Blog Archives - PFwise.com

Foreign Visitor With B1/B2 Visa Purchase Life Insurance in US - Part II

10/31/2015

In our last blog post, we discussed how Nationwide treats a foreign visitor's application for life insurance. Now we will visit Transamerica's requirements.

Underwriting Class
Its policy here is better than Nationwide's - the Best class is available, although with some conditions - minimum net worth $1M, and if age is greater than 40, fully access to all medical records is required.

Medical Exam
More stringent than Nationwide's requirements - the application, medical exam, and policy delivery must take place in the US! This means if the visitor's initial visit to the U.S. is short, he or she might have to come back again to take the policy delivery.

Required Documents
Nothing special here -

Copy of Visa
I-94
Permanente address at home country
W-8BEN
Travel Questionnaire

Finally, premium payment has to be in U.S. dollars!

Hope the above information is helpful for many of the Chinese B1/B2 visitors in the U.S. who are looking to purchase life insurance while in the U.S., because life insurance is a lot cheaper in US than in China.

If you have any question, please do not hesitate to contact us.

Can a Foreign Visitor With B1/B2 Visa Purchase Life Insurance in US?

10/30/2015

Q. Can a foreign national with B1 or B2 visa purchase life insurance products in the U.S.?

A. Yes, although there are some special conditions and requirements. We will use two companies as an example to illustrate below.

Nationwide
Nationwide will consider an application from a B1/B2 visitor, but its best underwriting class will be Preferred Non-tobacco.

While the application has to be submitted in the US, other requirement could be done back in the visitor's home country. For example, the medical exam could be done at an US embassy.

Required Documents
Here is a list of required documents

Copy of Visa
Copy of Passport
I-94
SSN/Tax ID/W-8BEN
Travel Questionnaire
Must have an acceptable nexus to US, such as: own a home or business; immediate family member in US; US investment or asset.

Finally, the premium payment must be in U.S. dollars, therefore it's best to open a bank account while in the U.S.

In our next blog post, we will check Transamerica's requirements on B1/B2 visitors' applications.

Where to Find a Reliable 10% Plus Yield? - Part D: Oil Bonds

10/29/2015

In our last blog post, we discussed a few good BDC 10% plus yield stocks. Now we will turn to Oil Bonds for 10% plus stars.

You may find such high yield bonds with C- or worse credit ratings, those are risky ones to avoid. But if B, BB, or even better ratings are acceptable risks for you, then you could find some good candidates. You can conduct research on bonds at some of the large brokerage houses such as Fidelity.

Some good examples -

Global Marine's 7% coupon due in 2028 bond has S&P's BB+ credit rating and 13.172% yield to maturity.

Transocean Offshore 7.45% coupon due in 2027 bond has S&P's BB+ credit rating and 12.048% yield to maturity.

Caution: generally, ordinary investors know little about bonds, it's best to avoid investment products you are not familiar with.

The Bottom Line
In summary, we have discussed 3 areas where an ordinary investor could find investment products with respectable 10% plus yields. Due diligence is always required if you desire to achieve such high yields safely in today's low interest rate environment.

A Portfolio Entirely Consists of ETFs - Bond ETFs

10/28/2015

In our last blog post, we mentioned a few good Stock ETFs that an investor could use to construct a portfolio that entirely consists of ETFs. Now we will mention some good bond ETFs.

Core Bond ETFs
A good choice here is iShares iBonds Mar 2020 Corporate (IBDC), it holds intermediate term corporate bonds that all will expire before March 31, 2020, which means they are all less sensitive to interest rate hikes what will happen soon. The fund will close and return all of the assets to shareholders by March 31, 2020.

Speculative Bond ETFs
If you want to be speculative on bonds, especially on bonds that fall out of favor - dropped from investment grade to junk status - a good candidate is Market Vectors Fallen Angel High Yield Bond (ANGL) - its yield is 5.34% and expense ratio is only 0.4%.

The Bottom Line
In short, with some well diversified ETFs, and well diversified Stocks/Bonds ETFs that range from stable core to speculative ETFs, you can construct a portfolio that could sustain market fluctuation and grow in the long term.

