Ken Himmler.com » Investment Strategies http://kenhimmler.com Wealth Design and Management Thu, 29 Jul 2010 21:06:39 +0000 en hourly 1 http://wordpress.org/?v=3.0 © admin@kenhimmler.com () admin@kenhimmler.com() Retirement Strategies for Conservative Investors admin@kenhimmler.com No no http://kenhimmler.com/wp-content/plugins/podpress/images/powered_by_podpress.jpg Ken Himmler.com http://kenhimmler.com 144 144 Bonds, Interest Rates, and the Impact of Inflation http://kenhimmler.com/2010/07/29/bonds-interest-rates-and-the-impact-of-inflation/ http://kenhimmler.com/2010/07/29/bonds-interest-rates-and-the-impact-of-inflation/#comments Thu, 29 Jul 2010 17:56:29 +0000 Ken Himmler http://kenhimmler.com/?p=733

 


 

There are two fundamental ways that you can profit from owning bonds: from the interest that bonds pay, or from any increase in the bond’s price. Many people who invest in bonds because they want a steady stream of income are surprised to learn that bond prices can fluctuate, just as they do with any security traded in the secondary market. If you sell a bond before its maturity date, you may get more than its face value; you could also receive less if you must sell when bond prices are down. The closer the bond is to its maturity date, the closer to its face value the price is likely to be.

Though the ups and downs of the bond market are not usually as dramatic as the movements of the stock market, they can still have a significant impact on your overall return. If you’re considering investing in bonds, either directly or through a mutual fund or exchange-traded fund, it’s important to understand how bonds behave and what can affect your investment in them.
The price-yield seesaw and interest rates
Just as a bond’s price can fluctuate, so can its yield–its overall percentage rate of return on your investment at any given time. A typical bond’s coupon rate–the annual interest rate it pays–is fixed. However, the yield isn’t, because the yield percentage depends not only on a bond’s coupon rate but also on changes in its price.

Both bond prices and yields go up and down, but there’s an important rule to remember about the relationship between the two: They move in opposite directions, much like a seesaw. When a bond’s price goes up, its yield goes down, even though the coupon rate hasn’t changed. The opposite is true as well: When a bond’s price drops,its yield goes up.

That’s true not only for individual bonds but also the bond market as a whole. When bond prices rise, yields in general fall, and vice versa.
 
What moves the seesaw?
In some cases, a bond’s price is affected by something that is unique to its issuer–for example, a change in the bond’s rating. However, other factors have an impact on all bonds. The twin factors that affect a bond’s price are inflation and changing interest rates. A rise in either interest rates or the inflation rate will tend to cause bond prices to drop. Inflation and interest rates behave similarly to bond yields, moving in the opposite direction from bond prices.
If inflation means higher prices, why do bond prices drop?
The answer has to do with the relative value of the interest that a specific bond pays. Rising prices over time reduce the purchasing power of each interest payment a bond makes. Let’s say a five-year bond pays $400 every six months. Inflation means that $400 will buy less five years from now. When investors worry that a bond’s yield won’t keep up with the rising costs of inflation, the price of the bond drops because there is less investor demand for it.
Why watch the Fed?
Inflation also affects interest rates. If you’ve heard a news commentator talk about the Federal Reserve Board raising or lowering interest rates, you may not have paid much attention unless you were about to buy a house or take out a loan. However, the Fed’s decisions on interest rates can also have an impact on the market value of your bonds.
The Fed takes an active role in trying to prevent inflation from spiraling out of control. When the Fed gets concerned that the rate of inflation is rising, it may decide to raise interest rates. Why? To try to slow the economy by making it more expensive to borrow money. For example, when interest rates on mortgages go up, fewer people can afford to buy homes. That tends to dampen the housing market, which in turn can affect the economy.
When the Fed raises its target interest rate, other interest rates and bond yields typically rise as well. That’s because bond issuers must pay a competitive interest rate to get people to buy their bonds. New bonds paying higher interest rates mean existing bonds with lower rates are less valuable. Prices of existing bonds fall.
That’s why bond prices can drop even though the economy may be growing. An overheated economy can lead to inflation, and investors begin to worry that the Fed may have to raise interest rates, which would hurt bond prices even though yields are higher.
Falling interest rates: good news, bad news
Just the opposite happens when interest rates are falling. When rates are dropping, bonds issued today will typically pay a lower interest rate than similar bonds issued when rates were higher. Those older bonds with higher yields become more valuable to investors, who are willing to pay a higher price to get that greater income stream. As a result, prices for existing bonds with higher interest rates tend to rise.
Example: Jane buys a newly issued 10-year corporate bond that has a 4% coupon rate–that is, its annual payments equal 4% of the bond’s principal. Three years later, she wants to sell the bond. However, interest rates have risen; corporate bonds being issued now are paying interest rates of 6%. As a result, investors won’t pay Jane as much for her bond, since they could buy a newer bond that would pay them more interest. If interest rates later begin to fall, the value of Jane’s bond would rise again–especially if interest rates fall below 4%.
When interest rates begin to drop, it’s often because the Fed believes the economy has begun to slow. That may or may not be good for bonds. The good news: Bond prices may go up. However, a slowing economy also increases the chance that some borrowers may default on their bonds. Also, when interest rates fall, some bond issuers may redeem existing debt and issue new bonds at a lower interest rate, just as you might refinance a mortgage. If you plan to reinvest any of your bond income, it may be a challenge to generate the same amount of income without adjusting your investment strategy.
All bond investments are not alike
Inflation and interest rate changes don’t affect all bonds equally. Under normal conditions, short-term interest rates may feel the effects of any Fed action almost immediately, but longer-term bonds likely will see the greatest price changes.
Also, a bond mutual fund may be affected somewhat differently than an individual bond. For example, a bond fund’s manager may be able to alter the fund’s holdings to minimize the impact of rate changes. Your financial professional may do something similar if you hold individual bonds.

a Bonds, Interest Rates, and the Impact of Inflation]]>

 


 

There are two fundamental ways that you can profit from owning bonds: from the interest that bonds pay, or from any increase in the bond’s price. Many people who invest in bonds because they want a steady stream of income are surprised to learn that bond prices can fluctuate, just as they do with any security traded in the secondary market. If you sell a bond before its maturity date, you may get more than its face value; you could also receive less if you must sell when bond prices are down. The closer the bond is to its maturity date, the closer to its face value the price is likely to be.

