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Guest Blog by Craig Guillot, Quicken.com.

With the start of 2012, there are a number of new tax laws and adjustments. From higher tax bracket thresholds and standard deductions, you’ll have some positive and negative changes to your taxes this year.

Higher federal income tax-bracket thresholds

A number of tax changes in 2012 have been due to standard inflation-related adjustments. Continue Reading »

I recently came across a calculator developed by Morningstar to help families estimate future college costs and to determine whether they are on track with saving to meet the future costs of higher education. Let’s have a look at what this tool can and cannot do and how such a tool may be useful.

The key variables that determine the future cost of a college education are:

(1) How many years remain until your son or daughter starts college

(2) Whether they will attend a public or private college

(3) How long they will remain in college, and

(4) Whether they will actually pay the “sticker price,” or receive financial aid, grants, scholarships (etc., etc.)

The Morningstar calculator assumes that your student will, in fact, be paying the full advertised cost of the average public or private university. This is a fairly large limitation to the utility of the tool all by itself. The average student does not pay the advertised price of attendance. In fact, Continue Reading »

One of the recurring themes in the financial press in recent years is a warning to income-oriented investors not to pile into dividend-paying stocks to boost portfolio income. The Wall Street Journal has a recent article on this topic titled, “Why Dividend Stocks Aren’t the New Bonds.”  This article is motivated by the fact that $17 billion flowed into equity-income funds in 2010 even as $80 billion flowed out of U.S. equity funds. 

 The arguments made by the WSJ article are similar to those in a November 2011 blog post by Vanguard’s Chief Economist, Continue Reading »

Well-known financial columnist Robert Powell has a recent article in MarketWatch titled, “Retirement in America is ‘Endangered.” The motivation for this piece, he writes, is that retirement preparedness is a crucially important topic that was missed in the recent State of The Union address by President Obama.

Powell goes on to list the key problems with the current ‘state of retirement’ in the United States:

1) Under-funding of Social Security
2) Low savings rates
3) Poor market returns over recent years
4) Inadequate levels of financial literacy
5) Half of American workers have no employer-sponsored retirement plan

All of these issues are critically important. In just one or two generations, we have shifted from a society in which employers provided lifetime retirement income via traditional pension plans, to one in which individuals now must manage every aspect of their financial futures, including how much to save and how to invest their retirement savings. The good news is that each of these five issues can be solved if we have the will to solve them. Continue Reading »

As Facebook prepares for its IPO, The Wall Street Journal has published an incredibly relevant article titled “No More Résumés, Say Some Firms.”

The article suggests that the traditional process of seeking employment or demonstrating your work history and capabilities, (a.k.a. the résumé), is becoming far less relevant. Now anyone who cares about your work experience or professional accomplishments, can simply Google your name and find out for themselves. Continue Reading »

The recently-published book by Zvi Bodie and Rachelle Taqqu, Risk Less and Prosper: Your Guide to Safer Investing, provides a unique perspective on how to meet the challenge of long-term financial planning.  The book is well-organized into a number of steps required for identifying and organizing long-term goals and thinking through how to meet these goals.  The presentation is built around a narrative in which a group of people meet to try to figure out how to meet their long-term goals and how to deal with the uncertainty associated with both their lives and their investments. Continue Reading »

Guest Blog from Quicken.com.

Only one thing always happens in the financial markets: Values fluctuate. Before investing in any market, at any price, in any climate, prudent investors think about how much fluctuation they can handle. In other words, how much can your portfolio go down before you start to lose sleep?

We all have our trigger points. After the stock market began skidding in October 2007, frayed nerves sent investors scrambling for havens they hoped were less risky. Then the market reversed course. Strong gains in much of 2009 left risk-averse investors on the sidelines, watching stock prices climb and wondering when, if ever, they’d have the stomach to invest in stocks again.

The lesson? Continue Reading »

Standard and Poor’s downgraded France’s credit rating last week from AAA to AA+.  While this downgrade has gotten a lot of press coverage, there are a number of topics surrounding the downgrade that are worth noting.

First, France now has the same credit rating from S&P as the United States.  As you’ll remember, S&P downgraded U.S. sovereign debt from AAA to AA+ back in August 2011.  Second, the yield on France’s 10-year bonds is at 3.08%. While this yield is well above the U.S. 10-year Treasury yield of 1.9%, it is certainly not a sign that the bond market sees substantial credit or interest rate risk associated with France. The media response to the downgrade is reminiscent of the situation in July last year when there was a media frenzy surrounding the possibility that the U.S. would fail to raise the debt ceiling and technically default on its debts.

Third, we can better understand the markets for debt (bonds) if we also look at the markets for equity (stocks).  They are related.  The appetite of investors for risk (and that of the market as a whole) varies through time.  When investors are broadly risk averse, they are less willing to Continue Reading »

In “Can You Get 7% Per Year in Income with Only Moderate Risk?” a blog I wrote back in the beginning of December, I analyzed a portfolio with 7% yield and “moderate” risk.  My analysis suggested that it was possible to create a portfolio with 7% yield and about the same level of risk as a portfolio allocated 50% to a total market stock index (VTI) and 50% to a broad bond index (BND).  My analysis also suggested that this portfolio had a projected volatility of 15% on a going forward basis. A helpful reader (see his comments by clicking on the article above and scrolling to the bottom of the page) found that this portfolio lost Continue Reading »

Guest Blog by Kip Robbins, CFA, Zacks.com.

Having worked in the equity markets for awhile now with a primary focus on finding profitable stock-picking strategies, I sometimes feel like the keeper of great stock picking ideas. That being said, as the New Year is upon us, I’m in a giving mood and would like to gift you three great ways to pick stocks in 2012.

In the previous two articles I’ve posted here, you’ll remember that I discussed the merits of Research Wizard as an essential stock picking tool for the individual investor to create and test new ideas. So today, I’m going to give you an example of how to develop a stock-picking strategy within the Research Wizard using three specific strategies:

First, it’s very important to start with a good ranking or rating system. Most of the time, there’s a lot of research already committed to a rating and starting with a good working foundation is a great way for you to save time. (Examples of these are broker stock ratings or the Zacks Rank. I’ll use the Zacks Rank since it’s more comprehensive than broker ratings and also has a great track record for selecting stocks.)

Second, look for stocks that Continue Reading »

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