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Best Ways to Invest in Foreign Markets (Part II)

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The world is a big place. Where will you invest?

Once the right type of fund is picked, the next step is deciding where in the world to invest. Most financial advisors advise that younger investors look for higher-risk funds with the probability of a huge return, while senior investors look for lower-risk funds that offer more stability. This typically translates to large emerging market exposure for younger investors and create market exposure for senior investors.

Lastly, finding certain mutual funds is as simple as using free online tools such as the Wall Street Journal Fund Screener or Yahoo! Finance Fund Screener. In the meantime, ETFs can be discovered by browsing through some of the biggest ETF providers such as iShares or SPDRs. Finally, investors must discover high-return, low-cost funds that satisfy their risk appetite and investment objectives.

Buy Individual Foreign Stocks Hassle-Free with ADRs

Investors that want a hands-on approach can simply buy numerous individual foreign stocks which are U.S.-traded securities that show ownership in the shares of foreign companies. Since they are denominated in dollars and traded on the AMEX, NYSE, or NASDAQ, ADRs don’t need any difficult currency conversion or foreign exchange transactions.

Sadly, there are several foreign stocks that aren’t available as ADRs and must be bought on foreign exchanges like the London Stock Exchange (LSE) in Europe or the Toronto Stock Exchange (TSE) in Canada. While some international brokerages provide a low-cost way to buy these stocks, like InteractiveBrokers, investors must carefully check their brokerage’s fee schedule before trading.

When your plan of selling and buying of ADRs happens in American dollars, any dividends presented to you will be denominated in the foreign currency and then changed into U.S. dollars upon distribution. As a result, there might be some currency exchange rate risk included in those situations.

Best Ways to Invest in Foreign Markets (Part I)

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Investing in foreign markets can be complicated but doing so can be in your best interests.

International investing can be a complex endeavor, from currency conversions and language barriers to foreign exchanges and regulations. Though, at the same time, many financial advisors suggest holding at least some foreign stocks in a diversified portfolio. Luckily, there are many simple ways to invest in foreign markets without learning a new language or exchanging dollars for euros. Below is how to diversify abroad with U.S.-traded stocks and funds, as well as some vital considerations for doing it correctly.

Easily Diversify Abroad with ETFs and Mutual Funds

The most common and easiest way to invest in foreign markets is by buying mutual funds or exchange-traded funds that hold a basket of international bonds and stocks. With foreign holdings across numerous industries and countries, these two fund types provide investors with a fast and highly diversified foreign component to their portfolio in just one simple transaction.

Also, investors can select between various types of mutual funds or ETFs such as:

  • Country Funds- invest in specific countries such as Russia or Spain.
  • International Funds- invest widely across several countries outside of America.
  • Regional Funds- invest in specific regions such as Asia, Europe or the Middle East.
  • Sector Funds- invest in specific sectors across several countries such as energy or gold.

How to Find the Best Fund for Your Portfolio

What fund type is best for you? Eventually, the answer to this question is contingent on the individual’s investment goals and appetite for risk. In general, mutual funds are actively handled by professional investors, while ETFs are passively managed with holdings based on a preexisting index. As a result, mutual funds typically are more costly than their passively managed counterparts.

The Bottom Line

ADRs and international funds are solid ways to create international exposure into any portfolio without having to worry about regulations or foreign stocks. By keeping these tips in mind, investors can be well on their way to getting proper diversification for their portfolios.

 

What is Equity?

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Equity is an asset that can be used in a few different ways.

What is Equity?

Equity is the amount of your home or vehicle that you own after calculating the debt. To get that figure, deduct your loan balance from the market value of your automobile or home.

If you get a negative number, your car or home is valued less than what you owe on it. You have negative equity.

Example: Your home is worth $250,000, and you owe $100,000 on your mortgage. $250,000 minus $100,000 equals $150,000 of equity in your home.

How You Can Use Your Equity

Equity is an asset. With it, you can:

  • Borrow against it with an auto or home equity loan.
  • Get cash after you sell your home and pay any associated costs.
  • Use it as a down payment or to purchase another house.

How to Build Equity

If you have a nice amount of equity, the better off you will be. There are a few ways to increase equity:

  • Your debt amount reduces.
  • Your property value increases.
  • You can take an active or passive approach to build equity, based on your goals and your resources.

When you get a job, the first two things you put on your to-get list is a car and a house. Though as life goes on and you find yourself in need of some cash because of a big expense such as fixing a leaky pipe in your house or a new the plumbing in your home or a new motor for your vehicle, an equity loan could be the solution you are seeking.

Though, before you go down this road, it’s critical to completely understand equity, what it is, how it works, what you can do with it, and where to get it.

Regardless if you’re interested in an auto or home equity loan, contact a professional banker to guide you through the process.

Affordable Places to Retire

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You’ve most likely have been dreaming about retirement since the day you began working. But will your budget let you make those dreams a reality? It has a better opportunity if you choose an affordable retirement destination.

