The Error-Proof Portfolio: 6 Asset-Allocation Pitfalls to Avoid

Looking for a hot stock to own for the next few months? An exchange-traded fund that will help you capitalize on trouble in the Middle East? You’ll have no trouble finding ideas in the financial media.

Meanwhile, advice on how to apportion your portfolio among stocks, bonds, and cash–while a much more significant factor in your portfolio’s long-term performance–is apt to be much tougher to come by. While there’s no shortage of commentators who are willing to predict the market’s short-term direction, telling investors to set a sensible stock/bond mix and sit tight is inherently less sexy, so you hear much less about the whole issue.

via The Error-Proof Portfolio: 6 Asset-Allocation Pitfalls to Avoid.

Private Equity Not Worth The Risk

More interesting information from Larry Swedroe –



Last week, I wrote in-depth about some of the problems with hedge funds, especially in terms of how they’re viewed and how they affect financial markets as a whole. I thought I’d begin this week with a closer look at the performance of private equity, another nonpublicly traded investment.

The term “private equity” is used to describe various types of privately placed investments. This type of investment has grown tremendously over the past 30 years, thanks largely to increasing contributions from America’s pension funds as they search for alternatives to public equity markets in an effort to meet their return objectives.

The authors of the 2013 study “Private Equity Performance: What Do We Know?” provide some arguably unwarranted hope for venture capital investors. The authors employed a “research-quality” database from portfolio management software firm Burgiss to examine the performance of nearly 1,400 U.S. private equity (buyout and venture capital) investments. The data set was sourced from more than 200 institutional investors.

read the complete article here: Swedroe: Private Equity Not Worth The Risk |

Swedroe: The Mystery Of Momentum |

One of my favorite writers on investing is Larry Swedroe.  In this article he has a great discussion of momentum – a factor that DFA includes in their investing decisions.



Momentum is a well-established, empirical fact. Its premium is evident in more than 87 years of domestic market data, in more than 20 years of out-of-sample evidence beginning from the time of its original discovery, in statistics from 40 other countries, and in the performance of more than a dozen different asset classes.

In fact, the momentum premium has been both larger and more persistent in the U.S. since 1927 than the other three stock premiums—equity, size and value. Over the last 87 calendar years (1927-2013), the annual momentum premium was 8.4 percent. It was positive in 78 percent of the years during that period.

By comparison, the figures for the equity, size and value premiums are not quite as strong or persistent. Over the same time frame, the equity premium was 8.2 percent, and it was positive in 68 percent of those years; the size premium was 3.1 percent, and it was positive in 56 percent of those years; and the value premium was 4.9 percent, while showing a positive return in 62 percent of those years.

read the complete article her:  Swedroe: The Mystery Of Momentum |

Five Tax Advantages of Donor-Advised Funds

There are five instances where a donor advised fund can serve as a tax reduction tool. However, before we delve into those specifics, let’s provide a clear definition:

What is a Donor Advised Fund?

A donor advised fund (DAF) is a charitable giving tool that enables donors to manage their charitable donations in simple, tax-smart and meaningful ways. Donors can enjoy the best tax advantages available, make grants on their own flexible time table and build their enduring charitable legacy.

How Can a Donor Advised Fund (DAF) Reduce Taxes?

Due to their structure, donor advised funds provide explicit tax reduction opportunities in the following ways:

1. Income Tax Deduction: The donor receives an immediate tax deduction in the year they contribute to their DAF. Since a Donor Advised Fund is a public charity, contributions made to  Donor Advised Funds immediately qualify for maximum income tax benefits. The IRS does mandate annual limitations, depending upon the donors adjusted gross income (AGI):

– Deduction for cash – up to 50 % of AGI.

– Deduction for securities and other appreciated assets – up to 30 % of AGI.

– There is a five-year carry-forward for unused deductions.

2. Capital Gains Tax Avoidance: The donor will incur no capital gains tax on gifts of appreciated assets (i.e. securities, real estate, other illiquid assets)

3. Estate Tax Avoidance: The DAF will not be subject to estate taxes.

4. Tax-Free Investment Appreciation: The investments in the DAF appreciate tax-free, providing the donor additional funds that they can use for charitable gain.