Though the ups and downs of the bond market are not usually as dramatic as the movements of the stock market, they can still have a significant impact on your overall return. If you’re considering investing in bonds, either directly or through a mutual fund or exchange-traded fund, it’s important to understand how bonds behave and what can affect your investment in them.
The price-yield seesaw and interest rates
Just as a bond’s price can fluctuate, so can its yield–its overall percentage rate of return on your investment at any given time. A typical bond’s coupon rate–the annual interest rate it pays–is fixed. However, the yield isn’t, because the yield percentage depends not only on a bond’s coupon rate but also on changes in its price.

Both bond prices and yields go up and down, but there’s an important rule to remember about the relationship between the two: They move in opposite directions, much like a seesaw. When a bond’s price goes up, its yield goes down, even though the coupon rate hasn’t changed. The opposite is true as well: When a bond’s price drops,its yield goes up.

That’s true not only for individual bonds but also the bond market as a whole. When bond prices rise, yields in general fall, and vice versa.
 
What moves the seesaw?
In some cases, a bond’s price is affected by something that is unique to its issuer–for example, a change in the bond’s rating. However, other factors have an impact on all bonds. The twin factors that affect a bond’s price are inflation and changing interest rates. A rise in either interest rates or the inflation rate will tend to cause bond prices to drop. Inflation and interest rates behave similarly to bond yields, moving in the opposite direction from bond prices.
If inflation means higher prices, why do bond prices drop?
The answer has to do with the relative value of the interest that a specific bond pays. Rising prices over time reduce the purchasing power of each interest payment a bond makes. Let’s say a five-year bond pays $400 every six months. Inflation means that $400 will buy less five years from now. When investors worry that a bond’s yield won’t keep up with the rising costs of inflation, the price of the bond drops because there is less investor demand for it.
Why watch the Fed?
Inflation also affects interest rates. If you’ve heard a news commentator talk about the Federal Reserve Board raising or lowering interest rates, you may not have paid much attention unless you were about to buy a house or take out a loan. However, the Fed’s decisions on interest rates can also have an impact on the market value of your bonds.
The Fed takes an active role in trying to prevent inflation from spiraling out of control. When the Fed gets concerned that the rate of inflation is rising, it may decide to raise interest rates. Why? To try to slow the economy by making it more expensive to borrow money. For example, when interest rates on mortgages go up, fewer people can afford to buy homes. That tends to dampen the housing market, which in turn can affect the economy.
When the Fed raises its target interest rate, other interest rates and bond yields typically rise as well. That’s because bond issuers must pay a competitive interest rate to get people to buy their bonds. New bonds paying higher interest rates mean existing bonds with lower rates are less valuable. Prices of existing bonds fall.
That’s why bond prices can drop even though the economy may be growing. An overheated economy can lead to inflation, and investors begin to worry that the Fed may have to raise interest rates, which would hurt bond prices even though yields are higher.
Falling interest rates: good news, bad news
Just the opposite happens when interest rates are falling. When rates are dropping, bonds issued today will typically pay a lower interest rate than similar bonds issued when rates were higher. Those older bonds with higher yields become more valuable to investors, who are willing to pay a higher price to get that greater income stream. As a result, prices for existing bonds with higher interest rates tend to rise.
Example: Jane buys a newly issued 10-year corporate bond that has a 4% coupon rate–that is, its annual payments equal 4% of the bond’s principal. Three years later, she wants to sell the bond. However, interest rates have risen; corporate bonds being issued now are paying interest rates of 6%. As a result, investors won’t pay Jane as much for her bond, since they could buy a newer bond that would pay them more interest. If interest rates later begin to fall, the value of Jane’s bond would rise again–especially if interest rates fall below 4%.
When interest rates begin to drop, it’s often because the Fed believes the economy has begun to slow. That may or may not be good for bonds. The good news: Bond prices may go up. However, a slowing economy also increases the chance that some borrowers may default on their bonds. Also, when interest rates fall, some bond issuers may redeem existing debt and issue new bonds at a lower interest rate, just as you might refinance a mortgage. If you plan to reinvest any of your bond income, it may be a challenge to generate the same amount of income without adjusting your investment strategy.
All bond investments are not alike
Inflation and interest rate changes don’t affect all bonds equally. Under normal conditions, short-term interest rates may feel the effects of any Fed action almost immediately, but longer-term bonds likely will see the greatest price changes.
Also, a bond mutual fund may be affected somewhat differently than an individual bond. For example, a bond fund’s manager may be able to alter the fund’s holdings to minimize the impact of rate changes. Your financial professional may do something similar if you hold individual bonds.

a

Bonds, Interest Rates, and the Impact of Inflation

]]> http://kenhimmler.com/2010/07/29/bonds-interest-rates-and-the-impact-of-inflation/feed/ 0 Top Year-End Investment Tips http://kenhimmler.com/2009/12/22/top-year-end-investment-tips/ http://kenhimmler.com/2009/12/22/top-year-end-investment-tips/#comments Tue, 22 Dec 2009 18:25:04 +0000 Ken Himmler http://kenhimmler.com/2009/12/22/top-year-end-investment-tips/ Just what you need, right? One more time-consuming task to be taken care of between now and the end of the year. But taking a little time out from the holiday chores to make some strategic saving and investing decisions before December 31 can affect not only your long-term ability to meet your financial goals but also the amount of taxes you’ll owe next April.