To detect some of the cheapest places in the U.S. where you will really want to retire, we tried to pick a good place to retire in each state. We based our choices on factors crucial to retirees like safety, taxes, health care, cost of living, and lifestyle. Here are the appealing places left that really cheap for retirement. Decide for yourself if any of these destinations could be where you live out your American dreams.

Montgomery, AL

Annual expenditures: $37,000

Akron, OH

Annual expenditures: $36,000

Cleveland, OH

Annual expenditures: $36,000

Augusta, GA

Annual expenditures: $36,000

Brownsville, TX

Annual expenditures: $35,000

Toledo, OH

Annual expenditures: $35,000

Memphis, TN

Annual expenditures: $34,000

Jackson, MS

Annual expenditures: $34,000

Other Cities for Retirement

  • Winchester, VA
  • Portland, ME
  • Gainesville, GA
  • Wenatchee, WA
  • Tulsa, OK
  • Cheyenne, WY
  • Columbus, IN
  • Ithaca, NY
  • Harrisburg, PA
  • Midland, TX

 

If money doesn’t matter, there’d be lots of incredible places to spend your retirement. An all-glass contemporary on the Malibu beach, a small winery in Napa Valley. A house in Paris.

But money really does matter. Even as the financial markets gets out of its recession, many of us are redefining what our “dream” retirement is going to look like.

Absolutely, Honolulu has well-priced pineapples and beaches. But not many of us can afford its average home price of over a half million dollars. Chicago has lake views and first-class dining, though its way over the top, extremely high percent sales tax can put those niceties out of reach. Then again, not many retirees want to relocate, even if it is cheap, to a one-stoplight town either.

How to Choose A Stock

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So you finally decided to start stock investing. You realize that a low P/E ratio is usually better than a high P/E ratio. Your portfolio should be diversified across numerous sectors, a company with plenty of cash on its balance sheet is better than one greatly burdened with debt. Analysts’ suggestions must always be taken with a grain of salt. Now that you have all the basics of investing mastered, and perhaps even researched the more complex concepts of technical analysis, you are ready to choose your stocks.

But hold up! With thousands of stocks to pick from, how do you go about really picking an equity investment? Pouring over each income statement and balance sheet to see which companies have a favorable net debt position and are enhancing their net margins is an unreasonable feat. Moreover, picking an investment based just on the criteria inputs of a stock screener is prone to error and does not make a full representation of the company. Finally, simply coat tailing investors will typically not assist you in finding any ten baggers as fund managers tend to focus mainly on safe blue chip stocks.

The first step to actively picking out a stock from the sea of available alternatives is to decide what the purpose of your portfolio is. Investors concentrate on capital preservation, capital appreciation requirements, and income. Income-oriented investors will usually concentrate on low-growth businesses in sectors like the utilities.

Though other options like master limited partnerships are also available. Those who have a low risk tolerance and are primarily concerned with capital preservation tend to invest in solid blue chip corporations. Investors who are seeking capital appreciation should look at businesses of life cycle stages and ranging market caps. Whatever your goal is with

Choosing the Right Financial Advisor

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Planning is key!

You finally want to hire a financial advisor. You know this is a vital decision, but you have no idea where to begin. The amount of financial information available is endless and getting started can be frightening. But the process can be easy if you divide it into steps.

Selecting an advisor type:

Almost anybody can refer to themselves as a financial advisor. Let’s begin by reducing the field. There are three basic types of advisors according to how they are paid: commission, fee-only, and fee-based.

Commission: Commission-based advisors (insurance agents, registered representatives, brokers) sell financial products like mutual funds, annuities, insurance and mutual funds, getting commissions on those products. They are often working for big financial institutions and have their Series 6 or Series 7. Because what they are paid is based on what they sell, there is a huge conflict of interest. It’s critical to be aware that the temptation of commission is there and it can play a part in their recommendations for you.

Fee-based: These advisors are somewhat new to the financial industry. Fee-based advisors are usually associated with a broker/agent and like the commission-based advisors, usually hold a license to sell insurance or investments for a commission. Fee-based advising is complex because like the fee-only advisor, the fee-based advisor offers financial planning for a fee. However, the vital difference is they also sell products and get paid commissions. So, there is still that big conflict of interest, because their fee-based recommendations could, and typically do, include buying products they get commissions on.

Fee-only: This is the only type of advisor recommended for complete financial planning and/or asset management. Fee-only advisors possess a fiduciary duty to work in the best interest of their clients. They only make money through hourly rates, flat fees, or a % of the assets they manage.

What Happened to US Savings Bonds?

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There was a moment when billions of dollars in U.S. savings bonds were given for weddings, graduations, birthdays, or just because. Those days are over. After selling billions of dollars of saving bonds every year, the Treasury is selling less than $50 million right now.

