Archive - October 30, 2017

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You Not Updating Beneficiaries May Haunt Your Heirs
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Recharacterizing
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What Is The Sharpe Ratio?

You Not Updating Beneficiaries May Haunt Your Heirs

Investopedia outlines the many reasons it is so important to update the beneficiaries on your retirement accounts. Whether you update your beneficiaries right after a major life change or go over this information periodically with a Fee-Only financial advisor, this is not something you want to ignore.

You may already know that you need to check to see who your beneficiaries are if you divorce, remarry, or have a child and that if you don’t designate someone, the courts will decide. But have those of you leaving money to charity checked periodically to make sure the charity is still …

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Recharacterizing

For IRA contributions, the concept is simple:  a certain amount may be contributed to the account each year, dependent upon the type of IRA and your MAGI (Modified Adjusted Gross Income).  But what if you find out that you are ineligible to contribute to a Roth IRA due to the MAGI limitation?  How about if you made contributions to a Trad IRA and, upon filing your taxes found out it would be in your best interest to put those funds in your Roth instead?  Enter the Recharacterizing.

Recharacterization of IRA Contributions

This is a relatively simple process, but, …

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What Is The Sharpe Ratio?

The “excess return” is the expected return of an investment minus the expected return of a so-called risk-free, guaranteed investment return.

For example, if you expect an investment or a portfolio to have a mean return of 9% and a standard deviation of 12% in an environment where a so-called risk-free, guaranteed investment has a return of 3%, that investment or portfolio’s Sharpe Ratio would be 0.5. The calculation is simply (9% – 3%) / 12%.

The Sharpe ratio is a quick measure that tries to answer the question, “Am I getting enough extra return for my extra risk?”

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