Blog Archives

3 Fundamental Investment Principles

8/31/2014

Q. What are the fundamental investment principles I should remember?

A. Here are 3 most important investment principles to follow:

1. Diversify your investment portfolio
Otherwise you will be gambling by concentrating your money in a few potential "winners", but there is no guarantee in the investment world for "winners".

2. Keep a long term investment horizon
We know for the long term, stocks are up, but if you aim to make a profit in the short term, there is not much difference from your hoping to win in a casino.

3. Rebalance your portfolio
If you don't rebalance, you will overtime build a concentrated portfolio and deviates from principle #1. When principle #2 kicks in - in the short term, there is no guarantee your holdings are "winners", you could be in for some nasty surprises.

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Where to Get Hard Money Loan Easily?

8/30/2014

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Q. I want to flip a property and need easy to access hard money loans, where can I get it easily?

A. Nowadays you can do almost everything online, so is finding hard money loans.

You can try Visiolending.com, it offers mortgage loans designed to meet the needs of investors purchasing investment properties. Its process is fast, simple, and dependent only on the property itself, it doesn't require your income verification, credit check, etc. Its rates are comparable to any hard money loans you can find.

Of course if you have a whole life policy with sizable cash value, its collateral feature also enables you to use the cash value as a collateral and use the money easily, while the actual cash value still enjoys the return as expected, not affected by such borrowings.

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Age 50 Still Need Life Insurance?

8/29/2014

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Q. I am 50 years old but still with a child at home. Do I still need life insurance?

A. The answer is yes. Th reason you need life insurance is because there is someone who depends on your income. If your situation fits this description, then life insurance is necessary.

However, for people who are age 50 or higher, life insurance is getting more expensive. Depending on your affordability, you can buy a 10-year Term life policy, which will be very affordable even for people at the age 50.

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2 Tools Every Consumer Should Use to Deal With Dynamic Pricing

8/28/2014

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Q. Any recommendation to deal with dynamic pricing tactics from many e-tailers?

A. Many retailers, such as Amazon, Bestbuy, Walmart, use dynamic pricing tactics that charge higher prices to consumers on an item, once it figures that you might not mind paying a higher price for the item, based on your past online shopping behaviors.

To deal with such tactics, here are two tools consumers can use:

1. Camelcamelcamel: this is a good tool for people who shop at Amazon, it allows you to create price watches on Amazon products.

2. GetInvisibleHand: this tool is a browser extension, whenever you land on a page selling a product, it automatically searches the web for the lowest prices on the item.

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Is a Total Stock Market Index Fund Enough?

8/27/2014

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Q. If I put all my money into a total stock market index fund such as Vanguard's VTI, will it be good enough?

A. A total stock market index fund such as VTI will give you exposure to ALL of the stocks in the US stock market, with an extremely low fee (0.05% of asset).

However, while it gives you good diversification, it also limits your chance of beating the market level performance in the long term. To enhance your chance, you can add a small portion of your overall portfolio to small cap and/or value stocks, because they tend to perform better than the overall market over the long term.

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Which Retirement Plan is the Best - 401K or Roth 401K?

8/27/2014

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Q. Of all the retirement plan options - Roth IRA, 401K, regular IRA, Roth 401K, which one is the best?

A. The conventional answer is it depends, for example, if your current tax rate is lower than retirement time tax rate, then Roth 401K or Roth IRA is better.

However, a recent T.Rowe Price study has a surprising finding - Roth IRA is the best retirement plan, for people of all ages! Of course, if you are still eligible for Roth IRA, by all means do it first.

This finding may sound a little counter-intuitive, but as many financial decisions you need to make, it's best to let numbers talk and do the comparisons.

We will follow up with a financial model next blogpost to test if Roth 401K truly is the best option, or not.

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Offline vs Online: Which Way Do People Prefer to Get Financial Advice

8/26/2014

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Q. Should I seek financial advice from a live financial planner, or from a financial service website?

A. It depends on what type of investors you are and what stage of your investment life cycle you are at. At least a recent Gallup survey indicates this way.

Overall, the Gallup survey found that that Americans are more than twice as likely to use a financial adviser than a financial website for guidance on investing and retirement planning.

Go ahead take a look at the survey results, you will find lots of interesting stats.

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Who Is An "Accredited Investor"?

8/26/2014

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Q. I am trying to participate in a private investment deal and was told I need to be an "accredited investor". What is that?

A. An "Accredited Investor" as defined by the SEC is as follows:

Individual income is $200,000 or more (or $300,000 with a spouse) and has been at this level for at least the past two years, and reasonably expected to be so this year OR
Have a net worth of $1,000,000 or more, OR
Meet other criteria listed on the official SEC definition of accredited investor

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Want to Pursue Your Dream? Try This

8/26/2014

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Find a peer group of people with similar dreams, goals and views.

They are people who will push you in exchange for being pushed, who will raise the bar and tell you the truth.

They're not in your business, but they're in your shoes.

Finding a peer group and working with them, intentionally and on a regular schedule, this could be the biggest boost you dream needs from being a dream to an action.