A Portfolio Entirely Consists of ETFs - Stock ETFs

10/27/2015

Q. Is it possible to construct a diversified portfolio that entirely consists of ETFs?

A. Yes, given the wide variety of ETFs available, anyone nowadays can construct a portfolio using ETFs. Here are some good ones to consider, we will start with the stock ETFs:

Core Stock ETFs
There are a few good choices here, for example: iShares Core S&P 500 (IVV) - it reflects the U.S. market performance, or Vanguard Total International Stock (VXUS) - it tracks developed and emerging markets' performances (excluding U.S. market).

Dividend Stock ETFs
Dividend stocks or preferred stocks could suffer if interest rates go up, but if the ETFs include quality stocks that consistently paid dividends or have histories of increasing dividend payouts, your risk will be mitigated. Some good choices in this category includes: Schwab U.S. Dividend Equity (SCHD) - it only includes companies that have paid dividends for at least 10 years in a row, its expense ratio is only 0.07%.

Speculative Stock ETFs
If you want to be speculative, you can make some bets on certain sectors that you believe might rise in the future. For example, if the Fed raises the rates, financial sector will benefit, you can invest in Financial Select Sector SPDR (XLF). If you believe with the increasing population of baby boomers, the health care sector will benefit, you can invest in Guggenheim S&P 500 Equal Weight Health Care (RYH).

In our next blog post, we will mention a few good Bond ETFs to be included in the portfolio.

Saturday Summary For Oct 24, 2015 - Perspective on Market

10/26/2015

Where to Find a Reliable 10% Plus Yield? - Part C: BDCs

10/25/2015

In our last blog post, we discussed a few good Mortgage REITs that still offer 10% plus yields. Now we will move to the BDC areas to find such treasures.

Business Development Companies
BDCs are famous for their unreliable dividends, but if I could show you a stock with 10% yield and at 72% of its book value, would you find it attractive? Prospect Capital (PSEC) is one such example - it has a 13.1% yield and 0.72 price-to-book value ratio!

There are a few other BDCs in this category - high yield, below book value price. For example, Ares Capital (ARCC) - 10.1% yield, Fifth Street Finance (FSC) - 11.5% yield, and Triangle Capital (TCAP) - 12.3% yield.

Caution: your due diligence should include work that look into these BDCs' investment portfolios so you can assess those companies' risks.

In our next blog post, we will focus on the third 10% yield area - Oil Bonds.

Where to Find a Reliable 10% Plus Yield? - Part B: Mortgage REITs

10/24/2015

In our last blog post, we pointed out the inherent risks associated some of the 10% plus yield investment products. But that doesn't mean you should ditch every 10% yield stocks or funds.

We will discuss 3 potential areas where you might still be able to find trustable 10% or higher yields. We will mention a few specific examples for you to consider as well.

Mortgage REITs
We will start with mortgage REITs. As we have discussed in one of our previous blog posts, mortgage REITs don't actually own properties, they borrow at short-term interest rates to purchase high yielding mortgages. They have been out of favor for a while as investors are concerned about the risk of rising short-term interest rates.

This analysis is definitely right, but you have to look behind the surface - what if the property owners have the power to adjust rents therefore keep up with the mortgage payments?

If this is the case, the risk will be reduced. A good example is New York Mortgage Trust (NYMT) with an insane 16.9% yield and its price is near its 52-week low. If you do your due diligence on this REIT, look for how much of its assets are in loans with such rent appreciation power, then decide whether you can take the risk.

If you want to be more prudent, Apollo Commercial Real Estate Finance (ARI) is a good choice. Why? Because despite the downside risk associated with the real estate market in the U.S., commercial real estate market might actually point up. ARI offers an attractive 10.7% yield as of mid of Oct. 2015.

In our next blog post, we will look into the Business Development Companies and uncover some of the 10% yield treasures.

Where to Find a Reliable 10% Plus Yield? - Part A: Risks Everywhere

10/23/2015

Q. Can I invest in stocks, bonds, or funds with 10% or even higher yields and still have a good sleep at night?

A. It might be tough because naturally there are many questions you could ask for such high yield investment products - is the high yield really sustainable? Would price erosion more than offset the high yield and lead to net investment loss? Even worse, many of the 10% plus yields are actually misleading and not reliable.

Stocks
Look into a company's fundamentals will help you determine whether the high yield is sustainable or not. For example, nTelos (NTLS) is a regional wireless company, it offered double digit yields just 2 years ago, now offers no yield at all, because its business fundamental simply couldn't sustain the high dividend payouts. You need to do your due diligence when select an investment product.

