As the stock market continues its rollercoaster ride everyone must consider a Plan B strategy to buy shares of stock outside of the U.S.A. Yes, the good ole U.S.A. continues to be a great place no matter what the stock market is doing. Good stock buys are not hard to come by, but our first rule of investing is to diversify your portfolio of stocks. Many investors know little about how to buy foreign stocks directly through exchanges, but for the most part it is simple. Buying foreign stocks, or ADRs, is a simple transaction; just like buying American stocks. Sale of this stock type is just as simple.
There are many ways to reduce risk in your stock portfolio and putting 10-20% of your money into foreign stocks is typical these days. Especially since many look at past returns and see how well foreign stocks have performed recently. Moreover, concern remains for the U.S. equity market so investing in investments that do not correlate directly with U.S. stocks is another great way of diversifying.
So if you have a brokerage account and you want to delve into buying foreign stocks you know you can do it with ease. If you are wary of doing the investing yourself there are plenty of international stock mutual funds that can be bought directly through the mutual fund or through your brokerage house.
Written by Nagel on March 22nd, 2007 with no comments.
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February 27 scared a lot of investors and made bulls out of bears. The bears are trying to win this war of wills that has been going on since Black Tuesday. Their job was easy at first because of the dearth of actual information on why the market took a big drop. Alan Greenspan’s comments in China, the Chinese market drop, housing stock default and more were blamed for the downturn in the equity market last week, but in reality it stemed mainly from a computer glitch that occured for about 2-3 minutes that prevented some large trades from being executed. This problem quickly snowballed into a panic because traders and investors did not know what was happening.
Those that “short” stocks, have tried to continue the panic so they can capitalize off it. However, as more information is revealed and the stock market shows more strength their scare tactics are playing on more and more deaf ears. However, they might be able to continue this as more earning reports come out and they claim the sky is falling. Next week will be telling to see how the Street reacts to all this information–if it can stabalize this might be the end of the sell-off. if not, then there might be more opportunities to buy stocks at a deep discount.
Written by Nagel on March 10th, 2007 with no comments.
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I think a huge sigh went out over all of Wall Street and the financial world with the gains posted today. The Dow Jones Index, NASDAQ and S&P 500 all showed gains of over 1% with the NASDAQ almost 2% up. After more of a sell-off on Monday following the correction of February 27, doom and gloom was casting a pall over the street.
Personally I saw 2 of my own personal stock holdings jump back and give life back to my portfolio. Goldman Sachs (GS) was up 3.88% (197.37) after dropping to 190 just a couple trading days prior. I am still down overall on the stock, but i cannot pass up its P/E of under 10. Last Friday after a sell-off I built more of a position and by Monday afternoon I began to have some second thoughts.
My other poor performing stock is the New York Stock Exchange (NYX). It has figuratively killed me since I bought it. A couple weeks back I had faith after it had another big drop so I built a position in by doubling up. The end of yesterday I was down almost 16% on a cost basis–not good. Therefore, today’s skyrocket of over 7% was a welcomed sight. Wednesday and the several days following will be telling as 24.6 million shares of former seat holders become active. I am crossing my fingers even though I do believe that the company is financially solid.
Hopefully the volatility will wane so we can return to a more stable stock market.
Written by Nagel on March 7th, 2007 with no comments.
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Google (GOOG) stock is on my watch list for my retirement accounts. Its 52-week high was in the 510 range and now it is hovering around 440–about a 14% drop. Many claim Google has nothing but upside and I see little reason that it cannot rebound and gain at least 10% in the next few months.
The problem is the stock market has been volatile lately and it had disappointing growth last earning report. Yahoo! finance stock is making an effort to catch up to GOOG stock and this could be a drag on Google as well.
Apple (AAPL) stock is currently in my retirement account portfolio. It was in the $95 range after the announcement of the iPhone. Then lost steam quickly and dropped to 85, where I purchased it. This week AAPL stock was volitile and on Thursday it was up over 4% at one time during that day. I see Apple having a lot of upside. I think it can easily get back to 95 and in the next 6 months possibly $115.
These Wall Street stocks have tremendous upside potential, but Wall Street needs to calm down from last week’s trouble in order to get a clear picture of where these two stocks, and more are going.
Written by Nagel on March 6th, 2007 with no comments.
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Many people want to learn more on personal finance and investing, but do not know where to start. Websites like this one and other personal finance sites are great tools. I also wanted to let you know of other resources available to get you up-to-speed on a wide variety of financial topics.
I would recommend watching Mad Money for investing. He is one of the few who will go step-by-step to help you invest smarter. This can buttress a general investing education you can get from doing some homework. Obviously, there are loads of investing books so look around and see what others have to say about it.
