Archive - July 2008

1
Using Exchange Traded Funds – Part 1
2
Tax Breaks Tucked into the Latest Housing Bill
3
Take Our Financial Quiz
4
Life Insurance 101 – Part 2: How does life insurance work?
5
Parking Your Cash

Using Exchange Traded Funds – Part 1

In the last four years or so, there has been explosion of newly created exchange traded funds (ETFs) in the financial marketplace. What are these investment products, and how are they different from the more familiar mutual funds?

Figure 1 shows the growth in both the number of exchange traded funds available and the amount of money invested in them.  Although the ETF world is still dwarfed by the $11 trillion mutual fund industry, ETFs have clearly taken off on a growth spurt.  Exchange traded funds were originally introduced to provide an investment vehicle with certain advantages over mutual funds.…

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Tax Breaks Tucked into the Latest Housing Bill

Tax Breaks in the Latest Housing BillThe Senate bill passed today provides aid for homeowners on the brink of foreclosure, relief for beleaguered mortgage finance firms Fannie Mae and Freddie Mac, and something else: tax breaks for first-time homebuyers and a deduction for homeowners who normally aren’t able to itemize their deductions.

For 2008 only, the bill provides that homeowners who don’t itemize will receive an extra deduction for a maximum of $500 or $1,000 for single or married filers, respectively.  The deduction will be based on property taxes paid.  An estimated one-half of homeowners don’t itemize – presumably because their mortgages are paid off …

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Take Our Financial Quiz

Take the Financial Literacy QuizA profound shift in retirement trends has been underway in America in the last couple of generations.  The landscape has shifted from retirements funded largely through pensions and Social Security to retirement years that will be heavily dependent on individual savings, with relatively less help from Social Security.  Meanwhile, the leading edge of the Baby Boom has begun retiring.  The financial industry, eager to cash in on a perceived demographic windfall, is busy creating new investment products that claim to meet every retirement need.  Retirement savers have lots of options, but without a good understanding of personal finance, they’re likely

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Life Insurance 101 – Part 2: How does life insurance work?

Today I’d like to offer a simple explanation for how life insurance “works.” This discussion will also lay a foundation for discussing the difference between term and permanent life insurance. The first post in this series, on the reasons someone might need life insurance, is worth reading if you’re not sure whether you need life insurance.

Suppose that you’re a 20-year old male and you’ve decided that you need some life insurance.  For the purpose of this illustration, let’s assume you’ve determined that you need $1,000,000 in coverage for an indefinite period of time.  Let’s also assume that you …

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Parking Your Cash

Parking your CashIf you have a longer-term CD that is now coming to maturity, you’ve probably been disappointed to discover how much interest rates have dropped since you last locked in your CD rate. What are the best options for those with short-to-medium-term cash to invest these days?

My first observation is a warning: you should scrutinize closely any investment that is not a straightforward money market fund or CD.  Why?  Because there are quite a few short-term cash “alternatives” being touted right now; among these are a variety of ultrashort bond funds, bank loan funds, and exchange-traded notes.

With interest rates …

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