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3 Things You Should Always Ask a Financial Adviser

The following first appeared on Kiplinger’s as 3 Things You Should Always Ask a Financial Adviser.

Your choice of financial adviser might be the single most important decision you ever make, short of your spouse or maybe your doctor.

While you might not be putting your life in his or her hands, per se, you’re certainly putting your financial future at risk. A good adviser can help you protect the savings you’ve spent a lifetime building, and – with good planning and maybe a little luck from a healthy stock market – grow it into a proper nest egg.

But how do you choose?

Let’s take a look at some traits you’ll want to look for, as well as three questions you’ll want to ask any prospective candidate.

What you want in a financial adviser

An older adviser with a little gray in their hair might instinctively seem safer, but ideally you don’t want an adviser that will kick the bucket before you do. However, going with a younger adviser introduces greater uncertainty as they will generally have a shorter track record.

Likewise, educational pedigree matters … but not as much as you might think. You can assume that an adviser with an Ivy League degree is highly intelligent and motivated, and those are qualities you want to see. But these same characteristics can make for lousy investment returns if they mean the adviser is overconfident. Investing is a game in which discipline, patience and humility generally matter more than raw brains and ambition.

As Warren Buffett famously said, “Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.”

Yes, you want your adviser to be smart. But don’t be overly swayed by fancy degrees.

To finish reading the article, please see 3 Things You Should Always Ask a Financial Adviser.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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How to Use Your 401k in Your 50s and 60s

The following is an excerpt from How to Use Your 401k in Your 50s and 60s:

If you’re like most working Americans, chances are good that you’ve had access to a workplace retirement plan such as a 401k for decades. Hopefully, you’ve been faithfully contributing over the years and, by now, you have a decent-sized, tax-deferred nest egg.

But if you’re in the 50s or 60s, retirement is getting closer by the day, and the way you think about your 401k should be evolving. Yes, it’s still the same tax-sheltered, nest-egg-accumulating vehicle it always was.

But it’s also a distribution vehicle. And how you handle your distributions can potentially save you a small fortune in taxes.

Using Your 401k: The Basics

Before we get to that, let’s start with the contribution basics. In tax year 2017, you can contribute up to $18,000 to a 401k plan via salary deferral. The IRS hasn’t officially announced the 2018 limits, but it’s safe to assume it will be something in the ballpark of $18,500.

Of course, if you’re 50 or older, you can contribute an extra $6,000, bringing your total to $24,000 in 2017 and — presumably — $24,500 in 2018.

And remember, this is just your contribution and it doesn’t include any employer matching or profit sharing. Depending on your salary and your employer’s generosity, that can add thousands in additional contributions.

To read the rest of the article, see How to Use Your 401k in Your 50s and 60s

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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How To Scew Up Your 401k Plan

The following is an excerpt from 5 Ways to Screw Up Your 401k

There are all sorts of creative tax loopholes out there for savvy investors to exploit, and over the years I’ve looked at (and even tried) plenty of them. But the truth is, you don’t have an army of fancy Ivy League tax lawyers to massively lower your federal income tax bill. The single best tax shelter out there happens to be one that is available to the vast majority of working Americans: the humble 401k plan.

The 401k plan is the only investment vehicle I’ve ever seen that offers instant, tax-free “returns” of 100%, via employer matching. And depending on what federal tax bracket you find yourself in, you can get instant “returns” of 10% to 39.6% due to the tax deferral.

That’s real money, to say the least.

And all of this assumes your 401k contributions and matches sit in cash. We haven’t even touched on actual investment returns yet, fop good reason. A well-constructed mutual portfolio might return 8%-10% per year if you’re lucky, which isn’t bad, of course. But it pales in comparison to the matching and tax benefits.

The humble 401k plan is a veritable money-printing machine. Yet it can be remarkably easy to make a mess of things and kill the goose laying the golden eggs. Today, we’re going to look at ways to really screw up a good thing.