These are from from the only options available. You can easily go to Kiplinger, Money, Smartmoney, Yahoo! Finance, Google Finance, etc. These are all informative and can hold your hand until you get the hang of certain topics you might not have mastered yet.
These are great personal finance education websites to start. Ask around and get people’s opinions on what sources to use. I would recommend using as many reliable sources as possible. It is not easy, but we all want to do better with our money.
Written by Nagel on March 4th, 2007 with no comments.
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More great information written by Robert Powell in IBD.
Call it a mistake waiting to happen. Every year millions of workers who retire or switch jobs must figure out what to do with money in their 401(k) plan. Should they leave the money with their former employer? Should they cash out? Should they transfer the money to their new employer’s plan? Should they roll over the money into an IRA?
Big money may be at stake in the answer to those questions. And lots of people still make costly mistakes even when they answer the questions correctly.
Consider: Some 7.5 million Americans took about $440 billion in distributions from their 401(k) plans in 2004, according to Brightworks Partners research. Of the 7.5 million, 6.25 million were job changers and 1.25 million retired. Of the 7.5 million, 55% had 401(k) balances greater than $5,000.
Where did the money go? About 45% — representing some $200 billion — rolled their 401(k) into an IRA, while 32% left their money in their former employer’s plan, 20% withdrew the money and paid the taxes due on that distribution, 9% transferred their money to a retirement plan at their new employer and 6% purchased an annuity or arranged to have the money paid in installments over a period of time.
To the untrained eye, all that 401(k) money sloshed to and fro problem free. Nothing could be further from the truth.
According to Mercer HR Services, many workers get off the retirement-savings track when faced with the what-to-do-with-my 401(k) question. For one, many workers — especially those who had 401(k) balances of less than $5,000 — took taxable cash distributions. In fact, more than 40% of distributions from a 401(k) plan were taken in cash, according to the Federal Reserve Board’s 2004 Survey of Consumer Finances.
Taxable cash distributions
A new law — the automatic IRA rollover law — was put in place in 2005 to address what the U.S. Department of Labor called leakage, small-balance 401(k) owners cashing in their nest eggs. With that law, workers who have between $1,000 and $5,000 in their 401(k) and leave their employer will have their money automatically rolled over to an IRA unless they choose otherwise. And to some degree, that new law has helped reduce the problem of cash-outs, David Wray, president of the Profit Sharing/401(k) Council (PSCA).
According to a Centier Bank study of small-balance plans published in a PSCA newsletter, only 2.7% of workers cashed out of their 401(k) plans over a 17-month period following the enactment of the automatic IRA rollover law. What’s more, 12% of workers had their 401(k) automatically transferred into what’s officially called a safe harbor IRA. That’s an IRA in which the worker’s money is invested in funds designed to preserve principal and provide a reasonable rate of return. (One problem with this model is that the safe harbor IRA may or may not sync up with the investor’s investment goals so it’s imperative that workers examine whether the investments in the safe harbor IRA make sense or not.)
The bigger problem with small balance transfers, however, is this. James Boyd of Centier Bank noted that there’s a large percentage of what the industry calls “no-contacts,” that is, missing or nonresponsive 401(k) participants. Some 80% of small-balance participants who left their employer were labeled as “no contacts” in the Centier Bank study. And in the extreme, funds in those plans could be escheated by a state as unclaimed property. And that’s just another form of leakage, according to Boyd.
Paperwork problems
Even workers who want to roll over their 401(k) plan to an IRA can fly off the savings track, according Mercer HR Services. Indeed, the process to transfer those assets is downright difficult and onerous.
For instance, about one-third of the forms required to complete the transfer are not completed correctly. In other cases, the forms are lost in transit. Workers often spend countless days if not weeks completing, correcting and tracking down paperwork and calling multiple plan sponsors. Mercer estimates that the traditional process of requesting and completing an IRA rollover could take up to two to three weeks.
So what can be done to head off those problems? First, make sure an IRA rollover is the best option. “Before deciding to roll over 401(k) assets to an IRA, people should make sure that they are not missing out on other benefits by rolling over the assets,” Denise Appleby of Appleby Retirement Consulting said in an e-mail.
Appleby said there are two cases when a worker might choose something other than a rollover. If a person has employer stock in a qualified plan account that has been highly appreciated since they were first added to the account, Appleby said it may be more beneficial to have those stocks credited to a regular savings account instead of an IRA, as that person would then be able to apply capital gains treatment to the earnings. “Rolling these stocks to an IRA means that the individual would pay ordinary income tax on any distribution of the earnings from the traditional IRA, instead of the capital gains rate,” she said.
In another case, Appleby said if the balance in the qualified plan includes after-tax amounts, the person should consider whether it would be more beneficial to have that amount credited to a regular account, instead of being rolled over to an IRA.
