THE ABC's Of INVESTING...”ALWAYS BUY CHEAP”

It might be urban myth but someone famous said “Buy Low and Sell High”. I prefer the ABC's of investing “always buy cheap”. Imagine if Costco raised prices instead of lowering them, would you buy more? Would you buy at all?

Well we have a sale going on in commodities these days. And if these things were sold at Costco we would have shopping carts full. On Maui where I live there are gas lines at the Costco pumps while other gasoline sellers are empty. And why not? The other stations prices are almost a dollar a gallon higher. But what about the commodities you don't buy a tank at a time?

Remember when gold was all the rage? Five years ago December 2009 gold was 1135ish an ounce. That was already a three fold rise off the lows. From there, just two years later, it went to a new high near 1920. Today it is 1128 an ounce a 40 percent decline. You don't see many “We will buy your gold” commercials on TV like you did back then.

Catching up to gold is crude oil. As 2014 winds down we have seen the price of a barrel of Oil decline 40 percent this year. It was in100 area and today is in the 55 dollar area for a barrel of oil. I saw a headline the other day calling this an oil “GLUT”. I kept looking for the articles that mentioned the recent dinosaur sitings. I mean how can you go from worrying about the low stock piles of oil to an oil glut without dinosaur sitings? Which gets me back to the ABC's of investing.

The ABC's of investing “Always Buy Cheap” is more about when not to buy than a value discussion. Let me explain. People are almost 100 percent emotional. And when it comes to investing they need that crowd pleasing security of something that is constantly talked about and seemingly can only go up. In my opinion that is today's stock market.

The Dow at this writing is above 18000, a new all time high. Almost 250 percent higher than the lows in 2009. Anyone remember the financial crisis? It's as much a distant memory as the dinosaur sitings. But if you had to sell during the crisis you remember it like it was yesterday. Why? Because the Dow and the S and P declined 50 percent in less than 24 months...Now that's a blue light special.

My point to this long treatise is that while we may have reached Nirvana, history tells us probably not. It gets harder to lower interest rates and pump up asset values as you reach zero percent. Eventually you have to have real growth (profits too) to support the debt load. Otherwise markets implode.

At this time of year where we financial types are thinking tax loss selling, I am taking money off the table. Remember what you see in your statement are “UNREALIZED” gains and can evaporate faster than you can analyze the reasons why. Those gains that make you smile today are never cash in your pocket until you go to the cashiers window. Harvesting some (taxable) gains after the 250 percent rally from the 2009 financial crisis lows is what this prudent man would do...Merry Christmas to everyone. May there be peace on earth...Yours Truly...Steve

So which is Best?... INCOME OR GROWTH?

Actually, what's most important, and many people lose sight of this, is the total return that an investment produces over a period of time: The net return after taxes.

If you can't afford to have your money tied up without generating much of an income, you'll want to lean towards high income returns. On the other hand, if you can afford to invest for the long term without taking income today, you might earn more after-tax money by keeping a larger percentage of your nest-egg in tax-favored accounts.

As John D. Rockefeller said almost a hundred years ago “Don't pay taxes on income you don't need now.

Of course, you also have to consider the "bird-in-hand" principle. Your income accounts are cold hard currency rustling in your pocket. No current income tax on the reinvested accounts, but you lose the right to spend the interest immediately!

The most important consideration is this: Do you want or need a regular income to cover your living expenses?

Tax-favored reinvestment plans compound your interest and principal. If you don't need the income today tax-favored reinvestment plans are worth considering.

The one thing that matters most:

Yours (not your neighbors or beneficiaries but your) income and tax needs. We now need to consider what a high and low interest rate. Is 5 percent a good rate? How about 10 percent? And what about inflation?

There's no way of knowing what rates will be when you renew. It depends on the economy and the federal reserve. We need some kind of yardstick to measure today's rates by. In other words, are today's 6.7 to 8.87 rates high in relation to today's unpredictable and variable growth accounts?

My answer is this: “A bird in the hand is worth more than two in the bush”.

The Dow Jones Industrial Average closed at 17,055 near the all time highs. It might go higher but it is not cheap in relation to history...These heights make me feel queasy.

Rates will vary according to the length of time you sign up for. But, while one maturity might be higher than another you deserve the most generous rates I can find. Is the desire for generous rates inside you too?

For now, we can say that the rates you are receiving are quite good and should continue. They are in fact linked to the one thing that matters most – A bird in the hand is worth more than two in the bush.

When you are ready to add to your income accounts, just let me know. I will find you the most generous rates available. It's a promise...Yours Truly...Steve

PS. We like to reward you when you refer your friends and relatives. So send them an invite to the blog. Afterall they may want to make more money and pay less taxes...simply email swoodard77@gmail.com

WHERE SHOULD YOU KEEP YOUR ESTATE PLANNING DOCUMENTS?

"Where should I keep my original estate planning documents?" The answer is really simple - in a safe and accessible place. But what does that mean?

What About Your Safe Deposit Box?

Many people think that their safe deposit box is the best place to store their original estate planning documents. But in many states, if the box is just in your name without any other joint owner, then your family will need a court order to open up the box and remove your estate planning documents. Thus, if you become disabled or after you die, then your loved ones won't have immediate access to your estate plan.

In this situation, consider placing the box in the name of your Revocable Living Trust so that the successor trustee of the your trust will be able to gain immediate access to your box, or add a joint owner who you can trust to carry out all of your estate planning wishes.

Other Safe But Readily Accessible Places

Where are some other safe but readily accessible places to store your original estate planning documents?

The most logical place is somewhere in your home or office that's protected from fire and floods, such as your very own fire and water-proof safe. But if you do decide to use a personal safe, be sure to let someone you know and trust the combination to the lock. And at a very minimum you should keep your original estate planning documents on a high shelf in your home or office.

Especially in Hawaii where Hurricanes and tsumami's are possible I have heard of other advisor 's clients lose their original estate planning documents because they were stored on the bottom shelf of a bookcase.

Leaving Copies With Your Estate Planning Attorney

Aside from this, your estate planning attorney should retain signed copies of all of your estate planning documents. Then, if the original documents are destroyed inadvertently, your estate planning attorney can recreate your documents and everything can be resigned.

If the original documents can't be found at the time of your death, then the presumption will be that you intended to destroy them. You don't want anyone to think that you died without a will or other estate plan

I hope that this was helpful. As always if you have questions about your estate plan or the best way to avoid estate taxes for your IRA's give me a call. We can go over the details of your estate and holdings...Yours Truly...Steve

PS. Estate & Tax Law changes often. An annual review can save thousands and sometimes millions in a large estate. Setting up a review is easy and FREE...simply call or email me...Talk to you soon...Steve