Look at the forest, not just the trees

The first step in your year-end investment planning process should be a review of your overall portfolio. That review can tell you whether you need to rebalance. If one type of investment has done well–for example, large-cap stocks–it might now represent a greater percentage of your portfolio than you originally intended. To rebalance, you would sell some of that asset class and use that money to buy other types of investments to bring your overall allocation back to an appropriate balance. Your overall review should also help you decide whether that rebalancing should be done before or after Dec. 31 for tax reasons.    Also, make sure your asset allocation is still appropriate for your time horizon and goals. You might consider being a bit more aggressive if you’re not meeting your financial targets, or more conservative if you’re getting closer to retirement. If you want greater diversification, you might consider adding an asset class that tends to react to market conditions differently than your existing investments do. Or you might look into an investment that you have avoided in the past because of its high valuation if it’s now selling at a more attractive price. Diversification and asset allocation don’t guarantee a profit or insure against a possible loss, of course, but they’re worth reviewing at least once a year.  

Know when to hold ‘em

When contemplating a change in your portfolio, don’t forget to consider how long you’ve owned each investment. Assets held for a year or less generate short-term capital gains, which are taxed as ordinary income. Depending on your tax bracket, that rate could be as high as 35%, not including state taxes. Long-term capital gains on the sale of assets held for more than a year are taxed at lower rates: 15% for most investors, 0% (through tax year 2010) for anyone in the two lowest tax brackets. (Long-term gains on collectibles are slightly different; those are taxed at 28%.)

Your holding period can also affect the treatment of qualified stock dividends, which are taxed at the more favorable long-term capital gains rates if you have held the stock at least 61 days. (Those days must occur within the 121-day period that starts 60 days before the stock’s ex-dividend date; preferred stock must be held for 91 days within a 181-day window.) The lower rate also depends on when and whether your shares were hedged or optioned during those 61 days. Check with your tax professional to make sure you don’t inadvertently incur unnecessary taxes by selling or buying at the wrong time.

Make lemonade from lemons

Now is the time to consider the tax consequences of any capital gains or losses you’ve experienced this year. Though tax considerations shouldn’t be the primary driver of your investing decisions, there are steps you can take before the end of the year to minimize any tax impact of your investing decisions.

If you have realized capital gains from selling securities at a profit (congratulations!) and you have no tax losses carried forward from previous years, you can sell losing positions to avoid being taxed on some or all of those gains. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 for a married person filing separately) or carried forward to reduce your taxes in future years. Selling losing positions for the tax benefit they will provide next April is a common financial practice known as "harvesting your losses."

Example: You sold stock in ABC company this year for $2,500 more than you paid when you bought it four years ago. You decide to sell the XYZ stock that you bought six years ago because it seems unlikely to regain the $20,000 you paid for it. You sell your XYZ shares at a $7,000 loss. You offset your $2,500 capital gain, offset $3,000 of ordinary income tax this year, and carry forward the remaining $1,500 to be applied in future tax years.

Time any trades appropriately

If you’re selling to harvest losses in a stock or mutual fund and intend to repurchase the same security, make sure you wait at least 31 days before buying it again. Otherwise, the trade is considered a "wash sale," and the tax loss will be disallowed. The wash sale rule also applies if you buy an option on the stock, sell it short, or buy it through your spouse within 30 days before or after the sale.

If you have unrealized losses that you want to capture but still believe in a specific investment, there are a couple of strategies you might think about. If you want to sell but don’t want to be out of the market for even a short period, you could sell your position at a loss, then buy a similar exchange-traded fund (ETF) that invests in the same asset class or industry. Or you could double your holdings, then sell your original shares at a loss after 31 days. You’d end up with the same position, but would have captured the tax loss.

If you’re buying a mutual fund in a taxable account, find out when it will distribute any dividends or capital gains. Consider delaying your purchase until after that date, which often is near year-end. If you buy just before the distribution, you’ll owe taxes this year on that money, even if your own shares haven’t appreciated. And if you plan to sell a fund anyway, you may minimize taxes by selling before the distribution date.

Know where to hold ‘em

Think about which investments make sense to hold in a tax-advantaged account and which might be better for taxable accounts. For example, it’s generally not a good idea to hold tax-free investments, such as municipal bonds, in a tax-deferred account (e.g., a 401(k), IRA, or SEP). Doing so provides no additional tax advantage to compensate you for tax-free investments’ typically lower returns. Similarly, if you have mutual funds that trade actively and therefore generate a lot of short-term capital gains, it may make sense to hold them in a tax-advantaged account to defer taxes on those gains, which can occur even if the fund itself has a loss. Finally, when deciding where to hold specific investments, keep in mind that distributions from a tax-deferred retirement plan don’t qualify for the lower tax rate on capital gains and dividends.

Be selective about selling shares

If you own a stock, fund, or ETF and decide to unload some shares, you may be able to maximize your tax advantage. For a mutual fund, the most common way to calculate cost basis is to use the average cost per share. However, you can also request that specific shares be sold–for example, those bought at a certain price. Which shares you choose depends on whether you want to book capital losses to offset gains, or keep gains to a minimum to reduce the tax bite. (This only applies to shares held in a taxable account.) Be aware that you must use the same method when you sell the rest of those shares.

Example: You have invested periodically in a stock for five years, paying a different price each time. You now want to sell some shares. To minimize the capital gains tax you’ll pay on them, you could decide to sell the least profitable shares, perhaps those that were only slightly lower when purchased. Or if you wanted losses to offset capital gains, you could specify shares bought above the current price. 

