Archive - December 2013

1
PE10 In Foreign Markets May Be Very Misleading
2
Equity Risk Premium: Do Stocks Always Beat Bonds?
3
Don’t Forget the Saver’s Credit on Your Tax Return
4
Financial Planning Should Come First When You Inherit
5
All about RMD’s, The Required Minimum Distribution

PE10 In Foreign Markets May Be Very Misleading

 

The best stock valuation method is the PE10 which uses the ten year inflation adjusted corporate earnings to determine a PE ratio. The WSJ had an article about this. If below 15 then it may be time to buy, if over 15 it is time to either hold or to reduce holdings. However the ratio must be carefully fine tuned in other countries. PE’s are much lower in Russia, Brazil, China, Greece. This is because there is significantly more risk and the “real” interest rates and foreign currency rates differ greatly so one must not compare one country’s PE …

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Equity Risk Premium: Do Stocks Always Beat Bonds?

In the 19th century U.S. stocks didn’t provide an excess return over bonds from 1803 to 1871. Then in 1871 equities beat stocks for the next 58 years until the great crash of 1929. A popular myth is that if you buy equities they will provide an equity risk premium of 4% higher than bonds. However this may only be true over a period longer than one’s lifespan. Often an investor accumulates wealth from age 45 to 65 and then retires and experiences a 20 year retirement. Thus his total investment time frame is 40 years, which may not …

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Don’t Forget the Saver’s Credit on Your Tax Return

Did you realize that there is a tax credit available to you for your contributions to retirement plans?  There are income limits, but if you fit the limits, this type of credit can be exactly what you need to get you started on your retirement savings activities.

Recently the IRS published IR-2013-93, which provides information about this valuable credit.  The actual text of the bulletin follows.

Plan Now to Get Full Benefit of Saver’s Credit; Tax Credit Helps Low- and Moderate-Income Workers Save for Retirement

WASHINGTON – Low- and moderate-income workers can take steps now to save for retirement and …

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Financial Planning Should Come First When You Inherit

Many people fantasize about getting an unexpected inheritance, but what would you do if it happened to you? Would financial planning be at the top of your to-do list?

According to USA Today, “More than $41 trillion will be transferred to heirs over the next 50 years…Much of that wealth will be passed on to people who are already affluent and presumably schooled in how to manage an inheritance. But for those who are accustomed to living paycheck to paycheck, even a modest windfall can present daunting challenges — and significant risks.”

Don’t make any sudden moves: Getting …

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All about RMD’s, The Required Minimum Distribution

For many, once we reach the age of 70.5 IRA and other Qualified plans mandate a distribution so Uncle Sam can get his fair share of taxes. For some, RMD’s or Required Minimum Distributions occur even sooner.

What is an RMD ?

A Required Minimum Distribution (RMD) occurs most frequently for those turning age 70.5 with IRA or other Qualified (fancy word for never taxed $$) funds. In certain instances, as an example, if a stretch IRA has been commenced, in order to avoid taxes, any age person may be required to complete a RMD.

Why an RMD ?

Taxes, …

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