5. Alternative Minimum Tax (AMT) Reduction: If the donor’s income is subject to alternative minimum tax (AMT), the contribution to their donor advised fund will reduce their AMT impact.

Other Tax Considerations

In contrast to gifts made to a private foundation, donors can deduct the full market value of certain contributed assets, subject to the AGI limitations listed above. These assets include:

  • Closely held stock (C-corp or S-corp)
  • Real estate

7 Retirement Mistakes Gen X Is Making

Richard Eisenberg has an interesting viewpoint on how generation x (the generation born after the Western Post–World War II baby boom – dates ranging from the early 1960s to the early 1980s) is handling their retirement planning.  I think it is worth a read.



I often write about the retirement preparedness (or lack thereof) of boomers — my peeps and the prime Next Avenue demo.

But how well is the generation right behind them — Gen X — doing on that score?

“They’re on a retirement collision course,” according to Catherine Collinson, president of the Transamerica Center for Retirement Studies (TCRS), which just published a survey of the 36- to 49-year-olds (as TCRS defines the group; there’s no universal agreement).

“Gen X is, frankly, at risk and they’ve been overshadowed in the headlines by boomers and Millennials,” notes Collinson. Some call Gen X “the neglected middle child.”

(MORE: Don’t Call Me Slacker)

Retirement Reality Bites

Here’s the problem: The online survey, Generation X Workers: Retirement Reality Bites Unless Answers Are Implemented, found that even though Gen X’ers started saving for retirement at age 27, they only have $70,000 (median figure) in their retirement accounts. And, the survey said, they expect they’ll need to save $1 million for retirement. About a third of Gen X workers surveyed (31%) believe they’ll need to save $2 million or more.

“Do the math,” says Collinson.

Oh, and did I mention that Gen X’ers will start turning 67 (the Full Retirement Age for Social Security benefits) one year before the Social Security trust fund is projected to run out of money? Little wonder that 83% of those surveyed are concerned that Social Security won’t be there when they’re ready to retire.

Dealt a Bad Hand

via 7 Retirement Mistakes Gen X Is Making.

Eight Financial To Do Items for the Rest of 2014

Roger Wohlner has created an excellent list of things you should think about before the end of the year.  I suggest you do everything on the list.



Though most of 2014 is behind us there are still plenty of things left to do financially in 2014. Here are eight financial to do items for your list.

Review your 401(k)

With the S&P 500 and other market indexes at or near all-time highs this is a good time to revisit your 401(k) asset allocation and to rebalance if needed. Better still why not take this time to active the auto-rebalance feature if your plan offers this feature?

Are you on-track to contribute the maximum to your 401(k) this year? If you are not there is still time to increase your salary deferral if you can afford it. The maximum contributions are $17,500 and $23,000 if you will be 50 or over at any point during 2014. Even if you can’t contribute the maximum amount this is still a good time to bump your deferral if you can.

via Eight Financial To Do Items for the Rest of 2014 | The Chicago Financial Planner.

Consider managing career as financial asset

One of the greatest assets you have is your career.  Rick Kahler does a great job in this article explaining why this is so important and has some excellent advice for using your career as a financial asset.  Let me know your thoughts.



Is your career part of your net worth? Should you include it as an asset class in a diversified investment portfolio? While we consider careers as essential aspects of financial and professional success, few of us think of or manage them as financial assets.

Michael Haubrich, CFP, of Financial Service Group, Inc., in Racine, Wisconsin, encourages clients to think of careers this way. Some of the following ideas come from his new book, Career Asset Management: Getting Ahead, Staying Ahead and Using Your Head to Maximize Your Career Value.

If you consider your career an asset, then managing it means paying attention to the return you get from that asset. Here are a few things to consider in order to get the most value from a career.

1. Keep in mind that the most important return on investment from a career is not necessarily financial. The value of a career is much more than just the money you earn; it includes a host of less tangible but vital rewards like the satisfaction you get from your work and the fulfillment that comes from following your dreams and using the talents that make up your unique genius.

via Rick Kahler: Consider managing career as financial asset |.