Whether you are saving for a retirement that is still decades away or building a college fund for your high school student, developing a smart, diversified investment strategy to also include real estate will not happen by accident. If you want the finances of your future to be better than the finances of today, you need to work hard to make it happen.
You do not have to be a savings savant or a real estate expert to develop a smart, effective and safe investment strategy. All you need is the dedication and desire to get it done, and here are a few tips you can use to make your plan more successful.
1. Lay out your goals. Before you start on this road, you need to know where you are going. Lay out your short-term and long-term goals and determine your investment personality. Do you prefer to flip real estate for profit or are you the type of investor that enjoys cash flow from single-family rentals?
2. Explore your options. Know what your options are, from the retirement plan at work to an individual retirement account, IRA, or 529 plans for education. Laying out all the available pieces will make it easier to develop a comprehensive investment strategy.
3. Pay yourself first. Instead of waiting until the end of the month and seeing how much is left to invest, put your investments first. Whether that means investing automatically in a 401(k) or 403(b) or transferring money from your checking account to ensure you have capital ready to invest in a real estate deal, paying yourself first is a winning strategy. Remember, your income is the greatest wealth generator.
4. Be smart about diversification. Diversifying your investments should be part of your investment strategy. If you are investing for retirement and have decades to go, you can probably afford to take more risk. If you need the funds in just a few years, reducing or eliminating that risk can keep your money working without the danger of loss. Given where the real estate market is right now, I would consider a 40/40/20 strategy. My colleague Rick Melero from HIS Capital Group and I discuss this at length because it truly is a smart strategy to deploy. Forty percent of your activity should be in real estate flips, 40% of your activity should be in buying cash-flowing assets (e.g. single-family rentals) and 20% of your activity should be in high-risk, high-rewards opportunities.
5. Keep your costs low. Investment costs can eat into your investment portfolio, so look for the lowest cost products that meet your needs. If you want to play it safe, index funds are low cost and provide exposure to a wide universe of stocks and bonds both domestically and internationally, making them excellent choices for most investors. In the real estate game, consider flipping one home and with the profit, buying two rental properties.
6. Invest consistently. It can be scary to keep investing when the real estate market is falling, but the down years are actually the best times to buy. When the market falls, every dollar you invest buys more property, and that can make a huge difference when the market eventually recovers. Remember, this is a long-term game; don't be swayed by short-term fluctuations.
7. Do not be a micromanager. Micromanaging your real estate investments will do nothing but increase your stress level, so avoid daily checks of your account balance. It is important to review your passive investments once or twice a year, but micromanaging your accounts will get you nowhere.
8. Be smart about taxes. When you make money on your investments, Uncle Sam will want a cut, but there are things you can do to reduce the pain. Keeping your real estate investments in self-directed retirement accounts, which are taxed when you take the money out, is one smart way to reduce your tax bill and keep your investments growing.
9. Ramp up your savings. Getting started is often the hardest part of investing, but once you are started, it is just as important to ramp things up. If you are currently investing 6% of your earnings into your real estate investing strategy, make it 7% next year and 8% the year after that. This escalation can give you the discipline you need to ramp up the savings over time, and that will be good news for your portfolio.
Developing a smart investment strategy will not happen by accident, but if you work hard and consistently, it will happen over time. The tips listed above can help you get started, and as your comfort level rises, you can up the ante and invest even more.
Many investors find themselves experiencing extreme emotional shifts in concert with the unpredictable rises and falls that come with stock market investing. Anxiety may hit like a ton of bricks when prices fall, while excitement sets hearts racing with exhilaration when they rise.
Those who choose to invest in long-term dividends, however, will not feel this same angst as stock prices shift. These investors know that the financial success of their investment is not based on the vagaries of the market itself, but rather on the long-term success of the company. They believe that the stock price and dividend will eventually rise over the long haul, resulting in huge gains over a long period of time.
So, what type of investor should you be? Should you ride the rollercoaster of short term investing, or settle in for the long haul? Really, it’s all about your personality and financial goals. Read on for some of the how’s and why’s of long-term dividend investing.
