Simplest Way To Avoid Back Taxes

Posted on August 25, 2010 by J.Wenger

The simplest way to avoid back taxes is to file a tax return. It really is that simple!

For a lot of individual investors, taxes aren’t something that gets much attention until March and April.

However, the IRS is always watching, as the subject of an article from the NY Daily News found out recently. The last paragraph is the one point that all investors should remember.

“If you don’t file, the IRS assumes that you have 100% profit, that basically it’s as if you bought the stock at no cost.” – Manhattan CPA Marc Albaum

While buying a stock at no cost would be great, that’s probably the ONLY way you could truly afford the resulting tax bill.

Until someone figures that trick out, stick with filing a Schedule D. Even if you get it totally wrong, you’ll still be better off than that guy!

Sources:

Trader nailed with $172 million bill in back taxes, asks ‘What’s the IRS?’
Bill Hutchinson – Daily News – August 24, 2010
http://www.nydailynews.com/ny_local/2010/08/24/2010-08-24_thought_you_had_irs_problems_failed_daytrader_nailed_with_172m_bill.html

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Is Jim Cramer a Circus Clown?

Posted on June 29, 2010 by J.Wenger

Jim Cramer…a circus clown? Well, not quite. But his outbursts do make for some comedic relief at times.

For instance:

I read an article by Carl Richards (Mr. Richards is a CFP and founder of Prasada Capital) entitled “Ignore Generic Financial Advice (Except This Post)”. It dovetails really well with my blog entry back in May (Should personal finance writers be liable for bad advice?) and got me thinking about the reasons that I started this site.

Mr. Richards kicks things off with the following:

“It is dangerous to mix investing with entertainment. The classic example is thinking that Jim Cramer is your investment adviser rather than some sort of circus clown.”

He makes the case (correctly) that dealing with financial matters is a personal activity. Collecting and reviewing information is very useful; it helps grow your knowledge base. However, you MUST apply it based on your specific circumstances.

The article supports the sites mission to teach principles that help you understand and create your own plans…your very own personal investment strategy, if you will.

Sources:

Ignore Generic Financial Advice (Except This Post)
Carl Richards – NY Times – July 7, 2010
http://bucks.blogs.nytimes.com/2010/07/07/ignore-generic-financial-advice-except-this-post/

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Behavioral Investing – Anger or Denial?

Posted on June 29, 2010 by J.Wenger

Today’s link touches on behavioral investing and comes from Damien Hoffman (Wall St Cheat Sheet) via Barry Ritholz (The Big Picture).

Basically, this graphic describes a “market cycle”, which is based on the feelings of investors during certain stages of rising and falling markets.

So where are you in this 12 step program?

Sources:

Psychology Cheat Sheet
Barry Ritholtz – June 29th, 2010
http://www.ritholtz.com/blog/2010/06/psychology-cheat-sheet/

Do You Think We Are in the Disbelief Stage of the Recovery?
Damien Hoffman – Wall St. Cheat Sheet
http://wallstcheatsheet.com/breaking-news/economy/do-you-think-we-are-in-the-disbelief-stage-of-the-recovery/


Your Cheat Sheet To The Psychology of Market Cycles
The Hoffman Brothers – Wall St. Cheat Sheet
http://wallstcheatsheet.com/trading/your-cheat-sheet-to-the-psychology-of-market-cycles-infographic/

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1,000,000 saved is 40,000 earned…

Posted on May 30, 2010 by J.Wenger

When is retirement a luxury you cannot afford? According to Kiplinger Magazine, when you’ve saved $1,000,000!

“Considering that saving $1 million will only amount to about $40,000 per year for the average retiree (assuming you stick to a widely accepted rule of thumb that says you should limit your withdrawals to 4% of your savings during your first year in retirement), it’s easy to understand why retirement has become almost a luxury.”

With all the people I know who have had their 401k matches suspended, I’m guessing Kiplinger’s isn’t the only one who thinks retirement is a luxury you can’t afford!

Click here to read the article and view a giant graphic.

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Look out Below!

Posted on May 6, 2010 by J.Wenger

Drastically falling market prices, such as the ones we saw today, highlight the need for individual investors to use stop-loss orders.

Placing “stops” means that you are entering a limit order to sell your stock. The “limit” is the price that you want to have the order activate.

For example, assume that I purchased a stock at $50 per share. I also have a rule of losing less than 10% on every trade. This equals a maximum loss of $5 per share for my $50 stock.

After purchase, I would enter a second order; a sell order with a price “limit” between $45 and $50. For this example, I’ll use $46.

If the stock price fell below $46 per share, the order would activate and turn into a regular market order, and my shares would be sold.

This is just one method to limit your maximum loss, and a great way to gain peace of mind when the market is not cooperating.

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Is Your Financial Advisor a Yes Man

Posted on March 25, 2010 by J.Wenger

Recently, I posted an article from CNN Money to our Twitter account (@investsafely) regarding investment advisors, titled “Do you have a yes-man problem when it comes to financial advice?”

To summarize, the article covered a study on investment advisor bias. Actors went to advisors with fake investment portfolios. Long story short, the advice was largely based on the current holdings of the “client”.

In other words, instead of looking at each person’s goals and objectives, advisors looked at the current investments and recommended more of the same.

One follower asked the question: “So what is the solution?”

Realistically, it will take some time on your part to figure this out. I know, I know…I can hear all the groaning already!

Seriously though, you need to find an advisor that is willing to push you; one that takes time to review your goals with you up front, before trying to figure out what investments you need.

Your adviser should push you as to why your goals are so important; not because they are not important. Instead, you want someone who can assist you in making sure that the goals are really in alignment with what you want and will help you get it! Reviewing your portfolio and making recommendations should only occur afterward.

Above all, any advice needs to make sense to you! Even the information listed on this site is up for discussion. At the end of the day, you’re the one that will be left holding the bag, so to speak. Hopefully, it will be full of a lot of money, and not something less pleasant.

Sources:

Financial advice: The yes-man problem
Stephen Gandel – CNN Money – March 11, 2010
http://money.cnn.com/2010/03/10/pf/financial_adviser.fortune/index.htm

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Fidelty Investments Save You Money

Posted on February 11, 2010 by J.Wenger

Fidelity Investments lowered the boom on trading commissions.

Schwab was the first to lowered online trading fees for equity trades by more than 30% to $8.95.

Click here to read the full article from Barron’s – Has a New Price War Broken Out in Online Trading?

Not to be outdone, Fidelity responded by lowering commissions to $7.95 per online equity trade. In addition, 25 ETFs from iShares will be commission free for Fidelity’s online customers.

If you’re an active trader, there are other investment brokers with even lower commissions that are probably better suited for your needs.

However, for those of you that like a full service brokerthat offers higher level of service and a wide variety of good research tools, Fidelity just raised the bar substantially (or lowered it, depending on your point of view).

Sources:

Has a New Price War Broken Out in Online Trading?
Theresa W. Carey – Barrons
http://online.barrons.com/article/SB126469936769636479.html

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