Tuesday, December 19, 2006
Simple Formula for Asset Allocation
Once decided to invest and opened an brokerage account, the next question would be how to allocation assets. It depends on individual styles and tolerance. One simple formula would be divide investment into equity and fixed income. Stock would be (120-age)%, and the rest in fixed income.
Stocks
Large Cap, Mid Cap, Small Cap, Internation, Specialty. Style would be value Vs. Growth. My favorite is Mid Cap Value, whith exposure to both Large, Small and International.
Fixed Income
CDs, US Savings Bond and Bond Fund. Unlike long-term capital gain and stock dividend that are taxed at 15% or lower, fixed income is taxed at the marginal tax rate, easily runs above 25%.
Stocks
Large Cap, Mid Cap, Small Cap, Internation, Specialty. Style would be value Vs. Growth. My favorite is Mid Cap Value, whith exposure to both Large, Small and International.
Fixed Income
CDs, US Savings Bond and Bond Fund. Unlike long-term capital gain and stock dividend that are taxed at 15% or lower, fixed income is taxed at the marginal tax rate, easily runs above 25%.
Monday, December 11, 2006
Simple Sequence of Investment Accounts
Tax takes a significant bite from the investment return, hence the difference in the sequence of putting money into different types of investment accounts.
(1) Roth Accounts
Includes Roth IRA and Roth 401(k). Roth Accounts will be on the top because the flexiblity and the earnings are tax-free.
(2) 401(k) and 403(b)
With or without employer match, these are tax-deferred accounts.
(3) Traditional IRA
May not be tax-deductable for higher income household. However, there is a reason to open this account before 2010. The tax law allows conversion to Roth no matter what income level. Do it while you can.
(4) College Savings for Children
This is the sequence I choose: 529 Plan, UTMA, ESA. Each type has its advantage and disadvantage, depends on income level.
(5) Regular Accounts
Offers no tax advantage. Aim for long term capital gains and dividends, which are taxed at 15%.
(1) Roth Accounts
Includes Roth IRA and Roth 401(k). Roth Accounts will be on the top because the flexiblity and the earnings are tax-free.
(2) 401(k) and 403(b)
With or without employer match, these are tax-deferred accounts.
(3) Traditional IRA
May not be tax-deductable for higher income household. However, there is a reason to open this account before 2010. The tax law allows conversion to Roth no matter what income level. Do it while you can.
(4) College Savings for Children
This is the sequence I choose: 529 Plan, UTMA, ESA. Each type has its advantage and disadvantage, depends on income level.
(5) Regular Accounts
Offers no tax advantage. Aim for long term capital gains and dividends, which are taxed at 15%.
Tuesday, December 05, 2006
Choose Simple Brokerage Firms
Merger after merger, there are less brokerage firms, now. Smart Money magazine has an annual broker survey. Here are some brokers I like.
(1) Fidelity
Likely one would have at least one tax-sheltered account with Fidelity, such as 401(k) or (403(b). For the principle of SIMPLE, Fidelity would be a good choice for brokerage account(s). The more important thing is Fidelity offers a wide spectrum of investment products and low commisions.
(2) Bank of America
Offers $0 commision for up to 30 stock trades per month, the catch is $25,000 in deposit accounts. This is a good deal if you are a frequent trader. Otherwise it not worth to freeze this much cash.
(3) Wells Fargo
Up to 50 free trades with $250,000 combined accounts. Downside is high price for option trading and less mutual fund choices.
(4) Firstrade
Best place for mutual fund investment, no transaction fee for all mutual funds, therefore the best place for one stop shopping. Commision for equity trading is only $6.95.
(1) Fidelity
Likely one would have at least one tax-sheltered account with Fidelity, such as 401(k) or (403(b). For the principle of SIMPLE, Fidelity would be a good choice for brokerage account(s). The more important thing is Fidelity offers a wide spectrum of investment products and low commisions.
(2) Bank of America
Offers $0 commision for up to 30 stock trades per month, the catch is $25,000 in deposit accounts. This is a good deal if you are a frequent trader. Otherwise it not worth to freeze this much cash.
(3) Wells Fargo
Up to 50 free trades with $250,000 combined accounts. Downside is high price for option trading and less mutual fund choices.
(4) Firstrade
Best place for mutual fund investment, no transaction fee for all mutual funds, therefore the best place for one stop shopping. Commision for equity trading is only $6.95.
Labels: Investments
