One of my favorite stations on the radio while I’m driving or commuting for work is to listen to Biz Radio AM.  If you haven’t ever had a chance to listen to Phil Grande; you definitely should.  He’s got a great personality and a lot of what he says I agree with 100%.  I really like the guy.

One thing he says that I agree with is that “Mutual Funds are set to fail!”  One reason for that is because you can not  short the mutual funds.  You can short stocks just as long as it’s not in any individual retirement accounts.  Who really makes up all these rules?  I don’t know.

I can understand that shorting stocks may seem to be the Non-American thing to do, because if you’re an American; wouldn’t you want all US equities to go up in value over time, right?  Then again… is it fair or is it a double standard when huge U.S. institutions, banks, and so called sophisticated investors get to short the market and profit from the downside movement while the 52 million+ employees with their mutual funds in their 401k are hit with growing losses because they aren’t allowed to bet on the downside?

This is also significantly more mutual funds than there are stocks in the S&P500, which makes doing your research harder than it really has to be.  A majority of mutual fund managers can’t even get the average return rate of the S&P500 index.  If they are able to beat it, they can’t do it consistently over a long period of let’s say 10 yrs.  You can argue with me here, but I’ll get some solid figures together here one of these days.  I’ve just been a little busy with work recently.

It might seem like I’m going on a tangent here; however the point I’m trying to make is that they should allow you to short mutual funds and also short stocks in your IRA’s.  It’s just ridiculous in my opinion to limit an employees ability to be profitable as an investor when you don’t allow them to bet on the downside of mutual fund or a stock in their IRA.  I really feel sorry for those that bought BP at $60 a share in their 401k’s within the last 3 months and are still holding on.

I’m not saying to completely stop investing in the stock market.  I’m only suggesting that you further your financial education if you are to invest directly in the markets.  Also you should be open to learning about the advantages and disadvantages of all different asset classes.  That way you aren’t stuck with going long on mutual funds and stocks in your 401k or ira’s.

Popular Searched Terms:

• 401k rollovers - mutual funds

IRA Distribution Mistakes You Can Avoid

• What 2 Things Can Ruin Your Retirement Income! (page 5)
• IRA Trusts and IRA Beneficiary Facts! (page 7)
• How you can lower your distribution taxes and increase your income! (page 10)
• How Employer Stock Plans Effect Your Retirement Plan! (page 11)

Order & Download Your IRA Distribution Ebook Guide Today – FREE

(simply click the download button and become a fan on FB to get instant access)

Popular Searched Terms:

• 401k rollover to avoid RMD
• should I avoid minimum distribution
• avoid minimum distribution
• How to avoid minimum distribution
• rollover ira to 401k to avoid rmd
• rollover of 401k to avoid rmd
• rollover to avoid rmd
• rollovers to avoid minimum distribution
• things to avoid with 401k
• what is the average ira distribution

We’ve all heard it before.  Diversify, diversify, diversify.  This is the part that most people can not get right.  They fail to understand the true meaning of diversification and how it relates to investing.  If you look up the definition of diversification; you will find it stated as, “A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance.”

Here’s the problem I see that most people do.  They simply choose different products within the same asset classes.  That is not diversification.  Doing so will set you up for major disappointment.  Robert Kiyosaki has the same belief as mine on how to diversify.  The idea behind diversification is not to choose or pick between the blue, the yellow, the purple mutual fund brochures.  It is not having 100% of all your investments strictly in mutual funds and stocks.

It also is not about having only real estate.  True diversification would be dividing all of your assets between different asset classes.  A perfect example would be to have money invested in real estate, individual stocks, government or corporate bonds, some commodities, certificate of deposits, money market accounts, life insurance, and tax sheltered annuities above and beyond your mutual funds.

You can not make money on mutual funds when the market goes down.  You can however buy options as insurance for individual stocks or even get some inverse exchange traded funds if you anticipate a major correction.  This however does require planning and effort and we’ll dive into that at a later date.

If all you had were stocks and mutual funds; a major recession can leave you hanging in the red for years.  The same would apply if you were only in real estate and the real estate market were to burst.  Do both of the above sound familiar to you?  Is it possible that there will be another tech, stock market, or real estate bubble explosion?

The best thing to do is to come up with a strategy and design a plan on where you want to invest and when you plan to exit the investment.  Without a plan, how diversified are you?

Need Help With Your Diversification Plan?