Bonds
Prudence is required when investing in some of the corporate bonds as well. You should avoid the bonds that are rated at C- or worse, even they currently offer 10% yields. You need look behind the yields - what's supporting the high yield? Risky real estate projects? There is no need to gamble on that.

Funds
Some closed end funds also distribute 10% to shareholders, but it's just like a pyramid scheme - it would sell new shares or borrow to return the capital. Of course you should stay away from those funds.

So, you might wonder - are there places the 10% or above yields could still be trusted?

The answer is maybe, we will look at 3 potential areas in our next several blog posts.

A Quick and Easy Way to Get Small Business Loan

10/22/2015

If you run a small business and need working capital loans, now there is a very quick and easy way to get it, without leaving your home - Kabbage.com.

Kabbage is the first financial services data and techbology platform to provide fully automated funding to small businesses, the decision time is just minutes, and have many different types of loans tailored to your industry. Worth a try if you are in a hurry for a working capital loan for your small business!

How Is a Mutual Fund's Management Fee Charged?

10/21/2015

Q. If I buy and sell a fund within a few days, can I avoid a fund's annual management fee?

A. Unfortunately the answer is no. While most investors are aware of a fund's management fees, but few knows how it gets charged.

A fund's management fee is usually calculated as a percentage on an annual basis, however, the charge occurs on a daily basis in order to support the daily operating expenses to run a fund.

For example, a fund's expense ratio is 0.36%, which means for $10,000 investment, it will charge $3.6 per year, or about $0.01 per day. You just can't avoid a fund's management fee.

In addition to management fee, some funds also charge front end or back end loads, which is transaction based. If you want to trade a fund frequently, in addition to its management fee, also pay attention to the load fees.

What Do People Regret the Most in Retirement?

10/20/2015

What do retirees regret the most? See the following CNBC survey results:

Leaving the workforce too early
Overspending in the first years
Not travelling earlier in retirement
Expecting unrealistic returns
Not planning for leisure time
Drawing social security too early

A Free Portfolio Tracking Tool

10/19/2015

Q. My investments spread everywhere - from my past 2 employers' 401Ks, to my Roth IRA accounts, to my individual brokerage accounts at two different brokers. Is there any way I can easily track all my holdings from a single source?

A. If you have investment accounts at many different places, and holding a lot of different stocks, funds, and bonds, it is a nightmare to manage them. Now a free service is available to tackle that task - Trakify.

What Trakify does seems trivial - allowing you to view all of your investment at one place, and alert you with any change. It is a reporting tool, not a trading tool (Robinhood is a free trading tool). This is not an easy task as it appears, given different investment companies' different reporting formats. Trakify even displays holdings by share lot and date of purchases, this is very useful information when deciding which share lots to sell.

Exitpoint.com is a competitor to Trakify, it offers broader services than Trakify, unfortunately you have to pay a monthly fee for its service.

Resources for Hospital Rankings and Ratings

10/18/2015

Q. How to find the best hospital?

A. If you require care in a hospital, the first step you will do is probably start searching hospital's rankings and ratings. Below are some reputable websites that provide hospital rankings and ratings:

Consumer Reports
Ratings of over 4,000 hospitals in the U.S. You can find how hospitals in your area are ranked.

Healthgrades
Helps you find the right hospital!

The Leapfrog Group
Provides hospital safety scores

Medicare
Compare hospitals

U.S. News and World Report
US News and World Report's annual best hospital rankings

The Bottom Line
Rankings just give you the statistics, don't forget to listen to your Dr.'s advice, and check out patients' reviews and stories.

Is Target Date Fund Safe for Retirement Investment?

10/17/2015

Q. Is target date retirement fund really save for retirement purpose? The 2015 target date fund was down this year.

A. A Target-date Retirement Fund, by definition, adjusts its holdings automatically to fit people's retirement time, and beyond.

Many people expect, for example, the 2015 target-date fund, which is for people who retire in 2015, to be conservative as these people are entering retirement time. However, these people might be surprised to hear that most 2015 target date funds still hold quite significant percentage of stocks. For example, Fidelity's 2015 target-date fund has 55% stocks, so are Vanguard and T. Rowe Price's 2015 target-date funds all hold similar percentage of stocks.