 

a Top Year-End Investment Tips]]> Just what you need, right? One more time-consuming task to be taken care of between now and the end of the year. But taking a little time out from the holiday chores to make some strategic saving and investing decisions before December 31 can affect not only your long-term ability to meet your financial goals but also the amount of taxes you’ll owe next April.

Look at the forest, not just the trees

The first step in your year-end investment planning process should be a review of your overall portfolio. That review can tell you whether you need to rebalance. If one type of investment has done well–for example, large-cap stocks–it might now represent a greater percentage of your portfolio than you originally intended. To rebalance, you would sell some of that asset class and use that money to buy other types of investments to bring your overall allocation back to an appropriate balance. Your overall review should also help you decide whether that rebalancing should be done before or after Dec. 31 for tax reasons.    Also, make sure your asset allocation is still appropriate for your time horizon and goals. You might consider being a bit more aggressive if you’re not meeting your financial targets, or more conservative if you’re getting closer to retirement. If you want greater diversification, you might consider adding an asset class that tends to react to market conditions differently than your existing investments do. Or you might look into an investment that you have avoided in the past because of its high valuation if it’s now selling at a more attractive price. Diversification and asset allocation don’t guarantee a profit or insure against a possible loss, of course, but they’re worth reviewing at least once a year.  

Know when to hold ‘em

When contemplating a change in your portfolio, don’t forget to consider how long you’ve owned each investment. Assets held for a year or less generate short-term capital gains, which are taxed as ordinary income. Depending on your tax bracket, that rate could be as high as 35%, not including state taxes. Long-term capital gains on the sale of assets held for more than a year are taxed at lower rates: 15% for most investors, 0% (through tax year 2010) for anyone in the two lowest tax brackets. (Long-term gains on collectibles are slightly different; those are taxed at 28%.)

Your holding period can also affect the treatment of qualified stock dividends, which are taxed at the more favorable long-term capital gains rates if you have held the stock at least 61 days. (Those days must occur within the 121-day period that starts 60 days before the stock’s ex-dividend date; preferred stock must be held for 91 days within a 181-day window.) The lower rate also depends on when and whether your shares were hedged or optioned during those 61 days. Check with your tax professional to make sure you don’t inadvertently incur unnecessary taxes by selling or buying at the wrong time.

Make lemonade from lemons

Now is the time to consider the tax consequences of any capital gains or losses you’ve experienced this year. Though tax considerations shouldn’t be the primary driver of your investing decisions, there are steps you can take before the end of the year to minimize any tax impact of your investing decisions.

If you have realized capital gains from selling securities at a profit (congratulations!) and you have no tax losses carried forward from previous years, you can sell losing positions to avoid being taxed on some or all of those gains. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 for a married person filing separately) or carried forward to reduce your taxes in future years. Selling losing positions for the tax benefit they will provide next April is a common financial practice known as "harvesting your losses."

Example: You sold stock in ABC company this year for $2,500 more than you paid when you bought it four years ago. You decide to sell the XYZ stock that you bought six years ago because it seems unlikely to regain the $20,000 you paid for it. You sell your XYZ shares at a $7,000 loss. You offset your $2,500 capital gain, offset $3,000 of ordinary income tax this year, and carry forward the remaining $1,500 to be applied in future tax years.

Time any trades appropriately

If you’re selling to harvest losses in a stock or mutual fund and intend to repurchase the same security, make sure you wait at least 31 days before buying it again. Otherwise, the trade is considered a "wash sale," and the tax loss will be disallowed. The wash sale rule also applies if you buy an option on the stock, sell it short, or buy it through your spouse within 30 days before or after the sale.

If you have unrealized losses that you want to capture but still believe in a specific investment, there are a couple of strategies you might think about. If you want to sell but don’t want to be out of the market for even a short period, you could sell your position at a loss, then buy a similar exchange-traded fund (ETF) that invests in the same asset class or industry. Or you could double your holdings, then sell your original shares at a loss after 31 days. You’d end up with the same position, but would have captured the tax loss.

If you’re buying a mutual fund in a taxable account, find out when it will distribute any dividends or capital gains. Consider delaying your purchase until after that date, which often is near year-end. If you buy just before the distribution, you’ll owe taxes this year on that money, even if your own shares haven’t appreciated. And if you plan to sell a fund anyway, you may minimize taxes by selling before the distribution date.

Know where to hold ‘em

Think about which investments make sense to hold in a tax-advantaged account and which might be better for taxable accounts. For example, it’s generally not a good idea to hold tax-free investments, such as municipal bonds, in a tax-deferred account (e.g., a 401(k), IRA, or SEP). Doing so provides no additional tax advantage to compensate you for tax-free investments’ typically lower returns. Similarly, if you have mutual funds that trade actively and therefore generate a lot of short-term capital gains, it may make sense to hold them in a tax-advantaged account to defer taxes on those gains, which can occur even if the fund itself has a loss. Finally, when deciding where to hold specific investments, keep in mind that distributions from a tax-deferred retirement plan don’t qualify for the lower tax rate on capital gains and dividends.

Be selective about selling shares

If you own a stock, fund, or ETF and decide to unload some shares, you may be able to maximize your tax advantage. For a mutual fund, the most common way to calculate cost basis is to use the average cost per share. However, you can also request that specific shares be sold–for example, those bought at a certain price. Which shares you choose depends on whether you want to book capital losses to offset gains, or keep gains to a minimum to reduce the tax bite. (This only applies to shares held in a taxable account.) Be aware that you must use the same method when you sell the rest of those shares.

