps.
By Kathy M. Kristof, Los Angeles Times Staff Writer
May 30, 2008
More than 160 million Americans would be able to learn their all-important credit scores at no charge -- and with no strings attached -- under a settlement by credit reporting giant TransUnion Corp. of a long-running class-action lawsuit.

The agreement would entitle consumers to at least six months of a TransUnion monitoring service, giving them access to the latest information in their credit reports as well as their current scores at any time.

The service also would notify consumers by e-mail of significant changes to their files, including reports of late payments or accounts opened in their names. The latter information could help thwart attempted identity theft.

TransUnion normally sells the service for $59.75 or more, giving the settlement a value that could top $10 billion.

Extracting free services from an industry that many Americans love to hate could give them a measure of satisfaction. On a more practical level, the information could be especially useful for people who are borrowing more because of difficulties caused by the slowing economy or who simply want to find loans or cards with better terms.

Ken McEldowney, executive director of Consumer Action, a national advocacy group based in San Francisco, called the settlement mind-boggling.

"It's everything we tell consumers that they need to find out if they have problems with their credit," he said. "They are getting information on how to improve it and information about whether they are creditworthy. This is astonishing."

A credit report supplied by TransUnion or its rivals, Equifax Inc. and Experian, contains information about your current and recent home and auto loans, credit cards and other credit accounts, including how much is borrowed, your credit limits and whether payments are made on time.

A credit score, which is calculated using a formula based on that data, is a three-digit number that can determine what interest rate you pay on a loan or credit card, or whether you even are approved for one.

Federal law entitles everyone to a free copy of his or her credit report once a year from each of the three major credit-reporting companies, but it doesn't provide access to credit scores.

The case being settled stems from a business operated by TransUnion that sliced and diced data from the Chicago-based company's massive credit files to generate customized lists of consumers. Retailers, lenders and other businesses would buy the lists to use in their marketing.

Federal law bars the sale of a person's private credit information except under certain circumstances, such as when he or she has applied for a loan.

Although companies can gather and sell public consumer information, such as mortgage lien information that's filed with counties, plaintiffs in dozens of suits argued that TransUnion had overstepped those bounds, violating privacy protections.

The plaintiffs alleged that anyone who had a credit file maintained by it had suffered damages, mainly by being inundated with junk mail from marketers who bought data about them.

The suits were combined into one class action in federal court in Chicago. TransUnion and the plaintiffs in that case agreed to a preliminary settlement Wednesday. It requires final court approval, which is expected in September.

Based on the number of people in the class, the settlement would be the largest in U.S. history, said Peter A. Chapman, editor of the Class Action Reporter.

"This was a long, hard fight and an excellent result," said John Zarian, a Boise, Idaho, attorney whose clients -- some of the original plaintiffs in the case -- filed suit 10 years ago.

TransUnion, which discontinued the list-marketing business in 2001, has said it didn't violate the law.

"TransUnion is committed to providing consumers with tools and services that empower them to manage their own credit health," said Colleen Ryan, a spokeswoman for TransUnion. "The services offered through this settlement complement our many consumer-empowering initiatives."

Under the settlement, anyone who had any type of loan account between January 1987 and Wednesday would be able to select one of two options:

* A basic service would provide free credit monitoring for six months. It normally retails for $59.75, according to the settlement. Those who select this service can also apply for a cash payment.

* An enhanced service would provide nine months of free monitoring, plus use of a "mortgage simulator" that lets consumers see whether improving their credit score would affect their mortgage rates and how much they could save if it did.

This option also includes access to one's insurance score, which is used by some insurers to set rates (though California bars their use). The settlement values this option at $115.50.

Under the settlement, a credit card number would not be required to sign up for either service. After the free service ends, TransUnion could not charge for an extension unless it was requested by the consumer.

The agreement also creates a $75-million fund that would be used to notify class members about their rights, to pay attorneys and pay any damages agreed to for people who opt out of the class and sue TransUnion on their own. If there is money left in the fund after two years, it would be paid to people who applied for the cash. Consumers who received the enhanced service don't have the right to apply for the money.

Claims can be filed starting June 16 by going to the settlement website at www.listclassaction.com or calling (866) 416-3470.

kathy.kristof@latimes.com