What Is a Dividend?
When a publicly traded company earns a profit, the management generally has three choices:
Frequently, fast growth companies will keep the proceeds and either reinvests their income in the long-term growth of the company or offer a share buyback. Share buybacks increase each investor’s proceeds in the future by decreasing the outstanding shares of stock.
Other companies will issue a dividend, or a share of the company’s profits, which is paid out to investors on a quarterly basis.
Long-Term Dividend Investing
Dividend stock investing does not often provide the short-term capital appreciation of hot penny stocks. Nor does it match the excitement of day trading, which during rapidly rising markets can make these investments seem like stodgy, slow money stocks. Moreover, dividend-paying securities often fall out of favor in rapidly rising bull markets, subsequently regaining a fervent following during turbulent and unpredictable markets. This is due to the relatively moderate growth nature of these securities as well as the slow compounding nature of dividends that can be achieved through a long-term, buy and hold philosophy of dividend stock investing.
However, during slow growth bear markets, more and more investors seek shelter in dividend growth stocks such as blue chip stocks. In addition, the stability that these stocks can offer makes them an attractive class of security to include as a component in any portfolio during both harsh and thriving economic times.
Now that you know what dividends are, and how they work in the market, is it the right investing route for you? Here are a few things to consider:
1. The Power of Dividends
When choosing whether or not to begin this type of investing, it is important to understand the hidden power of dividends. Take these dividend facts into account:
2. A Strategy for Investors, Not Traders
When choosing a dividend investing strategy, it is important to develop a long-term investor’s mindset. To the dividend investor, a share of stock is a living, breathing piece of a company, not solely a vehicle for capital appreciation. By looking at the investment as such, you will not be disappointed by what will likely be a slower growth rate than non-dividend-paying stocks. The most important factors in their overall investing strategies are:
3. Successful, Long-Term Investors Choose Dividends
Warren Buffett has been called a value investor. Indeed, he has historically purchased shares of companies when they are being sold at a discount to their inherent worth. But, if you review the top 10 holdings of Berkshire Hathaway, you will also find each position constitutes a dividend paying security. If dividend stocks are the investment of choice for the most successful investor in history, shouldn’t they be good enough for your personal investment portfolio? Buffet loves dividend-paying stocks because they add another, more stable form of capital appreciation above and beyond share price increases.
How to Choose the Best Dividend Stocks
As with any investment, it is imperative to do your research when choosing a dividend stock. The most important things to consider when determining the correct dividend stock for your portfolio are:
1. Long-Term Prospects
Dividend investing is a long-term investing strategy. When asked what his favorite holding period for stocks is, Warren Buffett is reputed to have replied, “Forever.” This is a dividend investor’s mindset.
As a dividend investor, you never want to sell because this ruins your long-term investing strategy. So you must carefully choose companies with the long-term staying power and ability to thrive despite economic conditions. Seek corporations that grow, regardless of external economic conditions. Even dividend investors have to sell from time to time, when the underlying business or strategy changes.
If you can’t read a balance sheet, research the company’s bond ratings. You want to invest in the companies with the best credit ratings (investment grade or above). If you are familiar with reading financial statements, you will want to look at all of the traditional valuation tools, including the P/E ratio, price/sales ratio, Enterprise Value/EBITDA, and book value.
The company’s outstanding debt structure will also be important to understand, as a corporation’s creditors will get paid before the shareholders in any financial downturn.
3. Management and Dividend History
Look for companies with management teams that have a reputation for being investor-friendly. Consider the management’s historical treatment of dividends and share buybacks, as well as the ability to navigate difficult financial times. Has management ever suspended or lowered its dividends? Has the company ever missed a dividend payout? Or has the company consistently grown its cash reserves and increased its dividend yield over the years?
If someone will be putting this company out of business in a few short years, there’s no point in owning the shares as a dividend investor. Remember, fads come and go, but excellent companies with long-term staying power have the ability to navigate difficult financial waters while emerging as a leader in their industry. Look for industry leaders with staying power.
