Archive for April, 2011

The Process of Mutual Funds Asset Allocation

Thursday, April 28th, 2011

Mutual funds asset allocation refers to the adjustment that is done to the various mutual fund classes that exist so that, they can fit into the description of the investment portfolio. This is done on a regular basis, bearing in mind that the requirements for the funds securities keep changing with the changing market conditions. The process of asset allocation tends to be generally accepted and is not faced with a lot of criticism. Many investors are of the view that the process brings about more merits than demerits.

In the process of mutual funds asset allocation, the two most crucial factors that are normally considered are the probable return and the probable volatility of each mutual fund asset class. Volatility of a fund is a sensitive factor that needs to be looked into every now and then. To be able to get the most suitable results, it is important to come up with strategies that are oriented towards risk reduction and improvement of the objectives at hand.

Some of the common pitfalls that arise and which need to be dealt with in mutual fund asset allocation process include the overlying categories, duplication and use of unsuitable funds. For this reason, a three-step process has been recommended for use in the allocation. It all begins by coming up with an appropriate plan that captures all the necessary aspects of a fund.

These factors include;
1) The size of the portfolio,
2) The investment period or the rime it takes for the asset to mature,
3) The risk factor per asset and
4) The return objectives.

Once the plan is in place, the next step is to come up with the most suitable strategy for its execution. The strategy entails allocation of funds by category. Each category should be defined by the objectives and risk tolerance levels it is subject to. Third, the funds are given a recommendation depending on whether they are load or no-load types. Funds that are recommendable for the no-load category are those that are above average in terms of performance, those which adhere to objectives and have below-average operating expenses.

Other factors to consider in the mutual funds asset allocation process is whether the funds are growth or income oriented. When these factors are all combined, you will find that the risk factor generally goes down, and there is a tendency for the funds to survive a full cycle before they can be revised. For a more comprehensive strategy in asset allocation, age factor of investors has been brought into the limelight and you will find funds being classified according to different age categories. The age brackets will help you determine whether to invest in the long or short term, growth or income oriented classes.

Peter Gitundu Creates Interesting And Thought Provoking Content on Mutual Funds. For More Information, Read More Of His Articles Here MUTUAL FUNDS ASSET ALLOCATION If You Enjoyed This Article, Make Sure You Read My Most Recent Posts Here MUTUAL FUNDS ASSET ALLOCATION

Tax Tips for Real Estate Investors Using IRA Funds

Thursday, April 21st, 2011

Youve seen the advertisements and news articles. IRA funds can be used to make real estate investments. But before you jump on this bandwagon, make sure you understand some of the tax planning angles related to this opportunity.

Passive Loss Deductions

Almost always, an important component of your real estate profits comes from the tax savings associated with depreciation. These paper losses, referred to as passive losses by the Internal Revenue Code, can save both small and professional real estate investors thousands of pounds a year in income taxes. Unfortunately, passive losses from depreciation and related, similar tax deductions wont benefit real estate investors investing through IRAs.

Capital Gains Preferences

If you sell an investment for a profitwhether a stock or real estateyou get a tax break because your profit gets taxed at a preferential capital gains tax rate. In the best case scenario under current tax law, for example, your capital gains get taxed at 15% rather than at 35%.

Unfortunately, by putting real estate inside of an IRA, you lose this benefit. In effect, the appreciation you enjoy from your real estate investment gets taxed at your marginal income tax rate rather than at the capital gains rate. (Fortunately, the tax gets paid when you withdraw the money.)

Note: This problem also exists for other investments that produce capital gains, such as stocks and mutual funds that invest in stocks.

Unrelated Business Income Tax

In certain special circumstances, an IRA needs to pay income taxes on the profits it generates. These taxes, called unrelated business income taxes, essentially put the IRA investor in the same position as a regular taxable investor.

For example, if youre developing and then flipping properties inside your IRA, you may actually be an active trade or business. And in this case, your real estate investmenteven though its inside an IRAmay be subject to income taxes. (Your IRA custodian is supposed to report your taxable income and tax liability, and then pay the taxes but many dont)

And heres another example of a situation where the unrelated business income tax can trip you up. If you borrow money to invest in real estatethe typical situation in any leveraged real estate investmentthe profit you earn on the money youve borrowed is treated as unrelated business income. Accordingly, that profit is subject to unrelated business income tax.

Unrelated business income inside an IRA is taxed according to trust taxation rules, which means that as soon as youve made much money at all, youre taxed at the highest marginal tax rates. Ouch.

Closing Caveats

Real estate is a great investment. And real estate belongs in any investors portfolio. But you need to think carefully about buying into the idea of using your IRA to make real estate investments. If you do decide to invest in real estate through your IRA, first consult with your tax advisor.