“Rolling over employer stocks and after-tax amounts are not necessarily poor choices, and may even be suitable for some individuals,” she said. “However, many individuals’ roll over these amounts unknowingly and attempt to reverse the rollover, but then it’s too late.’
Once the decision to do an IRA rollover as been made, Ed Slott, author of “Your Complete Retirement Planning Road Map,” suggests that the “best way to get this done right is to engage the people that have the most to gain from having you as their customer.”
Slott said workers leaving a company should contact either the IRA custodian or the financial adviser who will be investing the IRA funds early in the process. “They will make sure the rollover is done properly,” he said. “They will be gaining a new customer so they will be more than happy to handle all the paperwork.”
Slott said workers should never leave it to the plan sponsor or plan provider to help with the paperwork. “They generally do not have competent help and just really want to get rid of you,” he wrote in an e-mail. “The people at the plan don’t work for you. They work for the plan so they could really care less if the transfer goes as you would have liked.”
Appleby agrees. “Before completing the rollover request, the individual should have it, and the account statement, reviewed by a financial adviser who is proficient in the area of rollovers and IRA management, to ensure that the proper elections are made on the forms, and to help ensure that the options selected are the ones more suitable for the individual’s financial profile,” she said.
No matter who does the rollover, make sure it is done as a trustee-to-trustee transfer (a direct rollover) where the funds go directly from the plan to the IRA, Slott said. “If the funds are withdrawn and then rolled over to the IRA then a 20% withholding tax will be taken from the funds and it may be tough to find the money to make up the 20% to complete the rollover,” he said. “With a direct rollover, 100% of your company plan funds go to your IRA with no tax withholding.”
What’s more, with a direct rollover, the worker doesn’t have to worry about depositing the retirement money into an IRA within the 60-day grace period. If the taxpayer doesn’t roll the retirement money into an IRA within 60 days, the taxpayer will pay a penalty on the distribution and possibly more taxes.
After requesting the withdrawal/rollover
After requesting the withdrawal, Appleby said the person should take the following steps:
- Find out from the plan administrator when the transaction will be processed. Some plan administrators process distributions during certain periods, like the end of every quarter or only after a certain number of days have passed since the end of employment.
- Check back with the plan administrator about a week before the due date to make sure it is on track.
- Check with the receiving financial institution, not only to make sure the funds were received but that they were credited to the right account. There are countless instances where assets are erroneously credited to regular accounts instead of IRAs. Often, the error is not detected until months or even years later, creating an accounting nightmare for everyone involved.
- Also, check to make sure that amounts that are credited to IRAs are processed properly. For instance, check to make sure it was processed as a rollover contribution, which is reported on IRS Form 5498 and not as a nonreportable transfer.
Even workers who do IRA rollovers get off retirement-savings track
Appleby said most qualified plans liquidate the plan assets and complete the rollover in cash. This means that the money will likely sit in cash or a low-interest money-market fund in the IRA, she said.
Here is more great information from Investors Business Daily
In some cases, the money sits in cash because of inertia; investors have a proclivity to do nothing. In other cases, the money sits in cash because investors don’t know how to re-allocate their funds or find funds that were similar to the ones in their 401(k) plan.
“Individuals should make the money work for them by having it invested in assets that can produce higher returns,” said Appleby. And they should consider hiring an adviser to help with that process, say both Appleby and Slott.
For more on rolling over you 401k click here.
Written by Nagel on January 31st, 2007 with no comments.
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A few months I spoke often of how I was concerned about the stock market taking a dip. Well, I have been getting that feeling again. I was not right the first time when conditions were much worse than now, but the stock market moves in cycles. There has been a good run for a while, but can it really last? Their are a lot of bulls out there saying this will be another double-digit gain for the S&P 500, but the bears seem to be getting ignored.
Personally, I do not have any investments outside of retirement accounts, many of which are set up directly through mutual fund companies. However, my other holdings in my Scottrade account and my wife’s TD Ameritrade (we are in the process of closing this account) account have been liquidated (including Pfizer (PFE), Walgreen (WAG) and Qualcomm (QCOM)), except for the S&P 500 EFT and The New York Stock Exchange (NYX).
While I am not 100% sold on the bulls, but I am going to re-enter the stock market. I am going to go after Goldman Sachs (GS), Altria (MO) and Berkshire Hathaway (BRK.B). I believe all of these stocks are the best in their sector, also I think they Altria (MO) and Berkshire Hathaway (BRK.B) will be able to weather any potential stock market downturn. Goldman Sachs (GS) deals only with the wealthiest of the wealthy, so if there is an economic slowdown this group will be less affected than average Americans
Written by Nagel on January 26th, 2007 with no comments.
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