Example: You have invested periodically in a stock for five years, paying a different price each time. You now want to sell some shares. To minimize the capital gains tax you’ll pay on them, you could decide to sell the least profitable shares, perhaps those that were only slightly lower when purchased. Or if you wanted losses to offset capital gains, you could specify shares bought above the current price. 

 

a

Top Year-End Investment Tips

]]> http://kenhimmler.com/2009/12/22/top-year-end-investment-tips/feed/ 0 Are You Setting Financial Goals? http://kenhimmler.com/2009/06/13/are-you-setting-financial-goals/ http://kenhimmler.com/2009/06/13/are-you-setting-financial-goals/#comments Sat, 13 Jun 2009 05:05:29 +0000 Ken Himmler http://kenhimmler.com/?p=512  We all have moments where we daydream about our perfect retirement scenario. Some of us want to spend our golden years traveling the world and see for ourselves the wonders we hear about everyday on the news. Others want to have a nice retirement near the coastal waters and bask in the comforts of the warm, setting sun while enjoying the companionship of loved ones. Whatever your personal dream for the future may be, it is very important to consider the monetary requirements needed to realize your fantasies. It is essential that you develop a retirement plan.

 
One of the less talked about steps in creating the perfect retirement plan is the visualization process. In order to figure out how much money you are going to need in the future you will have to have at least a rough idea of what you want to aim for. In order for the visualization process to work, you have to spend some time honestly considering what you really want out of life. It is not necessarily important at this point to be realistic. Instead, try to realize that there is a lot of time between when you start making investments and when you actually retire. Once you have solidified your visualized desires you are ready to begin mapping out a retirement plan that will get you to your goal.
 
It is unrealistic to think that any investment strategy will work miracles over night because investments take time to fully mature. Sometimes the waiting can be painful for investors, so it is an extremely good idea to set smaller short-term financial goals. These smaller short-term goals will act as stepping-stones to your realized dream, and they can help you feel like you are actually making progress. They can also help you stick to your financial plan and adjust it as necessary. Both long-term and short-term financial goals are the keys to achieving your dreams.
a Are You Setting Financial Goals?]]>  We all have moments where we daydream about our perfect retirement scenario. Some of us want to spend our golden years traveling the world and see for ourselves the wonders we hear about everyday on the news. Others want to have a nice retirement near the coastal waters and bask in the comforts of the warm, setting sun while enjoying the companionship of loved ones. Whatever your personal dream for the future may be, it is very important to consider the monetary requirements needed to realize your fantasies. It is essential that you develop a retirement plan.

 
One of the less talked about steps in creating the perfect retirement plan is the visualization process. In order to figure out how much money you are going to need in the future you will have to have at least a rough idea of what you want to aim for. In order for the visualization process to work, you have to spend some time honestly considering what you really want out of life. It is not necessarily important at this point to be realistic. Instead, try to realize that there is a lot of time between when you start making investments and when you actually retire. Once you have solidified your visualized desires you are ready to begin mapping out a retirement plan that will get you to your goal.
 
It is unrealistic to think that any investment strategy will work miracles over night because investments take time to fully mature. Sometimes the waiting can be painful for investors, so it is an extremely good idea to set smaller short-term financial goals. These smaller short-term goals will act as stepping-stones to your realized dream, and they can help you feel like you are actually making progress. They can also help you stick to your financial plan and adjust it as necessary. Both long-term and short-term financial goals are the keys to achieving your dreams.

a

Are You Setting Financial Goals?

]]> http://kenhimmler.com/2009/06/13/are-you-setting-financial-goals/feed/ 0 Are You Getting Enough Return on Your Investments? http://kenhimmler.com/2009/05/29/are-you-getting-enough-return-on-your-investments/ http://kenhimmler.com/2009/05/29/are-you-getting-enough-return-on-your-investments/#comments Fri, 29 May 2009 10:57:32 +0000 Ken Himmler http://kenhimmler.com/?p=505 It generally goes without saying that when setting aside money for retirement you want to get the most out of your investments.  Every type of investment carries with it a certain amount of risk.  This has a tendency to scare people into sticking with the safest investments possible because they are afraid of losing all of their money.  Unfortunately, the risks involved with investments are not always clear at the outset.

While it may sound like a good idea, the fact is letting your money sit in a standard savings account could cause you to effectively lose more money than you would be risking in other forms of investment.  It is very true that a little bit goes a long way, and over time a small investment could grow exponentially.  Unfortunately, there are a lot of other factors that are figured into the growth of your money.  One of these factors that is often overlooked is the ratio of interest to inflation.  If the level of interest is lower than the level of inflation, you will effectively lose money in your investment.

With any investment option the goal is always to get the highest interest rate possible.  This is especially important when we take the rate of inflation into account.  The value of the US Dollar changes over time.  Placing $1 in the bank now might result in $100 in 20 years but the value of that $100 will be different than it is today.  To avoid losing value in your investment it is important that your interest rate is the same as or (preferably) higher than the inflation rate.  For this reason the safest investment options for you may not be the best options for you.  Talk with your retirement planner if you are having trouble finding investment options that will give you the most return.

 

a Are You Getting Enough Return on Your Investments?]]> It generally goes without saying that when setting aside money for retirement you want to get the most out of your investments.  Every type of investment carries with it a certain amount of risk.  This has a tendency to scare people into sticking with the safest investments possible because they are afraid of losing all of their money.  Unfortunately, the risks involved with investments are not always clear at the outset.

While it may sound like a good idea, the fact is letting your money sit in a standard savings account could cause you to effectively lose more money than you would be risking in other forms of investment.  It is very true that a little bit goes a long way, and over time a small investment could grow exponentially.  Unfortunately, there are a lot of other factors that are figured into the growth of your money.  One of these factors that is often overlooked is the ratio of interest to inflation.  If the level of interest is lower than the level of inflation, you will effectively lose money in your investment.

