The Big Bad Bear

The big bad bear is stirring again. So far he has stretched, yawned and peaked out of his cave. After his almost year-long nap he is hungry. A nice big steak would hit the spot.

That steak comes from cattle and not too far from his den there is a fat complacent bull munching in the pasture. He has his tail towards the bear and Mr. Bear remembers that 3 years ago he walked up to another bull and bit him in the backside. It looks like he can do it again.

We know who bull and bear really are. It seems that almost everyone is bullish and thinks we are in another bull market like the one in 1999 where all investors thought they were geniuses. History has taught (for those who wish to listen and learn) that major bull markets are followed by bear markets of equal length. The major bull came to an end after 18 years in 2000. Can we expect an 18-year bear market? If history repeats its cycle the answer is yes.

The recent return of the upward movement of stock prices from last year is very typical of rallies in bear markets. Many have a 50% retracement of the first down leg (as happened after the big break in 1929) that tops out with the resumption of the downward path.

Today our bull is feeding on the lowest interest rates in 40 years, a tax cut that puts extra money in the hands of consumers (where it belongs) and a strong housing market plus the belief that the market always does well in an election year. Let’s hope all these things will come to pass.

The worst problem for investors is their complacency. They start making money and forget to protect their profits. These slip away when the market starts down and their broker says, “Don’t worry. The market always comes back”. If the investor did not learn to protect his assets from the 2000 debacle he is doomed to lose again. What should he do?

He should protect his investment account with stop-loss orders on all stocks and mental stops for all mutual funds. Brokers hate this and will try to talk their clients out of doing it. Why? Because he makes a commission as long as you are invested and nothing if you have cash in your money market.

It is better to make 1% in a money market than lose 20% or more of the principle as the market heads south. You don’t have to be a market “expert” to place a stop. Decide how much risk you are will to take 5%, 10%, 15%? And place your stop accordingly.

When this bear comes out of his cave don’t let him bite you – you know where.

The Inside Scoop on Mutual Fund Rip Offs

The bear market that showed up at the end of 2000 have every brokerage house-as well as the full common monetary fund industry-scrambling to happen originative ways to hike both their image and underside line. Unfortunately, this is often at the investors' expense.

Fund managers are ever on the lookout man for ways to spin around the stats to conceal icky path records and to happen ways to befog fees. To add abuse to (financial) injury, investors end up being penalized for selling. So what's an investor to do? In this case, knowledge is power. Here are some of the ways common monetary fund investors are being taken advantage of:

Performance is always an issue for any investor. Formerly great funds, which I've used myself during the 90s, are the junkyard domestic dogs of this century. Janus Fund come ups to mind and is one of many that buy-and-hold investors got stuck with. It's toss off 59%, since we acted on our Sell signaling on 10/13/2000.

Most of the finances today have got 12b-1 fees place, and some spell as high as 1% of a fund's assets per year. Between fees, committees and management charges, the common monetary fund industry is always getting paid, even if you, the investor, are losing money. For example, if you had bought SunAmerica 2-1/2 old age ago, you would have got paid the above fees at 2.35% per year. And, if you finally decided your investing wasn't going anywhere, you would have got been stuck with a 5% deferred sales charge.

If you throw a monetary fund less than 180 days, program on being hit with a salvation fee. It's almost standard. What's the deal? Brokers only get paid while you throw their fund. So, if you're going to sell, they get a last whack. It's a great hindrance for selling, too. Can this be avoided? Not completely, but if you have got your money managed by an investing advisor, the retention time period is reduced to 90 days.

Then there's the delusory no-load rip-off involving B-shares. Sure investors don't pay anything up presence for these, but you'll pay brawny resignation fees when you sell. Plus, they carry higher management fees.

Keep in head that common monetary fund companies have got market share in mind, not your best interest. If you believe that mightiness not be true, see the skyrocket growing rate for pure engineering funds. But expression at them now: they've crashed & burnt and no bargain & holder have come up out with a win.

Then there's the sad narrative of incompetency in the common monetary fund industry. There are hosts of inexperienced financial contrivers (commissioned salesmen) just waiting to sell you loading finances (A and Type B shares), or to urge an plus allotment attack with no existent program or strategy that volition function you in a bear market.

Of course, there's always the option of having a perfectly balanced portfolio designed. Such was the lawsuit when a prospective client phoned me in 1999 during the tallness of the engineering boom. He felt left out because everybody was making money in one of history's great bull markets, but his portfolio was so well balanced that he was neither making nor losing anything. He would have got got been better off in a money market account.

To me, the term balanced portfolio translates into this: I have no hint what I'm doing, where the major tendency is, what I should be purchasing or whether I should be in the market in the first place. I'm hedging so much that one investing travels up and another travels down.

Balance is one thing and safety is really quite another. And common finances make not automatically intend either safety or balance. The cardinal is always information-knowing how to get dependable information and what it intends once you have got it.

This is not for everyone. If you have got got money to put and you don't have the clip or the disposition to make the homework, then your smartest move is to happen person you trust. That would be person with a path record you can verify, and person who is not going to make money off your investing every clip you purchase or sell something.