The reason of such high stock weight? Because people's retirement years could stretch over 20 years or even longer. With such long investment horizon, in order to keep the purchasing power of retirement funds, you have to invest in stocks This will obviously lead to higher risks.

The bottom line, even for people in early retirement, don't focus on short-term market fluctuations, aim for the long term outcomes!

Follow Activist Funds and Get Better Performance?

10/16/2015

Q. GE's share rose 5.3% on the news of an investment from an activist fund. Is it a good idea to invest after an activist fund's investment in a company?

A. Activist Funds' involvement in a company tend to generate news splash, but its track record is mixed at best, based on a recent comprehensive Walls Street Journey study.

Activist funds often demand the target companies to buy back stocks, split businesses, get board seats, or even sell the companies, or a combination of some or all of these. While high profile success stories are plenty, there are huge failures too.

One thing the WSJ study pointed out is that when an activist fund has long term time frame and plans, its success rate will be higher. It's best to avoid those trade for short term gains, especially for small investors who want to take the free rides, it's not that easy.

For more details on the WSJ study, visit this link, it lists all of the major cases studied.

Low Volatility ETFs As Part of Core Investment Portfolio

10/15/2015

Q. I want to own stocks in my portfolio, but am concerned about the volatility. What's the solution?

A. While you can own dividend paying stocks which tend to be less volatile, you can simple own some low-volatility ETFs as part of your core portfolio. Such low-volatility ETFs tend to perform better than bonds in times when economy is growing and rates might be rising.

One popular option is PowerShares S&P 500 Low Volatility ETF (SPLV), is it good for conservative investors.

If you are concerned about the high weight of interest rate-sensitive stocks in SPLV, another option is PowerShare S&P 500 ex-Rate Sensitive Low Volatility Portfolio (XRLV).

Finally, if you want to diversify the holdings to include foreign stocks, the Vanguard Global Minimum Volatility (VMVFX) is a good choice, its low expense of 0.30% certainly helps too.

Use 529 Money to Pay For Airfare to School?

10/14/2015

Q. Can I use 529 money to pay for airfare for my child's flight from home to school?

A. You have to read carefully about your 529 plan's details, but generally transportation costs don't count as qualified education expense. If you use 529 plan money to pay for non-qualified education expenses, you will have to pay tax plus 10% penalty on earnings portion.

Why an ETF Price and a Mutual Fund Price for the Same Class Are Different?

10/13/2015

Q. Why prices for an ETF and a Mutual Fund of the same class are different? Is it due to different stocks they own?

A. While the investments of two different funds, even for the same class, are most likely different, this is not the reason why two funds' prices are different.

The key reason is, a fund (either a mutual fund or an ETF)'s price you see today depends on its starting price. When a fund company introduces a new fund (mutual fund or ETF), it could be set at any price. What matters is how the fund price performs once launched, which typically mirrors the underlying asset class' performance.

If you understand this, you will know when you decide to buy a fund, its current price doesn't really matter, its future percentage gain or loss is what matters.

2 New Ways to Generate Income to Meet Retirement Needs - Part B

10/12/2015

In our last blog post, we discussed the new Managed Retirement Income funds. Now we will discuss another new method -

Method 2. Match Bond Income with Annual Costs
This strategy's premise is you know what exactly you need for what time, then scan the bond universe to construct a bond portfolio that best meets your life needs.

This method is different, or is better than, the traditional bond ladder or annuity product because the customized bond portfolio could meet the "spikes" of life needs - for example, you want to do a 6-month world cruise in 3 years which will double that year's living expenses compared with the normal level. The bond portfolio will be constructed in the optimal way (in terms of amount and maturity) to use the bond interest and redemption to meet each year's specific needs.

What's the downside of this strategy?

First of all, it's not easy to DIY - individual investors don't have the bandwidth to do the bonds related research and construct such an optimal bond portfolio. We have mentioned the Asset Dedication tool that is available for financial planners to help their clients to get the job done. Second, it is probably not the best investment decision to lock in longer term bonds when interest rates are low.

The Bottom Line
The best action for a pre-retiree to do is probably to purchase a single premium annuity to meet the basic needs of life, then use the above two methods - managed retirement incomes and matching bond income with expenses to meet those discretionary spending, because both methods have drawbacks and higher costs.