With any investment option the goal is always to get the highest interest rate possible.  This is especially important when we take the rate of inflation into account.  The value of the US Dollar changes over time.  Placing $1 in the bank now might result in $100 in 20 years but the value of that $100 will be different than it is today.  To avoid losing value in your investment it is important that your interest rate is the same as or (preferably) higher than the inflation rate.  For this reason the safest investment options for you may not be the best options for you.  Talk with your retirement planner if you are having trouble finding investment options that will give you the most return.

 

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Are You Getting Enough Return on Your Investments?

]]> http://kenhimmler.com/2009/05/29/are-you-getting-enough-return-on-your-investments/feed/ 0 Avoid Investment Scams http://kenhimmler.com/2009/05/26/avoid-investment-scams/ http://kenhimmler.com/2009/05/26/avoid-investment-scams/#comments Tue, 26 May 2009 10:45:11 +0000 Ken Himmler http://kenhimmler.com/?p=502 In the light of the present recession, everyone is looking for ways to make safe investments.  Unlike in previous generations, today’s primary resource for conducting the much needed investment research is none other than the Internet.  Unfortunately, there are a lot of dishonest people who have caught on to the fact that everyone is looking for a way to make a easy, safe investments.  These dishonest individuals have set up several elaborate scams to swindle honest, hardworking individuals like you out of their hard earned money.  You will need to equip yourself with the information you need to avoid such scams when doing your own investment research.

One of the most common scams comes in the form of unqualified individuals who claim to be reputable investment advisors.  These are sometimes easy to spot because they make unrealistic claims about your money.  Unfortunately there are also many well thought out scams that are hard to spot.  Sometimes scammers assume the identities of actual, licensed investment planners with outstanding credentials.  If you are not careful you can lose a lot of money in a short amount of time.

The best way to avoid these types of scams is to double-check all of your references.  Never send anybody money for investment services until you are absolutely sure they are who they claim to be.  Most reputable investment planners have only a select few websites that they operate with, and these websites are usually well documented by services that specialize in this kind of research.  When in doubt, do a google search with the name of the individual or service in question followed by the word ‘scam’ to find complaints other people have had.  When in doubt, follow this golden rule of Internet investing:  If it sounds to good to be true it probably is.  There are many legitimate investment services out there just waiting for you to find them.
 

a Avoid Investment Scams]]> In the light of the present recession, everyone is looking for ways to make safe investments.  Unlike in previous generations, today’s primary resource for conducting the much needed investment research is none other than the Internet.  Unfortunately, there are a lot of dishonest people who have caught on to the fact that everyone is looking for a way to make a easy, safe investments.  These dishonest individuals have set up several elaborate scams to swindle honest, hardworking individuals like you out of their hard earned money.  You will need to equip yourself with the information you need to avoid such scams when doing your own investment research.

One of the most common scams comes in the form of unqualified individuals who claim to be reputable investment advisors.  These are sometimes easy to spot because they make unrealistic claims about your money.  Unfortunately there are also many well thought out scams that are hard to spot.  Sometimes scammers assume the identities of actual, licensed investment planners with outstanding credentials.  If you are not careful you can lose a lot of money in a short amount of time.

The best way to avoid these types of scams is to double-check all of your references.  Never send anybody money for investment services until you are absolutely sure they are who they claim to be.  Most reputable investment planners have only a select few websites that they operate with, and these websites are usually well documented by services that specialize in this kind of research.  When in doubt, do a google search with the name of the individual or service in question followed by the word ‘scam’ to find complaints other people have had.  When in doubt, follow this golden rule of Internet investing:  If it sounds to good to be true it probably is.  There are many legitimate investment services out there just waiting for you to find them.
 

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Avoid Investment Scams

]]> http://kenhimmler.com/2009/05/26/avoid-investment-scams/feed/ 0 Is Your Plan Up To Date? http://kenhimmler.com/2009/05/22/is-your-plan-up-to-date/ http://kenhimmler.com/2009/05/22/is-your-plan-up-to-date/#comments Fri, 22 May 2009 02:27:26 +0000 Ken Himmler http://kenhimmler.com/?p=499 When an individual starts down the path toward financial independence, it is understood that he or she will have to make adjustments along the way.  Even the most well thought out plan cannot take into account every unforeseen situation that can interfere with your future plans.  For this reason, it is extremely important to stay on top of your financial situation so that you can make the appropriate adjustments to your savings and investments as necessary.

There is no substitute for being well informed about the laws that govern things such as taxes, investments, or anything that could affect your personal financial status.  State and tax laws have a tendency to change seemingly overnight, and adjustments to your financial retirement plan may have to be made so that you continue to get the most out of your hard earned money.  Failure to stay on top of your financial situation in this way could even have some potentially dire legal consequences.  Always check with your retirement planner when you hear about new laws that could concern your savings and investments.

Besides legal changes, there are many other situations that you should stay well informed about.  New financial opportunities become available every day for those who are actively looking for them.  Whether it is a new investment opportunity or a special holiday savings account with a particularly high interest rate, adapting your plan as necessary can make you a lot more money in the long run. 

If you get in the habit of doing investment research, watching the economic forecasts, and playing an active role in the investment process, you will be better equipped to deal with life’s uncertainties.  All it takes is a little bit of time, effort, and energy and you will be well on your way to true financial independence.
 

a Is Your Plan Up To Date?]]> When an individual starts down the path toward financial independence, it is understood that he or she will have to make adjustments along the way.  Even the most well thought out plan cannot take into account every unforeseen situation that can interfere with your future plans.  For this reason, it is extremely important to stay on top of your financial situation so that you can make the appropriate adjustments to your savings and investments as necessary.