Stem Cell Bill U.S. Senate approves a bill for

Thursday, April 14th, 2011

Stem Cell Bill U.S. Senate approves a bill for funding

The United States Senate approved a bill to increase funding for embryonic stem-cell research. They were four votes short of the number needed to avoid a presidential veto. The bill passed with sixty three positive votes. President Bush stated he would veto the measure. This would be his first veto since he took office.

Polls indicate that as much as seventy percent of the public support embryonic stem-cell research. The demand, which is surging forward, has crossed all lines ethic, racial and geographic.

Interestingly the Senate passed this bill by failed to pass a bill that encouraged stem-cell research from sources other than actual embryos. This bill passed in the Senate and failed in the House of Representatives. There will be another try to pass the bill this week.

On the same subject, both the Senate and House passed a bill which bans fetal-farming. This is the actual raising and aborting of fetuses for scientific research reasons. Former President Reagan suffered and died from Alzheimers disease. Mrs. Reagan made calls to a few senators to raise support for the bill to prevent a possible veto.

The research in this area brings up so many ethical questions. Society has not reached a consensus on this subject. Social change comes about slowly in our culture. Many people make their decision based on moral, ethical and religious reasons. Stem cell research has the future potential to correct or replace damaged cells in the human body; thereby extending and improving life.

State Funded Health Insurance for Your Child

Thursday, April 7th, 2011

Health care is one of those services that everyone needs, especially children. Yet, like in many other countries, the United States does not provide either federal or state blanket medical coverage for children.

For a lot of parents, the answer is individual or job-based health care insurance coverage. Unfortunately, many of these plans arent as comprehensive as people might think, and your child may not be covered. If that is the case, you will have to increase your coverage or look to state-funded health insurance, which can provide medical insurance security for children of working families those who may earn too much income to qualify for Medicaid assistance but not enough to realistically handle medical care or even ongoing private insurance.

Medicaid is a federally-funded program aimed at assisting low-income families get the medical attention they need. Medicaid-insured families may also receive access to discounted prescription drugs.

Each state has its own version of Medicaid delivery. There are many Internet resources available to guide you through the intricacies of Medicaid in your state, or you can call your local Medicaid office or your state representatives office for more information.

Ask how much income you can earn before being disqualified from Medicaid coverage, and what the guidelines are for determining income for Medicaid assessment and qualification purposes.

Figures from Centers for Medicare & Medicaid Services indicate that while a higher percentage of children are now enrolled in Medicaid insurance programs (nearly 20 percent, up from under 16 percent in the late 1980s), the percentage of children who have no health insurance coverage at all has also jumped from 13.1 percent to 15.4 percent. The Centers for Medicare & Medicaid Services website suggests fewer children being eligible for coverage under company-sponsored plans is behind a large part of the increase.

The State Childrens Health Insurance Program, or SCHIP, was created in 1997 so that each state could provide medical health insurance to children under the age of 19 who are not otherwise covered under a health care insurance plan. State Childrens Health Insurance Program guidelines and eligibility vary widely from state to state, so you will have to find out the specifications for where you live, but generally children under the age of 19, who are part of a family with an annual income of up to $36,200 per year are eligible for services such as physician visits, hospitalization, immunizations, prescriptions, and emergency room treatment. For children who qualify, there is no cost or only a nominal fee for these services. Again, depending on in which state you live, coverage may also extend to eye care, dental care and medical equipment.

Literally millions of children are covered by SCHIP every year, but there are millions of others who do not have health care insurance. Uninsured children are unlikely to receive adequate medical attention, which can be cost prohibitive, leaving them at risk for serious illness and health conditions.

Children of immigrant or alien families are among those kids who are often lacking medical insurance thanks to fears that an individuals or a familys immigration status will be adversely affected if their children are enrolled in Medicaid or State Childrens Health Insurance. The only case in which immigration officials consider a childs participation in a government-funded health care program is if the child requires long-term care, such as in a mental health facility or nursing home. There may be certain limitations on some services, such as long-term care, but for the most part, using government insurance to protect the health of their children is risk-free for immigrants hoping to obtain a green card.

Regardless of your financial or other status, it is vital that children receive proper medical attention from the time they are born until they are old enough to look after their own needs. This includes responsive medical care such as treatment of illness, disease and trauma, as well as regular preventative care such as vaccinations, checkups and nutritional monitoring. It has become a clich, but children really are the future, and with proper medical care and attention now, that future can be one with a lot of healthy people who create far less strain on Americans already burdened healthcare system. Think of health insurance for children as an investment in the future.


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