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5 Options If You Need More Than Emergency Fund

8/22/2014

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Q. If I have an emergency that my rainy day fund is not enough, what are the other options to consider?

A. While conservatively you should save at least 6 months' expenses for your emergency fund. If you need more, here are 5 options you could consider:

1. Cash out a CD
Don't worry about the penalty, there are nothing, especially in today's low interest rate environment.

2. Sell some stocks
Especially if you have some losers, this will help you offset some capital gain taxes which is at least 15%,

3. Take out a 401(k) loan
You can borrow up to half of your vested amount, up to $50,000, although you do have to pay yourself back with interest. However, this is not good for people who are losing jobs because you will be required to pay back the entire borrowed amount within 60 days or you will face income tax and 10% penalty.

4. Tap HELOC
Home Equity Line Of Credit is a good source of emergency fund, because you only pay for the amount you actually use. If you don't use, you have no cost.

5. Borrow from LendingClub
Rates there are not as high as the credit card companies' rates, but the process could take sometime.

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Why a Great Idea is Not Enough

8/15/2014

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A great idea is worthless unless you can understand and communicate why it matters to people.

The difference between a good idea and a commercial success is context, think about the following three questions:

Where does your idea fit in?
How it will be useful in the marketplace?
Who will care about it?

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Which Insurance Company Does Not Consider. Family History of Cancer

8/14/2014

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Q. I have a family history of cancer condition, which insurance company should I use to apply for my Term policy?

A. Most insurance companies will not give you favorable underwriting class if you have family history of cancer, even your own medical exam has perfect results.

However, based on our experience, there are at least two top insurance carriers do NOT consider family history of cancer in their underwriting decisions. So you could still get the best underwriting class from them if your own conditions meet their underwriting guidelines.

Please contact us if you are in this situation and are interested in getting more details.

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Can I Convert a Traditional 401k to a Roth 401k?

8/13/2014

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Q. Can I convert a traditional 401(k) to a Roth 401(k)?

A Yes, you can do it, just like you can convert a traditional 401k to a Roth IRA through backdoor conversion.

Your Roth 401(k) will enable you to withdraw money later tax-free, although you do have to pay your current tax rate on the amount you converted.

When should you do the conversion?

Only when you believe your future tax rate will be higher than your current tax rate.

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I Have Too Many Business Ideas, What Should I Do?

8/13/2014

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Do you have so many ideas that you don’t really know which one to start first?

The only thing you need to do is to stop thinking.

Just pick the one you feel most comfortable with, start it now!

In order to be successful in business, you need all of your energy focused on the one thing you are going to do, because you need to do it extremely well!

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Will Traffic Violation Affect My Life Insurance Premium?

8/12/2014

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Q. Does past traffic violation impact my life insurance premium?

A. Every insurer will ask you if you had traffic violations in recent 2 years, minor ones typically won't count.

However, if you had more than 2 traffic related severe violations, there is a chance insurer company will consider you as a risky person and charge you a higher premium.

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Is It a Good Idea to Sell My House to My Child for $1?

8/9/2014

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Q. I want to sell my house to my child for $1, how to do it cheaply?

A. You can do it without involving a lawyer - just create a quit claim deed to your child and you are done.

However, if you think you are doing your child a favor by selling your house for $1 to him or her, you are wrong!

The reason is simple, for child who receives the house for $1, that sets the cost basis of the property. Later on, when he or she sells the house, it could easily result in massive capital gain tax.

You can easily avoid such unnecessary tax for your child by willing it to your child - when you die, your child will receive it with then market value as the property's cost. The property will be counted as your estate, but if your estate value is less than $5 million, there is no tax implication.

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Which Mutual Funds Follow Activists Moves?

8/7/2014

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Q. I want to find a mutual fund that follow some of the famous activist investors, any recommendation?

A. We live in the era of the activist investors, they are famous and they move famous companies' stocks as well which attract a lot of media attention. But can the activist investors deliver each time?

The answer is no.

Which means invest in a mutual fund that focuses on activism is a wise choice, because your investment will be diversified.

There are two picks were recommended by the August issue Fortune magazine:

Fidelity Event Driven Opportunities Fund: it's launched in Dec 2013 and has returned 13% (beating its benchmark Russell 3000 which had 11.6% return)
The 13-D Activist Fund: it has returned annual return of 28% since inception in Dec 2011 (vs 25% for the S&P 500)

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3 Portfolio Rebalancing Tips

8/6/2014

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Q. How often and how should I rebalance my portfolio?

A. If you follow a disciplined approach to build and maintain your investment portfolio, here are 3 tips you can use to help you rebalance your portfolio:

1. Review your portfolio semiannually
You don't have to adjust every half year, but it's a good idea to look at your overall portfolio - 401K accounts, individual brokerage accounts, etc. at least semiannually.

2. Rebalance when asset mix is off a lot
How much is a lot? While it could vary with each investor's risk tolerance, it's a good idea to take some profit off the table when an asset class is 5% or more than your target level. Sure, it may eat into your return, but it also reduces your risks.