There is no substitute for being well informed about the laws that govern things such as taxes, investments, or anything that could affect your personal financial status.  State and tax laws have a tendency to change seemingly overnight, and adjustments to your financial retirement plan may have to be made so that you continue to get the most out of your hard earned money.  Failure to stay on top of your financial situation in this way could even have some potentially dire legal consequences.  Always check with your retirement planner when you hear about new laws that could concern your savings and investments.

Besides legal changes, there are many other situations that you should stay well informed about.  New financial opportunities become available every day for those who are actively looking for them.  Whether it is a new investment opportunity or a special holiday savings account with a particularly high interest rate, adapting your plan as necessary can make you a lot more money in the long run. 

If you get in the habit of doing investment research, watching the economic forecasts, and playing an active role in the investment process, you will be better equipped to deal with life’s uncertainties.  All it takes is a little bit of time, effort, and energy and you will be well on your way to true financial independence.
 

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Is Your Plan Up To Date?

]]> http://kenhimmler.com/2009/05/22/is-your-plan-up-to-date/feed/ 0 Retirement And The Recession: What You Need To Know http://kenhimmler.com/2009/05/14/retirement-and-the-recession-what-you-need-to-know/ http://kenhimmler.com/2009/05/14/retirement-and-the-recession-what-you-need-to-know/#comments Thu, 14 May 2009 23:16:13 +0000 Ken Himmler http://kenhimmler.com/?p=447 The recession is on everyone’s minds these days. If you are retired or nearing retirement this adds to the concern and stress. I recently wrote an article about the key points you need to know about how the recession effects your retirement.

Eventhough this is a difficult time for everyone, there are tips and techniques on how to comfortably retire in the midst of a weak economy: View the article here   http://www.financialadvisormatch.com/community/articles/1115_retirement_and_the_recession_what_you_need_to_know.html

a Retirement And The Recession: What You Need To Know]]> The recession is on everyone’s minds these days. If you are retired or nearing retirement this adds to the concern and stress. I recently wrote an article about the key points you need to know about how the recession effects your retirement.

Eventhough this is a difficult time for everyone, there are tips and techniques on how to comfortably retire in the midst of a weak economy: View the article here   http://www.financialadvisormatch.com/community/articles/1115_retirement_and_the_recession_what_you_need_to_know.html

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Retirement And The Recession: What You Need To Know

]]> http://kenhimmler.com/2009/05/14/retirement-and-the-recession-what-you-need-to-know/feed/ 0 Debt and Retirement Planning http://kenhimmler.com/2009/05/12/debt-and-retirement-planning/ http://kenhimmler.com/2009/05/12/debt-and-retirement-planning/#comments Tue, 12 May 2009 00:55:49 +0000 Ken Himmler http://kenhimmler.com/?p=444 Debt can be a huge problem for retirees and individuals who are saving for retirement.  Because of the current state of the economy, there is a good chance that you are facing at least some debt.  A common misconception that individuals have about debt and financial planning is that they need to pay off all of their debts before they can truly save for the future.  While it is true that having little to no debt is conducive to a good financial situation, waiting until later to invest for retirement is never a good answer.  If you feel that you are in so far over your head that you truly are unable to pay off your debts while investing for the future, it may be time to ask your personal financial advisor for advice on the best way to fix your personal situation.

No situation is ever the same and there is not one answer that will work for absolutely everybody in this situation.  Sometimes all it takes is a change in perspective.  Sometimes it takes a bit more thought to figure out how to make your financial situation work in your favor.  The only person who can truly decide what course your finances take is you and it is important that you always make an informed decision when your money is concerned.

While there is no singularly correct solution to overcome the investment obstacle of debt, the answer is never to forego saving for retirement.  The importance of your retirement savings can never be stressed enough.  Debt is a major obstacle when it comes to saving for retirement, but with a little bit of help and a bit of solid planning debt will never again threaten your happy retirement in the future.  No matter how hopeless it may seem sometimes, you always have options.

 

a Debt and Retirement Planning]]> Debt can be a huge problem for retirees and individuals who are saving for retirement.  Because of the current state of the economy, there is a good chance that you are facing at least some debt.  A common misconception that individuals have about debt and financial planning is that they need to pay off all of their debts before they can truly save for the future.  While it is true that having little to no debt is conducive to a good financial situation, waiting until later to invest for retirement is never a good answer.  If you feel that you are in so far over your head that you truly are unable to pay off your debts while investing for the future, it may be time to ask your personal financial advisor for advice on the best way to fix your personal situation.

No situation is ever the same and there is not one answer that will work for absolutely everybody in this situation.  Sometimes all it takes is a change in perspective.  Sometimes it takes a bit more thought to figure out how to make your financial situation work in your favor.  The only person who can truly decide what course your finances take is you and it is important that you always make an informed decision when your money is concerned.

While there is no singularly correct solution to overcome the investment obstacle of debt, the answer is never to forego saving for retirement.  The importance of your retirement savings can never be stressed enough.  Debt is a major obstacle when it comes to saving for retirement, but with a little bit of help and a bit of solid planning debt will never again threaten your happy retirement in the future.  No matter how hopeless it may seem sometimes, you always have options.

 

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Debt and Retirement Planning

]]> http://kenhimmler.com/2009/05/12/debt-and-retirement-planning/feed/ 0 Do You Personalize Your Budget? http://kenhimmler.com/2009/05/05/do-you-personalize-your-budget/ http://kenhimmler.com/2009/05/05/do-you-personalize-your-budget/#comments Tue, 05 May 2009 11:08:32 +0000 Ken Himmler http://kenhimmler.com/?p=440 Any good guide to personal financial freedom involves several things.  To make your money grow for you, you need to ensure that you are setting aside money for your personal long-term savings and investments.  This is all well and good in theory, but in practice it can be extremely difficult to make your income work for you in such a way to allow for these long-term savings and investments.  This is one of the reasons why having a budget is essential. 