Long-term dividend investing can be an excellent choice if you are looking to gain big over time. While it doesn’t necessarily provide the instant gratification (or complete devastation) of short-term investing, it does promise a more stable investment strategy. Take a page out of the playbooks of big investors like Warren Buffett, think long-term, research the companies you’re investing in, and your portfolio will significantly benefit.
There are no flashing lights, no clatter of coins hitting the metal bins of slot machines, no raucous shouts of victory or envious looks when a winner hits it big. But some believe that Wall Street is no different than the Las Vegas Strip – less glamor, less glitz, but still a place for gamblers to risk all where the house has the edge.
Dr. Leon Cooperman, the noted hedge fund founder and president of Omega Advisers, Inc., warned President Obama on CNBC television that “the best capital markets in the world were turning into a casino.” And The Motley Fool, a popular newsletter for individual investors, said in November 2011 that “market volatility had become so erratic this summer that it often felt like a rigged game.”
But what does this mean to the individual investor? Is the age of analyzing and picking your own investments passé? Should you be working with a new investment strategy? Knowing how to invest today requires, at minimum, two things: an understanding of how the market has changed, and strategies for survival in the new environment.
Fundamental Changes in the Equity Markets
Beginning in the 1970s, the composition of Wall Street participants – those who worked in the industry and those who invested in corporate securities – began to change. According to the Conference Board, an internationally known independent research association, institutions (pension/profit-sharing, banks, and mutual funds) owned 19.7% of the total U.S. equity value ($166.4 billion) in 1970. But by 2009, the institutional share had grown to 50.6% ($10.2 trillion) of the total value. According to Stat Spotting, a website that tracks the identification of stock buyers and sellers, professional or institutional funds accounted for more than 88% of the volume in 2011, with retail investors being only 11%.
Investors who purchase stock in individual companies – once the source of the majority of trading volume – have become increasingly rare due to the disadvantages resulting from the transition to institutional investor dominance. In fact, top performing stocks are likely to be sold by individuals and bought by institutions. What this means is that individuals are liquidating too soon, while institutions are picking up these stocks en masse, increasing their positions, and capitalizing on the subsequent appreciation and rise in profit.
Predominance of the Institutional Investor
The decline of investors buying individual stocks is due to a number of factors, including:
Despite the changes in the fundamental nature of the equity market, many people continue to believe in a market of stocks, rather than the stock market. They believe that good research and a fundamental, long-term approach to investing enables them to pick stocks that appreciate even if market averages go down. Others are content with the returns of the market as a whole, buying a fund that owns stocks of the same identity and proportion as in a popular benchmark index, such as DJIA or the S&P 500.
It is true that not all stocks go down or up on a single day or in any single period. There are always winners and losers. If you feel that you have the stomach, the brains, and the fortitude to thrive in this market, there are strategies that might keep you on the winning side.
Stock Investing Survival Techniques
One of the most successful investors of the modern era is Warren Buffett. Buffett recently told people at the Berkshire Hathaway annual meeting, “The beauty of stocks is that they sell at silly prices from time to time. That’s how Charlie [Munger, an early partner] and I got rich.” He has always taken a long-term perspective, sought companies that were overlooked and undervalued by the market, and exercised patience, believing that good management would deliver results that would be ultimately reflected in the stock price. There is no better example to follow if you elect to purchase stock in individual companies, rather than mutual funds.
Warren Buffett’s rules of investing include:
1. Invest in Yourself
Learn the rudiments of stock market analysis by reading and studying “Security Analysis,” a classic book written by Benjamin Graham and David Dodd in 1934 and still considered the bible for investors. Study annual reports of companies to become familiar with accounting and financial reporting, and subscribe to “The Wall Street Journal” to get a financial perspective on the nation.
2. Focus on the Long-Term and the Value of Good Management
On any given day, some industries and companies attract the attention of the public with the promise of untold riches and worldwide dominance. While the popular picks rarely deliver hoped-for profits, they often explode in price on the upside following by an equally spectacular implosion. When selecting long-term investments, consider the following:
Concentrate on industries that are stable and will remain vital to the economy into the future. Buffett’s current investment portfolio includes insurance, entertainment, railroads, and his much publicized investment into the automobile industry.