Ask Binh

Binh Nguyen

(832) 273-3392

admin@401krollovers.info

Popular Searched Terms:

• 401k diversification
• 401k Diversification Chart
• 401k diverisication
• 401k diversification charts
• 401k portfolio diversification chart
• diversification 401k
• DIVERSIFICATION WITHDRAWAL
• how to diversify 401k

I found a great article by Kay Bell @ bankrate.com

I hope you find the following definitions helpful… if you still need advice, don’t hesitate to give me call. – Binh = )

10 Must-Know IRA Terms

If you have or are thinking of establishing an IRA, give yourself a pat on the back. A great resource for retirement, an IRA allows you to enjoy the benefits of compounding growth and tax savings. But the language of finance sometimes makes simple concepts seem more complicated. Here are 10 must-know IRA terms.

1. Adjusted gross income, or AGI

Used to calculate federal income tax, your AGI includes all the income you received over the course of the year, such as wages, interest, dividends and capital gains, minus things such as business expenses, contributions to a qualified IRA, moving expenses, alimony and capital losses, interest penalty on early withdrawal of bank CD certificates and payments made to retirement plans such as SEPs and SIMPLE IRAs.

2. Individual retirement account, or IRA

IRAs are retirement accounts with tax advantages. You may contribute up to $5,000 in 2008. Or, if you’re 50 or older, you can put aside up to $6,000 for that tax year. But your contributions can’t exceed your earned income. The investment grows tax-free until you begin making withdrawals, usually after age 59½. Take money out before then and you will usually get hit with a 10 percent penalty unless you meet certain specified requirements.

3. Contribution

IRA contributions are limited to $5,000 for the 2009 tax year if you’re younger than 50. If you’re 50 or older, you can contribute as much as $6,000 for the 2009 tax year. The limits are the same for 2010. Contributions are classified as either tax deductible or nondeductible.

4. Deductible or nondeductible

Contributions to a traditional IRA are tax deductible if you are not covered by your employer’s retirement plan. Even if you do participate in a company pension or 401(k) plan, you still may be able to deduct contributions to a traditional IRA depending on your income and filing status. Contributions to a Roth IRA are not deductible.

5. Modified adjusted gross income, or MAGI

For the purpose of determining your contribution limit, some people use their MAGI. For most people, this will be the line on your taxes that says “adjusted gross income,” or AGI, but some taxpayers will have to modify their AGI by adding back some income or tax breaks. These add-backs range from foreign income you didn’t have to count in your adjusted gross income to interest income for Series EE bonds that you used to pay for qualified educational expenses to a deduction for student loan interest or a traditional IRA contribution.

6. Required minimum distribution

Generally, if you have a traditional IRA, you must begin taking money out of the account by April 1 of the year after you turn 70½. The amount is a minimum distribution determined by your age and life expectancy. The IRS has established simplified tables that a traditional IRA owner can use to determine the required distribution. If required payments are not made on time, the IRS will collect an excise tax. Roth IRAs aren’t subject to minimum distribution requirements until after the Roth owner dies.

7. Rollover

This is the term used when reinvesting assets from one tax-deferred retirement plan to another within 60 days. Generally 20 percent of the funds is withheld for tax purposes if you take possession of the funds. You can avoid this by doing a direct rollover, which is a trustee-to-trustee transfer from one retirement account to another.

8. Roth IRA

The most notable thing about a Roth is withdrawals are tax-free if the account has been open for at least five years and you’re at least 59½ when you start to withdraw money. Contributions to a Roth are not tax deductible. “You can withdraw your contributions anytime you want, no penalty or taxes,” says Picker. You can also withdraw earnings for a qualifying event if the account is at least five years old. Qualifying events include: death or disability of the account holder and a first-home purchase.

9. Tax and penalty-free withdrawals

You can take money out of your IRA tax-free and penalty-free as long as you repay the full amount within 60 days, but may only do it once in a 12-month period. The withdrawal proviso was intended to make IRAs portable, says Barry Picker, CPA with Picker, Weinberg & Auerbach. “It’s not for short-term loans.” But some account holders use the rule to make loans to themselves. And many financial planners caution against it. The situation is “fraught with the potential for missing the deadline, not having the money and having a taxable event,” says Peggy Cabaniss, CFP. A short-term IRA loan “would be my last resort,” she says.

10. Education IRA

This account was years ago renamed Coverdell Education Savings Account, or ESA, in honor of the late Sen. Paul Coverdell, but you still hear the term education IRA pop up. This is not strictly an IRA, since it doesn’t finance retirement, but when it was created, the general rules reminded folks of an IRA, hence the nickname. Instead, you make annual contributions, of up to $2,000 per child, to a Coverdell ESA to help pay education costs. You can’t deduct the Coverdell contributions from your income taxes, but earnings are tax-deferred and qualified withdrawals, for certain school costs from elementary school to college, are tax-free.

Still Confused With All This Lingo?

Ask Binh

Binh Nguyen

(832) 273-3392

admin@401krollovers.info