One of the first things that you do when you set up a budget is divide your income into different categories.  This is where many people who live on a budget run into problems.  There are many budget categories that everybody shares.  Unfortunately, everybody’s needs and the way that they need them can differ vastly from individual to individual.  No one system of budgeting can work for everyone.  For this reason, individuals should never be afraid to create their own budget categories that suit his or her lifestyle.

The key to having a good, balanced budget is to include all of the necessities.  This may sound simple but some of the essentials are easily placed on the back burner in the light of ‘more important things.’ Some of the ‘less important’ necessities include money set aside for recreation and entertainment, clothing, property upkeep, and of course your savings and investments.  No matter what your circumstance is, you should NEVER neglect your retirement savings and investments.

It is your budget and it should work for you.  If you prioritize your money before you get it you will find that it is much easier to take care of the most important things in life.  This is why you should always pay yourself first and dedicate a portion of your money to savings before you do anything else.   Over time the little bit you set aside will add up to true financial freedom and a comfortable retirement. 

Talk to your personal financial retirement planner to find ways to make your budget work for you more effectively.  You’ll be glad you did.
 

a Do You Personalize Your Budget?]]> Any good guide to personal financial freedom involves several things.  To make your money grow for you, you need to ensure that you are setting aside money for your personal long-term savings and investments.  This is all well and good in theory, but in practice it can be extremely difficult to make your income work for you in such a way to allow for these long-term savings and investments.  This is one of the reasons why having a budget is essential. 

One of the first things that you do when you set up a budget is divide your income into different categories.  This is where many people who live on a budget run into problems.  There are many budget categories that everybody shares.  Unfortunately, everybody’s needs and the way that they need them can differ vastly from individual to individual.  No one system of budgeting can work for everyone.  For this reason, individuals should never be afraid to create their own budget categories that suit his or her lifestyle.

The key to having a good, balanced budget is to include all of the necessities.  This may sound simple but some of the essentials are easily placed on the back burner in the light of ‘more important things.’ Some of the ‘less important’ necessities include money set aside for recreation and entertainment, clothing, property upkeep, and of course your savings and investments.  No matter what your circumstance is, you should NEVER neglect your retirement savings and investments.

It is your budget and it should work for you.  If you prioritize your money before you get it you will find that it is much easier to take care of the most important things in life.  This is why you should always pay yourself first and dedicate a portion of your money to savings before you do anything else.   Over time the little bit you set aside will add up to true financial freedom and a comfortable retirement. 

Talk to your personal financial retirement planner to find ways to make your budget work for you more effectively.  You’ll be glad you did.
 

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Do You Personalize Your Budget?

]]> http://kenhimmler.com/2009/05/05/do-you-personalize-your-budget/feed/ 0 How do I get started Investing? http://kenhimmler.com/2009/05/01/how-do-i-get-started-investing/ http://kenhimmler.com/2009/05/01/how-do-i-get-started-investing/#comments Fri, 01 May 2009 02:18:36 +0000 Ken Himmler http://kenhimmler.com/?p=438 There is a perception that many people have about investing for retirement.  While this perception manifests itself in many forms, it usually results in a lot of thinking and a lot less doing.  Despite the over abundance of excellent financial advice available to the public an exceedingly large number of people still have misconceptions about what it means to actually save for retirement.  This lack of knowledge contributes to one of the hardest problems a new investor will ever face: getting started.

If you are just getting started on your career making retirement investments, then you have already taken the first step by doing your own investment research.  A world famous proverb states that knowledge is power and in the investment world this is certainly true.  You can never have too much information.  When you are well informed you will be able to make sound decisions with your money.

Unfortunately a pitfall that many new investors fall into is spending too much time doing their investment research.  It truly does pay to be in the know financially, but knowing everything there is to know will not help you any unless you put your knowledge to work for you. 

This second step can be a very hard step because it involves taking a leap of faith that can be difficult to overcome.  This is the part where it becomes easy to come up with excuses to put off investing. If you can avoid this investment trap you will be ahead of most new would-be investors.  The fact is, there is no better time than the present to get started investing.  The sooner you start to establish your investment portfolio the better off you will be financially in the future.

Investing for retirement is not an abstract concept that is beyond the reach of the ordinary worker, it is a tangible possibility that is well within the reach of anybody who has a mind to take the plunge. 

 

a How do I get started Investing?]]> There is a perception that many people have about investing for retirement.  While this perception manifests itself in many forms, it usually results in a lot of thinking and a lot less doing.  Despite the over abundance of excellent financial advice available to the public an exceedingly large number of people still have misconceptions about what it means to actually save for retirement.  This lack of knowledge contributes to one of the hardest problems a new investor will ever face: getting started.

If you are just getting started on your career making retirement investments, then you have already taken the first step by doing your own investment research.  A world famous proverb states that knowledge is power and in the investment world this is certainly true.  You can never have too much information.  When you are well informed you will be able to make sound decisions with your money.

Unfortunately a pitfall that many new investors fall into is spending too much time doing their investment research.  It truly does pay to be in the know financially, but knowing everything there is to know will not help you any unless you put your knowledge to work for you. 

This second step can be a very hard step because it involves taking a leap of faith that can be difficult to overcome.  This is the part where it becomes easy to come up with excuses to put off investing. If you can avoid this investment trap you will be ahead of most new would-be investors.  The fact is, there is no better time than the present to get started investing.  The sooner you start to establish your investment portfolio the better off you will be financially in the future.

Investing for retirement is not an abstract concept that is beyond the reach of the ordinary worker, it is a tangible possibility that is well within the reach of anybody who has a mind to take the plunge. 

 

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How do I get started Investing?

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