Look for companies with a long-term future in products that people use today and will continue to use tomorrow. For example, Buffett’s biggest winner has been Coca-Cola, which he purchased in 1988 and still holds. As part of his analysis, he seeks to understand the industry in which the company operates, its competitors, and the events that are likely to affect it over the next decade. The management team is important with a track record of long-term growth in profits.
Buy companies that are undervalued relative to their competition. Plenty of companies with a history of improving earnings year after year and have lower price-to-earnings or price-to-sales ratios than their competitors are being overlooked in the market. Since this condition tends to correct itself, identifying these companies can represent an opportunity for profit.
3. Diversify Your Holdings
Even an investor with the prowess of Buffett can be wrong with regards to a company or its stock price. In 2009, he admitted taking a loss of several billion dollars on ConocoPhillips when he failed to anticipate the dramatic fall in energy prices.
Spreading your risks is always a prudent course to follow. Most professionals recommend a minimum of six positions or companies, but no more than 10 due to the work necessary to remain informed. It is also wise to vary investments across industries with the expectation that a general recession will not affect all of the companies and industries in the same manner or amplitude.
4. Act like an Owner
Be sure you’re on the company’s mailing list for announcements of new products and financial results. Buy the company’s products and services, and recommend them to your friends. Attend company board meetings and other public events where the company will be present. Learn the name of the security analysts following the company, and read their analyses. Treat the investment as your company and not just as numbers on a brokerage account statement.
5. Be Patient
The market is full of examples where companies rise, fall, and rise again, demonstrating the underlying fundamentals and the value of a competent, if not outstanding, management team. Apple Inc., the company with the highest stock capitalization in the world, sold on March 1, 2002 for $21.93 per share. On March 1, 2007, the stock sold for $122.17, but fell to $78.20 by February of 2009. An investor selling at that time would have missed the stock at $621.45 during March 2012.
If the reasons you purchased a company initially remain in place, keep the investment no matter how long or how short you’ve held it. The fact that the stock price goes up and down is not justification by itself to sell or buy.
While the stock market attracts more than its fair share of gamblers, investing doesn’t require taking extraordinary risks. Fundamental investing is based primarily on safety of principal with the knowledge that good management in an undervalued company will pay better than average returns to investors over time.
Do you use any of these principles? What has your experience been with them?
It is a common belief among most investment experts that the fastest way to financial growth is to invest in long-term ventures or to set a gestation period of at least 10 years for enhancing one’s prospects for bigger revenues instead of building a portfolio of short-term assets (for example, bonds and mutual funds). Hence, experienced leaders recommend diversifying investment portfolios with top-quality stocks that pay high dividends. This strategy has proven to be an efficient approach for investors to gain high long-term revenues that can sustain a stable retirement future for them.
Remember that this investment option is suitable only for investors who can have the patience and endurance to go for the long haul and choose to invest back dividends into the firms that offer payouts. For novice dividend investors, these primary advantages of investing in dividend-paying stocks on a long-term basis:
1. Highly rewarding with a potential return of a maximum of 45% when you re-invest.
2. You stand to gain a large number of shares, resulting to greater returns when you finally retire.
3. Dividends provide a lower volatility than earning over time.
4. Companies offering dividend stocks are most often well-managed, stable businesses in their particular areas and can, therefore, sustain their operations through unpredictable market conditions.
Nevertheless, be ready to apply many approaches of investing in dividend stocks in order to maximize your opportunities to gain big returns. Visit websites or consult experts to find out other essential investing tips any dividend-growth investor should implement to enhance your portfolio’s long-term viability.
Aim for the overall return
Investing in stocks that produce high revenues does not readily bring in your expected overall returns; the process all hinges on the results of capital growth and the actual dividend outcome. However, do not give up on dividend returns. The top dividend-producing stocks have the highest payout ratios, although it also means having less money to invest back with below-average dividend growth in the future. Hence, the best strategy would be to aim for the overall return rather than aiming for high yields; this is due to the fact that dividend growth depends heavily on the future outcome and not on the present performance.
