My pick for 2011:
DE Deere
C Citigroup
BX Blackstone
PFE Pfizer
CHK Chesapeake Energy
WU Western Union
DD Dupont
MSFT Microsoft
HD Home Depot
LLNW Limelight Networks
Disclaimer: I own all but LLNW in my personal portfolio.
Showing posts with label Investment. Show all posts
Showing posts with label Investment. Show all posts
With the Tax relief act of 2010, Coverdell ESA savings account will continue to allow annual contribution of up to $2000 annually. Even though, 529 plans are great, I prefer ESA for its investment choices. If you have an ESA account with brokerage like Schwab & E-Trade, you can invest in any stock, funds or bonds.
For a common investor, understanding wash sale and how one can leverage a loss to some profit is some daunting task. lets try to demystify wash sale for us 'common investors'.
The wash-sale rules comes into play if you sell a security and, within 30 days before or after the sale, buy a "substantially identical" security. Violate that rule and the loss on the first sale is denied.
Most of us have some securities whether it is a mutual fund, stock or etf which are in red since the market meltdown. Now as recessionary fear seems to be abating and stocks appear to be cheap, it seems to be a best time to do some tax loss harvesting.
For many investors, tax gain/loss harvesting is the single most important tool for reducing taxes now and in the future. If properly applied, it can save you taxes and help you diversify your portfolio in ways you may not have considered. Although it can't restore your losses, it can certainly soften the blow. For example, a loss in the value of Security A could be sold to offset the increase in value of Security B, thus eliminating the capital gains tax liability of Security B.
In a year like 2008 / 2009, almost no body should be paying any capital gain tax. If after selling securities either for profit or loss, you come up with a negative number, you can use up to $3,000 of those losses to offset ordinary income. And in many cases, you can carry over extra losses to subsequent years.
Example: Say I carry a Dreyfus mid cap index fund - PESPX and have a loss of $1000, I can sell it and using the proceeds can buy a not so substantially identical fund like Janus mid cap fund - JMCVX. This way I can reduce my tax liability by $1000 * my tax bracket. Point to note, I am still invested and my asset allocation is still intact. Replacing a index fund with active managed fund doesn't falls into the bucket of substantially identical fund and should not raise an IRS audit.
Few advises from Sage of Omaha, more like his investing principles.
- Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
- I always knew I was going to be rich. I don’t think I ever doubted it for a minute
- Our favorite holding period is forever.
- We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
- A public-opinion poll is no substitute for thought
- Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
- Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.
- I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
- In the business world, the rearview mirror is always clearer than the windshield.
- Wide diversification is only required when investors do not understand what they are doing.
- Success in investing doesn't correlate with I.Q. once you're above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing
- It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price
International and emerging markets funds are the key contributors to the globalization of financial market and one of the main sources of capital inflow in the emerging markets. They demand investors patience for a high risk and a subsequent reward which comes with these high octane investments.
Not every market is alike, for example Russia offers excellent growth with great political risk and government intervention whereas China is mostly export driven economy and susceptible to a fall out in the global markets. It is quite common for them to fall 60% and than give a return of 100% next year. When global market suffers, like the one in 2008 most of the financial institutional investors will be quick to move money out of these market and thus exacerbating their decline. Here is a snapshot of these individual markets and possible investment options, if any:
- Russia: Too much of political risk and uncertainty. ING Russia fund LETRX can be used for a very high risk/return investment. Note: LETRX is available as no Load in Schwab brokerage.
- China & neighboring region: Best long term bet for growth and investment. Started from a low cost producer and exporter of myriad small and big items, now it is biggest financier of US treasuries. Investors like us can use FXI or MCHFX as a proxy to investment in china.
- India: Good bet for long term investment, burgeoning educated middle class and self sustained economy provide enough fodder for growth. However Infrastructure and lack of commom amenities can put a damper on growth. Investment vehicle for India: MINDX, IFN and PIN
- Latin America: Commodity driven economy, too cyclical in nature. Great for a trade via FLATX, PRLAX and few ADR's trading in US like PBR, AMX etc.
- Frontier Markets: I still don't call eastern Europe, Africa and middle east an emerging economy, they are frontier markets. Financial markets is still in nascent stage and offers little in terms of disclosure and account abilities. Hence it is better to avoid these markets all together or have no more than 2% of total portfolio. For 'us' retail investors, Fidelity - FEMEX and T Rowe Price - TRAMX offers some investment opportunities in these frontier markets.
Although emerging economies may be able to look forward to brighter opportunities and offer new areas of investment for foreign and developed economies, they need to consider the effects of an open economy on its citizens. Furthermore, investors need to determine the risks when considering investing into an Emerging markets.
A step by step guide to gaining control of your financial life.
http://money.cnn.com/pf/101/index.html
Online Book: Investment Strategies for 21st Century
http://www.investorsolutions.com/v2content/book/index.cfm
http://money.cnn.com/pf/101/index.html
Online Book: Investment Strategies for 21st Century
http://www.investorsolutions.com/v2content/book/index.cfm
- Buy large-cap stocks in developed markets, no more of small cap.
- Technology Stocks, quite a few value stocks with good potential.
- Media Stocks.
- Military expansion and supplier stocks.
- AAA-rated corporate bonds.
- Non-U.S. dividend-paying stocks.
- Japanese consumer stocks, with recent surge in disposable income of average japanese.
- Sell retailers, except discount retailers.
- Trim exposure to financials, except multiline insurers.
- Reduce stakes in energy and commodities stocks.
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