The Risk of Owning Securities

Anyone that has been through a stock market downturn is familiar with the risks of owning stocks, mutual funds, unit investment trusts, Real Estate Investment Trusts, etc.

When values are rising, we pat ourselves or our advisors on the back and congratulate ourselves for making a wise pick. We may even buy more.

The true test of an investor comes when the market heads downwards. Then we second guess ourselves and/or our advisor and wonder if we made a big mistake.

Sometimes, some event out of our control happens and that company we thought was as solid as a rock crumbles out of the blue (Think Bear Stearns, Enron, WorldCom, Tyco, etc.)

Maybe we panic and sell at a loss. Then we curse ourselves for not acting sooner. Hindsight is indeed 20/20.

Any seasoned investor knows that the stock markets go through cycles just like real estate and bonds. One should be in it for the long haul or be prepared to ride a roller coaster.

You might think bonds can never lose value. This is not true.

It depends on the type of bond you own. Some need to be kept through the entire length of the maturity period in order to get what was promised.

Others trade on the open market and can trade at a premium or a discount from face value. Some are backed by more risky collateral and can lose their entire value.

Saving accounts, checking accounts, CDs are safer from loss, but here the lower interest rates also pose the risk of not keeping up with inflation and being worth less in the future than they are today.

Risk is not all bad. Huge profits can be made to those who invest wisely and consistently. Buy stocks when the market is down. They are on sale (assuming the company is still viable of course).

Most of all, remain diversified enough that when the stock market is down, real estate is up, or bonds are trading strong.


Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

The Risk of Owning Annuities

I’m not sure what you know about annuities, but I will tell you that a lot of insurance agents and registered representatives don’t know as much about the products they sell as they should.

You might wonder how that can be, but if you truly knew the number of annuity products currently being offered by hundreds of companies it wouldn’t be hard to fathom.

The other thing that makes annuities rather intimidating is that since each company’s products have different features and crediting methods they can rarely be compared side by side with much consistency.

The popularity of one over another can actually be the strength of the company offering it and how effectively they market it. Some companies set themselves apart by being truly innovative and others simply get a product out there to have something to offer along with other products.

Some agents are very knowledgeable and know their products inside out. They keep up on changes and take advantage of training seminars and company experts.

Others learn just enough to be dangerous and tell clients what they want to hear and leave out the potential downside.

This has lead to improper products being sold to unknowing prospects, especially in the senior marketplace.

Typically, the main issue has been tying up the funds of the elderly for excessive periods of time when they may need to access this money for issues such as health care or long term care in the short run.

Since bad news gets a lot more press than the products purchased by clients for the right reasons, annuities in general have taken a bad rap and that is a real shame.

There are a lot of good products out there that offer low fees, principle protection, tax deferred growth, good long term interest growth, guaranteed payouts and death benefits.

They make good vehicles for trust investments and for installment sale payments, as they are backed by strong insurance companies who must keep enough cash reserves to guarantee required payouts.

Any trustee or charity that is obligated to make payments to a contracted party needs to invest this money prudently as opposed to trying to hit a home run with an unrealistic return expectation and shouldn’t be subjecting the funds to risky or illiquid assets.

Bottom Line: Annuities for the right purpose are very appropriate and effective. Always make sure you understand what you are investing in and don’t be swayed by headlines- whether positive or negative.

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858


Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

The Risk of Owning Real Estate

Real Estate is an important part of anyone’s investment portfolio.

Whether it is the house you reside in, a rental property, vacant land, or a commercial building, a good piece of real estate will almost always increase in value over time.

That said, a number of factors can happen which can affect how much your property increases in value.

Any time you buy a property that is less than desirable, you can lose money. Structural issues you may not be aware of, property in a declining neighborhood, land in a flood zone, natural disasters such as fire, flood, hurricane, earthquake, zoning issues, tax issues, insurance issues, all play a part in the value and profitability of the property.

Economic issues can also have a great effect and are much harder to predict and knowingly avoid.

In 2008 times are tough. People are losing homes and jobs, property values are dropping, companies are going out of business or are seeing major declines in revenue, and a property may not sell as quickly as you’d like.

Even a solid commercial property can have a tenant break a lease and leave the owners temporarily in a negative cash flow position.

Just as I’ve seen my home triple in value in about 5 years, I’ve also seen it decrease by about 20% in 2 years.

This could have gone the other way if I purchased at a different time. It could have gone down significantly in the first couple of years and then rebounded in the next 5.

Real Estate is still a good investment. It is still up to every purchaser to do their due diligence and know what they are buying. It is not a liquid asset, and is almost always more profitably over a 7-10 year period of time.

Those who buy properties to resell at a profit in a short period of time will make a lot of money in some cycles and lose a lot of money in others. It’s the nature of the business.

The moral of the story is, just because real estate can go down as well as up don’t count it out as a good long term investment.

I had a client that did great with a few properties in Florida during the boom there. He sold and immediately bought several more thinking he’d make another huge profit and keep repeating the cycle. Now he is pouring money into empty rentals which aren’t selling and quickly losing his original profits.

Unfortunately, all his eggs are in one basket and he is forced to learn a difficult lesson.