Dividend growth has nothing to do with time; therefore, persevere as you implement your long-term strategies. Wait patiently as you hold on to your stocks over a long period of time, not panicking even when market values dip. Buying and selling on impulse could cost you more than you have to because of the burdensome expenses, such as brokerage fees and taxes; and, moreover, you lose the compounding benefits of potential returns from high-yielding dividends. Nevertheless, when stock prices decrease in times of recession, stocks offering high-quality dividends can sustain large payouts to investors. Remember that firms that consistently provide sizeable returns yearly will help you accumulate stable revenue on the long-term basis.
Well-known investment guru Jeremy Grantham was quoted by Reuters as saying this: “Be patient and keep your eyes on the light ahead…. Endure the pain in the meantime since an excellent investment will grow eventually. More often than not, individual stocks will recover; and all markets eventually do.”
Measure the risks involved
Besides persevering over the long-term, investors must also know when they have to invest and when to reduce any losses, the common qualities possessed by well-seasoned industry traders. FXCM recommends that traders must fully understand their trading personality, or, as in your situation, your investing personality. Ask yourself this: “Am I a risk-taker?” for it will show the type of investor personality you have to maintain and the best strategy to build wealth. As in all investment ventures, investing in dividend growth stocks likewise demands measuring risks and using your instincts often. All investors must learn to cut their losses and to let profits roll. Avoid the common human weakness to cling on to one’s losses and calculate early both the degree of risk and the potential returns to diminish or eliminate the effects of human emotions on your investment decisions.
Finally, it is important to stick to a well-designed strategy (meaning, the dividend income need you have set as your goal, investment approach to apply), as a dividend growth venture lends well to a systematic investment approach. From here on, you are all set to raise your investment portfolio to a higher level of performance by using these recommendations. All the best in your investment journey!
With the New Year with us, it is appropriate to consider your retirement savings and find out if you are benefitting at all from any applicable tax law with regard to your retirement future.
Melissa Sotudeh, a certified financial planner in Washington, D.C., offers tax-savvy advice on retirement savings.
What is the most vital aspect in retirement accounts tax-planning?
To a certain degree, you can control your income tax bracket by maximizing salary deferrals — for instance, by maxing your retirement accounts, such as 401(k) and IRA plans; hence, reducing your taxable salary. On the other hand, you can become tax-efficient when you invest money for college education, retirement or other objectives.
If you are in a lower tax bracket, take advantage of specific deductions, such as those for seeking a job or relocating for work, and tax credits, such as the education credit or the child-tax credit. Contribute to a Roth 401(k) as well, allowing you to pay lower-rate taxes today and then take out your Roth funds free of tax when you retire.
When you reach a higher tax bracket, salary deferral could be the best choice for a lower taxable income. Maximize your contributions to 401(k) or Health Savings Accounts.
Approach your investment planning as tax-efficiently as you can. This has nothing to do with tax brackets, rather, with the tax treatment of your portfolio investments. Strategies involve keeping the right investments in the right account (e.g., keeping tax-advantaged investments such as municipal bonds in a taxable account), annual tax loss harvesting and selecting funds with tax-effective features, such as low turnover ratios.
What is the most common pitfall in terms of income and tax brackets?
People do not leverage tax-advantaged savings instruments before they are phased out -- which is a common error with Roth IRAs. Although a great savings tool, your capacity to contribute starts to get phased out beyond specific earning levels. For 2017, the Roth IRA salary limits start once you begin receiving more than $118,000 ($186,000 for married, filing jointly). At the $133,000 income level ($196,000 for married, filing jointly), you are not qualified to contribute.
Likewise, not using the catch-up allowance for tax-deferred retirement accounts and HSAs, which allows you to contribute way above your retirement account when you are 50, is a big mistake. If you can, take full advantage of this chance to rev up your saving and limit your taxable salary. The catch-up contribution for retirement accounts, for instance, 401(k)s, is presently $6,000, aside from the regular $18,000 limit. It should give you a total maximum contribution of $24,000 every year for 50-above individuals.
