Making Money Alert
A Turkey of a Different Variety
11/22/2006
Tomorrow is Thanksgiving and I first want to wish all of my Alert readers a very happy, healthy and wealthy holiday. I know I will be enjoying a big bird tomorrow with all of the fixin's while I reflect on how thankful I am for what really matters in life -- a great family, fantastic friends, and a career I love helping people achieve their financial dreams.
One of the many things to be thankful for is our ability to foresee danger ahead. And, in my opinion, right now the danger factor is pretty high when it comes to the overall market. Things still are really overbought right now. As I watch CNBC, I hear a constant barrage of so-called "good news" like Google hitting $500 a share or how a certain sector or index just made a new all-time high.
I'd just like to offer a word of caution here when it comes to this market. The way I see it, the current market party could be spoiled by several factors. First, there is investor complacency, meaning that most investors just think things are going up and will continue to go up in perpetuity. That never happens. With the vaulted levels we've seen in stocks lately, the chances of this market continuing higher without a significant correction are slim at best.
Also, we have a potentially big party spoiler brewing on the oil front. After a sustained period of lower oil prices, we are starting to see the price of oil come up from its recent lows. Hey, there's a lot of geopolitical uncertainty brewing in the world right now and much of it is in the oil-rich regions.
Now, I am not saying for certain that oil prices are going to spike significantly from here, but if they do jump that could cause stocks to pullback sharply, possibly giving us a correction that I think is a bit overdue.
Don't get caught holding a turkey of a different variety this holiday season. You don't want to be left unprotected in stocks when the next inevitable market sell off begins. Learn how to protect yourself from the ravages of a potentially sharp market correction that could eat away at your nest egg by subscribing to my Successful Investing advisory service. You'll be thankful that you did.
To find out how to get started with Successful Investing, click here.
SECRETS TO VARIABLE ANNUITY SUCCESS 2
When it comes to variable annuities (VAs), I have what could be described as a classic love-hate relationship. I love VAs because they are a great tool to help you enhance your retirement nest egg. They offer unlimited contributions -- a great feature for those who receive some type of windfall such as inheritance, a life insurance payout or a big settlement. You also can get the benefits of active portfolio management. In addition, you can select your own type of income stream payout, such as a lump sum or a monthly payment.
I hate VAs because, so often, they are used by unscrupulous brokers who charge outrageous commissions to gullible investors who often are unaware of what exactly they are buying. Also, I hate when IRAs are put in a VA, since there simply is no reason for a tax-sheltered investment to be placed inside another tax-sheltered investment. Finally, I hate two popular VA strategies, buying-and-holding your investments without regard to market conditions and the so-called "index" annuities, which make promises of performance they may not be able to keep.
So, how do you put the love on your side and how do you minimize the hate when it comes to VAs? Well, that's exactly what I cover in my FREE online seminar, The Secrets to Variable Annuity Success. If you want to find out more about these great retirement investing tools, I encourage you to check out my seminar by clicking the link below (it's free).
I guarantee that after this seminar you'll be up to speed on the essentials of smart variable annuity investing.
NEW SPECIAL REPORT AVAILABLE NOW!
Worried about managing risk in this uncertain political and economic climate? If you aren't worried, you should be. The risks we all face right now require sound financial stewardship. These days, you just have to know how to protect yourself.
That's why I want you all to click here for your FREE Special Report titled, "The Successful Investor's Guide To Managing Risk."
This Special Report outlines the seven biggest threats to your financial nest egg and how best to mitigate those risks by employing the strategies that have helped to protect Fabian investors for nearly three decades.
If you invest, then you need to worry about risk and "The Successful Investor's Guide To Managing Risk" will help you do just that.
A "FREEDOM POINT" Q&A by Josh Lewis
Last week Doug and I presented a tele-seminar entitled "5 Steps to Financial Freedom." At the end of our presentation, we had a great question and answer session. Over the next several weeks, we would like to share some of the questions and answers with you.