 

Failing to Increase Your Contributions As Your Pay Rises

This is America. If you’re reading this, chances are good that you make enough money to eat and keep a roof over your head. Yes, our expenses rise over time due to inflation and family changes, such as the addition of children. But it’s safe to say that if you were able to survive on the income you earned last year, you should be able to survive on the same amount this year and do so comfortably.

So, as you get salary bumps, try to continue living on your old salary and use the raise to increase your 401k contribution. You don’t have to eat ramen noodles or sell blood to make ends meet. Just avoid lifestyle creep, and you can get a lot closer to maxing out your 401k plan.

I know, I know. That new car is just begging you to buy it. But you can stretch another year out of your old car, and 20 years from now, when you look down at your 401k balance, you’ll be happy you did.

To read the full article, see 5 Ways to Screw Up Your 401k

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Advice to a Recent Graduate

The following is an excerpt from 5 Things You Must Do As Soon As You’re Employed.

20 years ago, long before I starting managing money professionally, I remember a little nugget of wisdom my mother’s financial advisor Daniel gave me: “Your career is a far more important investment than any stock or bond I’ll ever buy for you.”

It was the late 1990s — at the tail end of the greatest stock market bubble in history — and I was a kid fresh out of college. The thought of grinding away in a cubicle for the next 40 years of my life was laughable to me. I was going to be a dot-com millionaire and retire by 30!

I often hear older men say that they’d love to go back in a time machine and kick their own asses for some of the stupid decisions they made in their youth. Well, I don’t have those urges because the 2000-2002 bear market did it for me.

In retrospect, it was fantastic timing. I had the get-rich-quick mentality bludgeoned out of me by a nasty bear market. It taught me discipline and humility. And from that point on, I took my career a lot more seriously.

Daniel was right. Getting serious about my career was the best investment I ever made. And by putting my nose to grindstone and getting to work, I advanced and managed to escape the greyish hell of the cubicle in just a few short years. I still work for a living, but today I have the freedom to make my own hours and work from anywhere in the world.

So again, work hard and advance your career. Yes, you’ll be a peon for a few years — just view it as a necessary stepping stone.

To read the full article, follow this link.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Spring Cleaning Tips for Your Portfolio

 

Photo credit: Hans Splinter

The following is an excerpt from a piece I wrote for InvestorPlace: 10 Spring Cleaning Tips for Your Portfolio

I don’t personally do a lot in the way of spring cleaning. It seems that my wife actually takes pleasure in digging through my closet and throwing away clothes that have outlived their usefulness, so I try my best to stay out of her way. But I do usually spend a few hours in the garage and attic going through junk we’ve accumulated over the past year.

What’s good for your household is also generally good for your portfolio. You should regularly tidy up your portfolio and your broader financial plan. You’d be surprised how much “junk” you can accumulate in a brokerage account.

You won’t want to get rid of it any more than you want to get rid of that old moth-eaten Texas Christian University Horned Frogs hoodie you wear during college football season. But frankly, getting rid of it is for your own good. Not only does holding on to portfolio junk tie up capital that can be better allocated elsewhere, it can also be a major distraction.

And frankly, like the moth-eaten hoodie, it’s downright bad for your self respect.

With that in mind, we’re going to look at 10 portfolio spring cleaning tips.

Rebalancing

Rebalancing is an important spring cleaning chore, both among asset classes and among your individual stocks. I agree with the old trader’s maxim to “cut your losses short and let your winners run”.

But if a single stock has come to completely dominate your portfolio, you should probably consider scaling it back a little and reallocating. Otherwise, you run the risk that that single stock will take a wrecking ball to your portfolio should it unexpectedly hit a rough patch.

There is really no hard and fast rule on when a single stock position is too big for a portfolio. My basic rule of thumb is to keep my initial investments to just 3% to 5% of the portfolio. When a stock really has a nice run and starts to make up 10% of the portfolio or more, that’s when I start to scale back.

Every investor is a little different here, and there is no absolute threshold at which you should sell. Just try to be honest with yourself about the risk you’re taking, and do what seems best for you.

To read the rest of the article — and the 9 remaining spring cleaning tips — follow this link to the article.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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