$1,000 catch-up contributions for HSAs are permitted beginning at age 55, aside from the maximum yearly contribution of $3,400 for individuals or $6,750 for families.
What else can people do about optimizing their tax status?
Giving to charity through Donor Advised Funds is an efficient way to optimize tax management in any particular tax year. Using these funds, you will be able to give money or appreciated assets and avail of the tax deduction for your donation during the year that you contributed the amount. Nevertheless, you need not choose a recipient beneficiary for your donation within that year. You may let assets in the fund to increase in time and contribute to any 501(c)(3) charitable group any time you desire.
No matter what investment method you choose, choose the appropriate tax strategy needed to optimize investment taxes.
Ready to become a million-dollar retiree?
Who would not want to become one?
From a recent survey conducted by Time Magazine, 1 of every 3 Americans has saved practically nothing for their retirement. And a surprising 23% of Americans -- almost a fourth -- have saved less than $10,000.
In short, a total of 56% of all Americans have saved below $10,000 for their retirement. That should be cause for great concern.
Moreover, 42% of millennials (people aged 18 to 35), unfortunately, have not started saving for retirement.
It seems that this generation is bound to commit the same mistakes that their parents and grandparents, in general, committed.
But there is hope! Building a million-dollar retirement fund is not too difficult to accomplish. With enough discipline and by following these three simple steps, anyone can be assured of a secure future.
The benefit of following these effective guidelines, aside from obtaining a million-dollar retirement fund, is that you can reach your goal earlier by seven years. Yes, that is an additional solid seven years of retiring earlier than expected to allow you to fulfill your dream of buying that vacation home, travelling around the world or just enjoying your life in the peace and comfort of your home.
If you believe that plan is for you, begin the journey this very day.
If you still have doubts as to the reliability of this claim or if you think that you will need a CEO’s salary or, perhaps, have to risk your very life to achieve that big a nest egg, you are gravely mistaken.
In reality, all you need is a salary of about $60,000 yearly in order to create a million-dollar retirement.
How? Follow the steps below:
STEP 1 – Commit a part of your yearly income into savings.
That easy! Do not follow the crowd headed for the precipice of unsecured retirement – that crowd that is about half of whom are millennials.
Planning to save a reasonable part of your salary is the initial step to attaining your niche in the millionaires’ club. Every giant undertaking starts with a small step. Trust the experiences of so many before you; unless you commit to this plan, you are most likely to lose the opportunity of gaining a million-dollar retirement fund in the future.
With your yearly $60,000 income, setting aside $5,500 or about 9% of your gross income for your retirement gets you through the initial and crucial step. Congratulate yourself for doing this!
Doing so, you would have saved $458 monthly. The best strategy is to set up an automatic draft payment which allows you to transfer your funds from a checking account toward an investment account. That will help you sustain your objective of achieving a million-dollar retirement fund.
STEP 2 — Set up a tax-advantaged Individual Retirement Account (IRA).
Get hold of this free and easy approach which allows you to trade in and out of investment securities with minimal costs. Majority of transactions will be cheaper than your favorite cup of latte at the coffee shop. Sometimes, commissions are even disregarded. Open up an IRA today if you still do not have one.
An IRA provides a viable investment instrument for creating wealth due to its deferred capital-gains tax as well as its tax-deductible annual contributions. In short, the government practically helps you become a millionaire while minimizing your income-tax expenses. At present, the minimum IRA yearly contribution is $5,500 annually ($6,500 for 50 or older individuals), right within your ballpark.
You can also make contributions on a lump-sum basis or at regular periods. The latter is a great option for leveling out fluctuations in the investment portfolio, since prices tend to become volatile within the year. The outcome will be what is called “dollar-cost averaging” of your contributions. This strategy reduces the emotional stress in your decisions with respect to your savings.
Two down and only one more to go! You may celebrate at this point.
To show you clearly what happens: Simply investing $5,500 yearly for 30 years, or a total of $165,000 principal investment, will earn you $1,036,000 in the end.