QUESTION: So, if you have saved the equity you borrowed from your house in an "offset account" and then pay off your mortgage upon retirement, the benefit is the growth in your offset account which is what remains after your mortgage payoff? Is that correct?
Greg
Littleton, CO
ANSWER: This is a great question with multiple layers. The answer to the direct question is, "yes." If you borrow money from your mortgage and invest it in an offset account, one of the major benefits to you is that this offset account will grow faster than you would have been able to pay off your mortgage. If and when you decide to pay off your mortgage, you would have this remainder available to use to meet your needs.
Another benefit to this strategy is that it allows you to maximize and then maintain the mortgage interest deduction on your home loan. When you consider a loan of $300,000 at 6% generates an $18,000 write off, you can see how large a benefit this is. Assuming the taxpayer is in an effective 25% combined federal and state tax bracket, the savings would amount to $4,500 annually versus someone who aggressively paid off their mortgage and eliminated this write off.
Lastly, the question doesn't account for the fact that we are often able to increase a homeowner's cash flow by $500 to $2,000 per month by eliminating debts and selecting the ideal loan program to match the borrower's needs. When this savings is conserved and not consumed, the monthly savings compounds quickly and steadily over time to create an even greater sum left over after paying off the mortgage.
I also would like you to consider one final thought. Most people plan on eliminating their mortgage before or upon retirement because they believe their taxable income will decrease to a point where there is little or no need for tax advantages. The reality is that most seniors continue to pay significant taxes in retirement and often find themselves in need of tax shelters. If you have been following a Freedom Plan and growing your offset account for 10 or 15 years, I would be willing to bet you will be comfortable continuing to let the account grow into retirement while you enjoy the ongoing growth of your nest egg.
If you missed the Making Money University Tele-seminar "5 Steps to Financial Freedom," I invite you to listen to the recording available at http://www.dougfabian.com/radio/5steps.jsp.
At the end of the recording, you will find out how you can receive several valuable tools absolutely free of charge. You also can contact me directly at josh@joshlewis.net or by phone at 888-944-JOSH (5674), with any questions regarding your "Freedom Point" or anything else mortgage or real estate-related.
ETF PROFILES NOW ON YOUTUBE
You probably all know by now what a huge fan I am of exchange-traded funds (ETFs), but did you also know I do a regular ETF profile on my radio show, Making Money with Doug Fabian?
This week we profiled three very interesting ETFs: The First Trust IPOX-100 (FPX), which allows investors to take part in recently debuted initial public offerings; the WisdomTree Dividend Top 100 (DTN), which seeks to replicate the performance of the top 100 highest dividend-yielding companies; and the Health Care Select Sector SPDR (XLV), an ETF play for those who want to buy into some of the biggest and best companies in the health care sector.
If you didn't get a chance to hear what I said about each of these ETFs, don't worry. You can catch a video stream of my live ETF and market updates on YouTube click here.
Plus, it's not just a one-way street anymore when it comes to discussing the markets. Sign up at the website to comment on my videos, send me a message, and get updates when we post new episodes. I broadcast an ETF and market update Monday through Saturday, which is uploaded by 5 p.m. PST. And, if you want to check out past shows go to our video archive.
Don't forget, you also can listen to the show through our podcast and live streaming whenever it's convenient for you. It's all at the site, and it's just another way we are helping you to stay on top of your money.
GOODBYE MILTON
"A society that puts equality... ahead of freedom will end up with neither equality nor freedom... a society that puts freedom first will, as a happy by-product, end up with both greater freedom and greater equality."
-- Milton Friedman, "Free To Choose"
Last week the world lost one of its foremost advocates of both freedom and capitalism with the death of the great Milton Friedman. This giant of a man, who stood just over five-feet tall, was one of the finest economic thinkers in history and his articulate and passionate defense of capitalism and freedom helped make this world a much better place.
Not many people leave a lasting mark on the world with their ideas, but in the case of Milton Friedman, I suspect his mark will last forever. I know I will do my part to advocate what Friedman stood for, namely the greatness and the ability of free markets to enhance the quality of life for us all.
May you rest in peace.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars, or anything else.