An older style EE Bond

What happened to U.S. Savings bonds? The government messed with the interest rate formula, making them unattractive as an investment by fixing rates for the lifetime of the savings bond. Then in ‘12, the government no longer offered paper savings bonds, eliminating their attractiveness as gifts. Furthermore, the Treasury no longer marketed savings bonds, probably due to the fact that the government was getting a big debt by overspending. They didn’t want to bring attention to the fact that it needed to borrow money.

U.S. Savings bonds have had a long and detailed history, beginning with Series A-D bonds, provided in the depression to offer folks an enticement to save correctly. The Series E bond was started in April of 1941 by as a way of financing World War II. These bonds, offered as an American investment, had an initial 10-year maturity and were offered at a reduction of face value. They had an interest rate of 2.9%. During the war, over $35 billion worth of saving bonds were sold to the public, in amounts as small as $25.

When Series EE bonds were a Great Deal

Saving bonds were introduced in the early ‘80s. This was a period of rising interest rates, making buying them more striking. These saving bonds had a lifetime, fixed base rate that was put in place every six months for all bonds sold during that time.   The bonds had a “floating rate” portion of the interest, which altered every six months to stay with the established rate on Treasury notes.

How to Open a Savings Account for an Infant

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As a grandparent, you can help reduce some of your infant grandchild’s expenses by opening a savings account for her/him. Health care and college are just 2 examples of expenses that you can provide assistance with by consistently adding to the savings account. In addition, when your grandchild is older, you can aid in teaching them the value of saving by letting them help manage the account. Many banks provide savings accounts that are purposely tailored for kids.

Contact your bank to find out if it has savings accounts especially for children. Make a note of all incentives and benefits that are available and the requirements and minimal balance necessary to open the account.

Call other banks and inquire about their incentives and benefits to open a child’s savings account. Compare your bank’s incentives with the other banks and pick the one that best fits your needs.

Gather the necessary information to open the account. For instance, you need your grandchild’s social security number. If your grandchild doesn’t have a social security number, ask their parents to apply for one as quickly as possible. There are a few financial institutions that let you open an account for your grandchild without it as long as you give it sometime down the line.

Fill out the application and include yourself and/or the parents/guardians if you want them to be on the account. Even though you can visit a bank branch to open the account, many banks let customers fill out the paperwork online. Moreover, you can pick the date that you want your grandchild to gain access to the account on the application. This is very important because if you set it up for college, you want to make sure he or she doesn’t bother the money until then.

The Best Investment Gift for a Grandchild

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Regardless if you have $1 to provide or $10,000, the finest investment gift for a grandchild is to start or give to a 529 savings plan.

“For grandparents who want to help their grandchildren pay for college, these make the most sense. You have a wide range of choices of where and how much you invest, and you can keep control if you want.

More relevantly, your investment increases without tax and qualified withdrawals, for expenses like fees, room/board and tuition aren’t subject to federal or state tax. Some states give a tax deduction if you go with your home-state plan.

In the meantime, saving money in a 529 plan will put little impact on the financial aid. By contrast, if you were to put money into a customary investment account in your grandchild’s name, those amounts would be factored into the expected contribution of the family.

If your grandchild gets a full college scholarship, don’t fret. You can just name another person as the beneficiary. The individual can be of any age and doesn’t have to be a relative.

If you have to cash out, you must pay a penalty, plus state and federal tax on any earnings. This shouldn’t be a deal breaker. The benefits of putting away money in a 529 plan overshadows the possibility that you won’t use the money for college.

There are a few ways to go about giving a contribution to a 529 account. The first is to start a 529 account in your name. You will be the custodian and you can designate your grandchild as the beneficiary. The benefit of doing it this way is control. You can regulate how the money is invested and you can modify the name of the beneficiary at any time.

The Need to Be Flexible in Your Retirement Plan

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When saving for retirement, you’ll want to make a detailed, yet realistic goal. After all, you need to understand how much money you should save. Even if you are young (20s or 30s), having retirement goals are vital, even if later on they may change.

To decide how much money you must save for retirement, there are several important questions that you first must ask yourself:

Where do you want to live? Do you want to relocate?

What type of home or living arrangement do you want?

Are there any hobbies/activities would you like to start?

Do you want to start a small business in retirement?

For these questions, you need to begin thinking about their costs. When doing so, also take into consideration basic living costs, like shelter, food, and transportation. Inflation should be taken into account as well.

A Financial Adviser can get you started

Once you have finished the above steps on how much you need to save for retirement, you will want to increase that amount. You should always save more money than you need. The reason for this is that the simple fact is that there aren’t any guarantees with retirement or an age increase. Your retirement spending plan should take into account flexibility, as there are many occurrences that can come about that call for you to be flexible with your spending.

As stated earlier, inflation should definitely be taken into consideration. The price of goods and services will only keep on rising as you age. Not taking into consideration this rise can make you not have enough retirement money. Online, you can find numerous tools that can help you figure out the approximated inflation rate at your time of retirement. Keep in mind, nonetheless, that these are only approximations. A retirement financial advisor can also give you these numbers, as well as assist you with setting up an accurate retirement plan.