Are you aware of the tax implications of international investing? When you invest in foreign securities, even those listed on U.S. exchanges, your investment is subject to foreign tax withholding. Foreign tax withholding is simply money that your broker takes out of your dividend income, capital gain, or interest income that is paid to the central government of the company you own. Withholding rates vary by country and source of income. Some countries require withholding on dividends, interest, and capital gains, and others only withhold income on dividends and interest. Why is this important … [Read more...]
Retirement Arithmetic
Are you planning an early retirement? We urge you to check out our retirement income arithmetic before you hurry off into the sunset. Let’s look at the arithmetic of a financially secure and comfortable retirement. First, we start with a portfolio balance of 50/50 stocks and bonds. A 50/50 mix offers a nice defense against down years and dampens your overall portfolio volatility. Next we make some return assumptions. Our long-term return expectation for stocks is 8.8%. If you’re still using historical returns of 10%+ you’re going to be sorely disappointed. Our stock return assumption is … [Read more...]
Give’em an inch and they’ll take a mile
Prior to 1913, the federal government was constrained from directly taxing personal income. Along came the 16th Amendment and the concept of limited government was thrown out the door. In 1913 the highest marginal rate was 7% on income over $500,000 ($10,495,000 in 2004 dollars). Compare that to today’s highest marginal rate of 35% on income above $319,100. It’s an utter disgrace. And why, you may ask, have our elected officials confiscated a growing portion of our income? Why else? To increase government spending on unneeded federal programs. Look at the chart below – prior to the … [Read more...]
Bond Funds
A recent article in the Wall Street Journal by Jonathan Clements highlighted the advantages of low-cost bond funds. Jonathan correctly points out that low-cost bond funds consistently outperform their high-cost cousins. This is not because low-cost bond funds are run by superior investment managers. It’s simply a result of the funds’ low expenses. As an example, take Vanguard GNMA with an expense ratio of .20% and Franklin US Government Securities with an expense ratio of .72%. Both funds focus exclusively on GNMA securities. The difference in their expense ratios is .52%. According … [Read more...]
Investment Resources
An Efficient Frontier The concept of an efficient frontier is central to investing.What is an Efficient Frontier? An Efficient Frontier is nothing more than the line that connects one optimal portfolio across all levels of risk. An optimal portfolio is the mix of assets that maximizes portfolio returns at a given level of risk.The Chart below illustrates an Efficient Frontier for a combination of two assets classes - long-term corporate bonds and stocks. Compound Interest Table Click Here to download our free compound … [Read more...]