This “miracle” is possible through the compounding power of money, since compounding can generate returns, which are then invested back in order to generate more income.
The figures used -- that is, $165,000 becoming $1 million -- are based on the actual yearly return of 9.5% for the U.S. Stock market way back to the year 1927.
This simply means that on the long-term basis, investors who buy and hold on to securities that track the overall performance of the general stock market can gain a 9.5% yearly return.
But you can even do better than that! You can actually turn that same $165,000 principal investment into $3 million within the same length of time. Yes, 30 years! No, within only 23 years, in fact!
How? There is a way to do it without any additional risk on your part.
Are you really excited now? The third step is the key to gaining greater wealth at a more rapid rate.
STEP 3 — Relative Strength Investing gets you faster to your retirement goals.
The Relative Strength approach basically measures a security’s performance in relation to that of another. Although there are various means of evaluating relative strength, the primary point is that a relative strength measurement can be done on any instrument.
Relative Strength, in short, can determine the parts of the general market which are strongest and those which are weakest.
This will allow us to see what is performing below par and, therefore, guide us to invest in the parts that are performing well, increasing the potential to gain greater returns. This is how we can accelerate even more the rate of compounding.
According to a research done by Dorsey Wright & Associates, momentum methods such as Relative Strength investing have overtaken the Total Market return by 4.6%, as determined by an extensive track-record analysis.
Hence, from way back in 1929, instead of accumulating only a 9.5% annual return, focusing your investment wholly on the best-performing portions of the market would have produced a 14.1% return. Moreover, within that long period, the difference in yearly return — while appearing minimal — resulted in increased worth of a portfolio of over 66 times.
As you can see, combining the power of compounding and the advantages of Relative Strength investing can help you earn that million-dollar retirement fund!
While we use up much of our employment income toward paying for our retirement accounts, we rarely consider what we need to do when taking it out in retirement. For example, if you have pre-tax, Roth, and taxable accounts, how much money should you take out from each account? Consider these few suggestions:
1) What is the safe amount to withdraw? Your safest choice is to only take out earnings and the principal but at present dividend yields and interest rates, not expecting to get anything beyond more or less 2% of your portfolio. It is not much for majority of people and the amount can shift and will not catch up with inflation over the long haul.
The normal rule-of-thumb is that you can securely take out about 4% of the initial value of a diversified portfolio and raise that amount to keep pace with inflation for 30 years or so. But the rule was conceived back in the 1990s when interest rates were higher and many financial experts consider the rule as passé, including the financial planner who developed it. Likewise, it does not include the possibility of you withdrawing higher amounts while you are paying a mortgage or before you begin using your pension and Social Security benefits; hence, a fixed withdrawal rate may not actually be practical at all.
The other way is to make use of a retirement calculator (you can browse for a free app online) to help you appreciate how your portfolio withdrawals might have progressed historically. Although not a certainty, if you would have endured every rolling-time event since 1871, you are bound to outlast others.
2) How are your accounts taxed? Withdrawals from a conventional pre-tax retirement account will be fully taxed as regular income. A Roth account that you have held for a minimum of 5 years and you are, say over 59½ years of age, will be offer tax-free withdrawals. Likewise, loans from cash-value life insurance and reverse mortgage payments are tax-free. In general, investments in regular taxable accounts can be taxed as long as you withdraw gains and not your principal.
3) Do you plan to buy health insurance under the Affordable Care Act? If you intend to retire prior to becoming eligible for Medicare at 65, you have to determine where you will get health insurance. One choice is under the Affordable Care Act (if it still applies) since insurance firms cannot disqualify you for pre-existing conditions and you can avail of tax credits that reduce your premiums.
Since those credits are calculated according to your taxable income, you stand to gain by delaying any withdrawals from pre-tax accounts and instead using tax-free sources or taxable accounts to reduce your taxable income and, it follows, your insurance premiums.
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5. transfer the materials to another person or "mirror" the materials on any other server.
2. This license shall automatically terminate if you violate any of these restrictions and may be terminated by Lexus Group at any time. Upon terminating your viewing of these materials or upon the termination of this license, you must destroy any downloaded materials in your possession whether in electronic or printed format.