3. Harvest tax loss
Rebalancing also involves harvesting some losses to offset your gains. While there is an IRS wash-sales rule that bars you from buying the same or a "substantially identical" investment within 30 days or a sale, if you do a semiannual rebalancing instead of year-end rebalancing, you should have more than 30 days to reconstruct your portfolio and avoid the wash-sales rule.

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How to Check Out an Insurance Company

8/5/2014

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Q. How can I check out an insurer and found its claim records?

A. Researching an insurer's claim records in advance is critical, because it's important to know if it hassles people about claims.

You can go to the National Association of Insurance Commissioners' Consumer Information Source to search each insurer by many dimensions (state, time, product line, etc).

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Young Investors: Target Date Fund or Broadly Diversified Index Fund?

8/4/2014

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Q. I am a young investor who just started out investing. Should I buy a target-date fund or broadly diversified index funds?

A. For a young investor, given long investment horizon, it's advised to start with a broadly diversified stock index funds, there is no need to allocate any money to bond funds, because a) your initial investments tend to be small amount, you can afford losing them big; b) by observing the stock index funds' ups and downs for a few years, you will have a better idea about the market cycles and if you can adapt to it.

A target-date fund is diversified, but it carries higher expense than the stock index funds, and it also has unnecessary bond components in it which is unnecessary for young investors. Overtime, target-date funds will add more fixed income components, but for people who will receive social security income, a target-date fund will be overly conservative.

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How Much Is My Expected Family Contribution Amount for College

8/3/2014

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Q. How much should I prepare to pay for my child's college expense?

A. You can use the following free tool to calculate your Expected Family Contribution (EFC).

Once you figure out your EFC, Financial Aid = Cost of Attendance - EFC

There are many factors affect a family's EFC, including:

Parents' assets
Parents' incomes
Child's assets
Child's incomes

While income is relatively easy to figure out, what should be included in parents' assets calculation? Below is a list to consider:

Net worth of any investments (stocks, bonds, mutual funds, money market funds, certificates of deposit (CD), commodities, etc.)
Value of trust funds, even if access to principal and/or income is restricted
Real estate investment equity (excluding primary residence)
Coverdell education savings accounts
529 college savings plans
The refund value of prepaid tuition plans (these savings plans are assets of the account owner, not the beneficiary. Savings plans owned by a dependent student are not reported as assets.)

Which assets would not be included in the calculation?

Value of the family's primary place of residence
Retirement funds
Pensions
Life insurance policies
Annuities

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What Are the Two Phases of Annuity?

8/3/2014

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Q. What are the two phases of an annuity?

A. An annuity typically has two phases –

Accumulation phase
Distribution phase

During the Accumulation phase, the owner contributes and invests funds to accumulate assets, earnings are tax deferred.

During the Distribution phase, the lifetime income stream starts, this protects the annuitant from the risk of running out of money in case of living too long. The payment has two components – the earning part (will be taxed as income) and the return of principal part (no tax impact).

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What Are the Differences Between Will, Living Trust, Living Will, and Durable Power of Attorney?

8/2/2014

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Q. What Are the Differences Between Will, Living Trust, Living Will, and Durable Power of Attorney?

A. These are the important documents for any estate plan.

Will
A will ensures that your property will be distributed and your family will be cared for exactly as you wish. Without a will, the courts may decide how your property is distributed.

Living Trust
A living trust allows you to distribute your assets and property while you are still alive, while at the same time reducing the amount of taxes you may have to pay.

Living Will
This document specifies the types of medical treatments you want in the event that you become unable to express those wishes directly. A living will not only ensures that you get the care you want, but protects your loved ones from making difficult decisions on your behalf.

Durable Power of Attorney
In the event you become incapacitated, this document allows you to designate someone you trust to make decisions on your behalf.

3 Fundamental Investment Principles

Where to Get Hard Money Loan Easily?

Age 50 Still Need Life Insurance?

2 Tools Every Consumer Should Use to Deal With Dynamic Pricing

Is a Total Stock Market Index Fund Enough?

Which Retirement Plan is the Best - 401K or Roth 401K?

Offline vs Online: Which Way Do People Prefer to Get Financial Advice

Who Is An "Accredited Investor"?

Want to Pursue Your Dream? Try This

5 Options If You Need More Than Emergency Fund

Why a Great Idea is Not Enough

Which Insurance Company Does Not Consider. Family History of Cancer

Can I Convert a Traditional 401k to a Roth 401k?

I Have Too Many Business Ideas, What Should I Do?

Will Traffic Violation Affect My Life Insurance Premium?

Is It a Good Idea to Sell My House to My Child for $1?

Which Mutual Funds Follow Activists Moves?

3 Portfolio Rebalancing Tips

How to Check Out an Insurance Company

Young Investors: Target Date Fund or Broadly Diversified Index Fund?

How Much Is My Expected Family Contribution Amount for College

What Are the Two Phases of Annuity?

What Are the Differences Between Will, Living Trust, Living Will, and Durable Power of Attorney?

The Best Advice for Proscrastinators

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