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858


Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

No Such Thing as No Risk

We all would like guarantees that any investment we make will never lose money or value. The reality is that every investment has a certain amount of risk.

Whether you are purchasing real estate, stocks, bonds, mutual funds, annuities, gold, or even certificates of deposit there is risk.

The best you can do is evaluate what it is you are purchasing, be aware of the specific risks and potential rewards that asset has associated with it, know what if any recourse is available should something unexpected arise, and do not put all your eggs in the same basket.

We all know the stock market goes up more than it goes down over extended periods of time. Buying good quality stocks of a diversified nature and holding them through both down and up cycles will almost always show long term profit.

Real Estate has similar cycles. If you purchase a good quality property in good condition in a good area it will most likely increase in value over time.

The comparative safety of a certificate of deposit has the risk of locking into a low interest rate for an extended period of time and having your savings not keep up with the rate of inflation.

The next couple of articles will address some of the normal things to expect which can put a crimp in any investors plan. In other words “Stuff Happens” and there is a chance it could happen to you.

It doesn’t mean you should never take risk, just that some risks will pay off right away, and others may encounter some challenges along the way. It is often forces beyond our control that make it hard to predict.

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858

Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Life Settlements and Capital Gains

Do you meet the following criteria?

*Age 65 or older
*Have a Life Insurance Policy with a face amount of 250K or more
*There has been a change in insurability since the policy was issued
*Life expectancy of 15 years or less

If so, a life settlement may be something to consider. A life settlement is the sale of a life insurance policy for more than the surrender value while living.

Here are some circumstances that may lend themselves to a life settlement.

*You have a policy that is underperforming and you can no longer afford the premiums to keep it in force.
*You had the policy to protect a spouse who has passed away.
*You have a key employee life policy and that employee no longer is in your employ.
*You have the ability to replace this policy for a policy with the same death benefit and lower premiums.
*The policy was to cover estate tax which is no longer an issue.
*You are considering surrendering the policy or letting a convertible term policy lapse for any reason.

Before you let a policy lapse or surrender it, let over 50 companies compete to offer you significant cash for your policy. Here are a couple of examples of real policy sales.

Male, Age 79, Universal Life Policy with 3.4 million face value and 180K cash surrender value. Policy was purchased for 640K dollars.

Female, age 76, joint survivorship policy, 2 million face value, surrender value of 290K. Policy was purchased for 390K dollars.

Since some of the profits are taxed as capital gain, additional tax strategies can be applied to minimize taxes due.

Contact me if you have a policy that may qualify. We can get an estimate of what fair market value you might expect at no cost to you.

A life settlement may also be effective for exiting a poorly performing variable annuity product.

I’ll be devoting an episode of my radio show “Simply Wealth” to this topic in the near future.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Having Trouble Selling Your Property? How About Auction?

The biggest thing affecting my clients over the last year or so is that real estate is simply not selling the way it used to.

I can’t even count the number of times that a sale is all wrapped up after months of waiting, and at the last minute it falls out of escrow.

Most times it is due to the financing of the buyer not coming through as planned. In today’s market even “preapprovals” don’t seem to hold a lot of weight.

So although the buyer may lose a deposit, the sale doesn’t happen and the property goes back on the market. It may sit there for any number of months and sometimes the seller is forced to rent it out again just to keep afloat.

If your property is just sitting there with no bites, or you need to sell it sooner rather than later, you might consider putting it up for sale through auction.

I recently devoted a weekly radio show to this topic, and if the idea appeals to you take a listen.

An archive of all of the episodes of “Simply Wealth” is now available on the following website.

http://www.savegains.com

Go to the link above and click on the “Listen to My Radio Show- Simply Wealth” link located in the right hand selection menu.

Alternately, listen to the most current show at www.webtalkradio.net and even download it as a podcast.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

When Is a Year and a Day not a Long Term Gain?

I read an interesting article today and had to share.

It’s one of those quirky things that you would probably not ever think about until you got caught in a really awful situation.

By now you know that long term capital gain is taxed at a lower rate than ordinary income, so if you hold an asset for longer than one year you receive a tax advantage when you sell.You actually must hold the asset for at least a year and a day to qualify.

So, something purchased on March 10 of one year could be sold on March 11 of the following tax year and receive long term capital gains treatment.

So when does this rule of thumb not apply?

Leap year, of course.

If you buy shares on February 28 in a year preceding a leap year, and sell them on the following February 29, your gain or loss is short-term, not long-term.

This surprising outcome is the result of a technicality. Your holding period for an asset is deemed to begin on the day after the date of purchase. That's why you can't get a long-term gain when selling on the anniversary of the date of purchase.

If you buy on April 10, your holding period technically begins on April 11. That's why you have to wait until April 11 of the following year to sell for a long-term gain.A purchase on February 28 in a year that isn't a leap year gives you a holding period starting on March 1.

Selling on February 29 the following year may seem good enough because it's a year and a day after the date of purchase. In reality though, you have a holding period that began March 1 and ended February 29 of the following year.

The way these rules work, that's a holding period of exactly one year: not good enough, because you need to hold more than a year to have a long-term capital gain.

I learn something new every day. Hope you did too.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858

Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html