The materials on Lexus Group's web site are provided "as is". Lexus Group makes no warranties, expressed or implied, and hereby disclaims and negates all other warranties, including without limitation, implied warranties or conditions of merchantability, fitness for a particular purpose, or non-infringement of intellectual property or other violation of rights. Further, Lexus Group does not warrant or make any representations concerning the accuracy, likely results, or reliability of the use of the materials on its Internet web site or otherwise relating to such materials or on any sites linked to this site.
In no event shall Lexus Group or its suppliers be liable for any damages (including, without limitation, damages for loss of data or profit, or due to business interruption,) arising out of the use or inability to use the materials on Lexus Group's Internet site, even if Lexus Group or a Lexus Group authorized representative has been notified orally or in writing of the possibility of such damage. Because some jurisdictions do not allow limitations on implied warranties, or limitations of liability for consequential or incidental damages, these limitations may not apply to you.
Revisions and Errata
The materials appearing on Lexus Group's web site could include technical, typographical, or photographic errors. Lexus Group does not warrant that any of the materials on its web site are accurate, complete, or current. Lexus Group may make changes to the materials contained on its web site at any time without notice. Lexus Group does not, however, make any commitment to update the materials.
Lexus Group has not reviewed all of the sites linked to its Internet web site and is not responsible for the contents of any such linked site. The inclusion of any link does not imply endorsement by Lexus Group of the site. Use of any such linked web site is at the user's own risk.
Any claim relating to Lexus Group's web site shall be governed by the laws of the country of none without regard to its conflict of law provisions.
General Terms and Conditions applicable to Use of a Web Site.
Lexus Group’ decades-long experience in the business has provided the company the privilege of collaborating with various firms from many industries. Lexus Group works as a guide to buyers and sellers and sector-confined organizations. We have succeeded in breaking ground in other nations, thereby crossing global boundaries toward establishing business progress. As a world-class member today, we have undergone the hardest tests to our capabilities and have prevailed. The challenge of entering into many industry sectors has produced in us the ability to serve with excellence and to progress in what we do best.
The demands and processes involved in each industry are totally distinct from one another and yet similar in certain ways -- unlike in terms of transactions, methods, and specifications and yet alike in the expectation and need for unparalleled quality of service. Attaining this demands a broad perspective and understanding of the history and conditions in each industry. Our teams which consist of experts from these industries assure our customers that Lexus Group has the capability to satisfy their requirements and meet their objectives.
The foundational strength that sustains every industry management is the ability to readily adapt, create positive change, and attain success. Fast-moving markets, stiff competition, growing demands, and overthinking can serve as hindrances to growth, restricting your capacity to commit even minor errors or strategic measures. Lexus Group reduces the occurrences of such circumstances by guiding you through the intricacies of the real business world where we have operated for many years and have achieved great success in serving others.
Lexus Group Business Services
1. Business Process Outsourcing
3. Consultancy Services
4. Security & Safeguarding
5. Facilities Management, Hard & Soft
6. Hiring & other HR Business Allied Services
1. Construction Equipment and Services
3. Construction Equipment
4. Building Materials and Products
Financial Services & Insurance Services
1. Corporate finance & investment banking
2. Commercial banking
3. Asset management & private banking
4. Insurance brokerage
6. Leasing & other specialized financing
7. Collection of Debts
8. Securities & commodities brokerage
Energy & Mining
1. Alternative Energy
2. Electric & Integrated Utilities
3. Coal & Non-renewable Fuels
4. Gas Utilities
5. Oil and Gas Exploration and Production
6. Oil and Gas Refining and Transportation
7. Water Utilities
8. Oilfield Equipment & Services
9. Precious Metals
10. Independent Power Providers
11. Metals & Mining
1. Automotive Components & Systems Controls
2. Industrial Automation
5. Hydraulics & Fluid Power
6. Machinery Equipment & Specialty Machines
Healthcare & Pharmaceuticals
1. Healthcare Services
2. Biotechnology &am