2 New Ways to Generate Income to Meet Retirement Needs - Part A

10/11/2015

Q. How to draw a steady packcheck from retirement funds to meet retirement needs?

A. While most people know the "4% withdrawal" rule of thumb, implement it is not an easy task. There are two new ways being introduced to specifically meet the "steady paycheck" needs:

Method 1. Managed Retirement Income Funds
A managed retirement income fund is designed to make steady monthly payouts to retirees, while maintain principal safety. Given the low interest environment, it's understandable the annual withdrawal rate can't be high, even 4% is probably a challenge. For example, the American Funds' Enhanced Fund (NDARX) is designed for a 3% to 4% withdrawal. Its sister funds, the Conservative fund (NAARX) and the Moderate fund (NBARX) are designed to support annual 2.5%-3% and 2.75%-3.5% withdrawals.

The problems with such managed retirement income funds? Higher fee is one, more importantly, there is no guarantee to such steady paychecks, the funds' performances are still subject to the market's ups and downs.

We will discuss the second new method in our next blog post.

What is Liability-Driven Investing?

10/10/2015

Q. I know I have several major needs of cash in the next several years, what is the best way to design my investment strategy?

A. If you know you have certain liabilities down the road, you can design your investment strategy based on liability-driven investing which basically aims to match the assets with liabilities, like you are managing your own balance sheet!

This investment strategy is different from the common "benchmark-driven strategy" that aims to maximize return. It is especially helpful for retirees to plan their retirement needs (for example, need a new car in 2 years, start world travelling in 5 years, etc.) so the money is there when the need comes.

The liability-driven strategy essentially plans the various investments in bonds to achieve optimal returns and more importantly timing of bond interest and redemption to meet future needs.

Asset Dedication offers a tool to help investors build a personalized portfolios of individual bonds, unfortunately the tool is only available to financial planners, for individual investors, given the difficulty in researching various bonds on the market, it's best to work with a pro to get the job done.

Resources for Fighting Senior Financial Abuses

10/9/2015

Here is an incomplete list of resources to fight elder financial abuses:

5 Best Organization Apps For Students

10/8/2015

Q. Which app is the best to help my child get organized?

A. Here is a list of top 5 apps that could help any student get organized:

My homework (free)
Last year USA Today ranked this app as one of the "Best Back to School Apps". It helps organize assignments and due dates and has a user friendly calendar to prioritize, track, and color code assignments. On the calendar you can also see anything that is due that day. If you're on a budget or this is your first time trying an organization-focused app then this would be a great one to try.

istudiez pro ($2.99)
This app helps organize schedules and prioritize homework. You can also receive push notifications before assignments are due. It has 5 main functions; Overview, Assignments, Planner, Instructors, and Holidays. Students can include course schedules, plan study sessions, and prioritize assignments based on importance, among other uses. The app can also help students keep tabs on their academic progress by tracking their grades. Plus, this app can easily sync with all of your devices.

Evernote (free)
Take notes, track tasks, and save things you find online. You can also set up a notebook for every subject. It has a function that allows you to make multimedia notes with pictures and audio.

Evernote is a place to record and save all your thoughts, notes, and photos. Everything you do can be synced to the cloud so that you can get to all of it from your computer, smartphone, or tablet. It's a very popular app that is continuously being updated with new features.

AudioNote ($4.99)
Audio note combines the functionality of a notepad and voice recorder to create a powerful tool that will save you time while improving the quality of your notes. You can sync audio with notes. This app is especially useful if your student has something quick that he or she needs to remember but doesn't have time to type it. You can also free-hand draw an image on the screen, which can be useful for jotting down diagrams and pictures.

Google Calendar
You can organize your time, color code activities or tasks, repeat events, add notes, and view the calendar in different formats. You can also set up alarms for any upcoming appointments or due dates. Of course it syncs with all of your devices as well.

Buy S&P 500 For Global Diversification?

10/7/2015

Q. Can I achieve global diversification if I buy S&P 500 index funds, since mos of the large companies have business overseas?

A. It is true that many of the large cap companies in the S&P 500 index have business overseas, some of them even have majority of their incomes from overseas, for example, Coca-Cola. From this sense, buying the S&P 500 index the fund has achieved some global exposure.

However, S&P 500 index only covers some of the large cap companies traded in the U.S., there are many more large companies do not trade in the U.S. Let alone thousands of middle and small foreign companies. If you want to achieve true global diversification, just S&P 500 exposure is simply not enough.