People like this make exist, and the good intelligence is you only need to do your homework once. That's when you check them out. From then on, you can loosen up knowing you're just not likely to fall quarry to any of the rip-offs that are out there.

Expense Ratios Are Nonsense

One of those investing counselors says, “I volition take your money and do you a net income every year, but I have got a very brawny fee. For every
dollar Iodine do you I volition charge you a dollar”.

“How much will you do for me?”

He replies, “Because I put in the stock
market I am not certain what each twelvemonth will be, but
I have got got a existent clip path record that I have
doubled my clients money every three years. If
you begin with $10,000 you should have got $20,000
three old age from now.”

“In other words out of the $20,000 you make
with my money you get half? That looks like an
atrocious lot.”

Mr. Money Manager asks, “Does it do any
difference how much Iodine do if I can duplicate your
money?”

Here we are computing a 50% disbursal ratio. Who cares as long as he duplicates the money? When you
speak to brokers when purchasing common finances 1 of their
pet talking points is that a peculiar monetary fund has
a very low disbursal ratio. Who cares? The only
thing that is of import is the concluding return.

Does it do any difference if a monetary monetary fund have a
3.5% disbursal ratio or a 1% disbursal ratio if the
3% fund do more than money? Of course of study not.

This is portion of the Wall Street mystique
designed to mistake clients. Whatever mutual
monetary fund you take it should be one that have the
highest return. When it is no longer going up it
should be switched to a better acting fund
that is why you should only purchase no-load funds. Full service brokerage companies make not desire to
sell no-load funds.

Commissions are expenses, but brokers don’t
talking about that. Bash NOT wage commission. Brokers
will state you that loading (commission) finances are
better than no-load funds. Not true. Get up and
walk away from that broker. He is lying. Be
careful of certain types of common finances that
volition have got got respective social classes of the same monetary fund some
of which have hidden commissions. Don’t be
afraid to ask. To be absolutely certain phone call the
common monetary fund company. They all have got toll free
numbers.

There is only one manner to do sense out of
disbursals and disbursal ratios and that is the
public presentation of the monetary fund in relation to all other
funds. First eliminate commissions. All other
disbursals are apportioned over the year. One
other awful charge finances have got started adding is
salvation fees. Most are 2% and tally out for
long clip periods of time. These are added to
discourage selling; no other reason.

There is only one thing that distinguishes
a “good” monetary fund from any other. It is going up while
the investor have it. If it doesn’t you should
not have got it. When it begins down it should be
sold and this have nil to make with expense
ratios.

There is only one ground to have any equity
and it have nil to make with expenses. It must go
up.

Copyright 2006

Stock and Fund Dividends

When is a dividend not a dividend?

The latest thing “conservative”
brokers are preaching these days is to buy stocks
that pay dividends. Everyone likes dividends. I
know I do, but when Wall Street tells me something
I am automatically suspicious because they lie to
me every day. Is this a new scam? Let’s take a
look.

When you buy a bond or a CD at the
bank it pays interest and is a real dividend. You
might get a check every month, quarter or annually
or receive a credit to your account. The amount of
your principle (what you paid for it) remains the
same. Yes, that is a true dividend.

Companies make big splashes about
raising their dividend. It was 50 cents per share,
but we have raised it to $1.00. Big deal. Yes, you
will receive a check and at least you know the
company has cash available to pay you. That is an
indication the company is in good financial
condition, but there have been many of the big
names on the NYSE that have continued dividends
even when they have lost money. How can that be?

Currently Microsoft has announced a
dividend of $3.00 per share. The talking heads on
CNBC-TV tell us they are loaded with cash and want
to distribute it to their stockholders. Many
people buy the stock in anticipation of the
dividend as they think they will be getting an
extra $3.00 per share. They are in for a big
surprise.

The day that dividend is paid
Microsoft stock (symbol MSFT) will automatically
drop $3.00 per share. Today $27.00; tomorrow
$24.00. Folks, this is NOT a dividend. This is a
distribution of capital. You are being paid in
your own asset. The fool that believes the Wall
Street mumbo-jumbo will not have one extra penny
after the dividend than he did before. In fact he
will have less. Why?

The stockholder will now be allowed to
pay income tax on the “dividend” distribution. To
make that “dividend” seem even better the Bush
administration has reduced dividend taxes from
38.6% to 15%. Thanks, Mr. Bush. Thanks for
nothing. I can’t blame him for more Maul Street
smoke and mirrors. He has just made it cost less
to get back your own money.

Companies seldom pay large dividends
and they are paid quarterly. A $30 stock that pays
a 4% dividend ($1.20) on a quarterly basis shows a
decrease in the stock price that day of 30 cents
per share and is lost in the noise of trading. Few
notice that part of the price change is due to the
“dividend”.

When you own the stock of any company
the most important criteria is to find one that is
in a long term upward trend. Never buy a stock
that is showing a decline no matter how “good” the
company may be. Even sideways movements should be
avoided. Keep in mind you are buying the stock to
make money. Forget the dividends and all other
“reasons” and remember if it isn’t going up, don’t
buy it!

Rebalance And Diversify

The stock market has not been very kind to your investments lately. Your broker knows this so you may have received a call from him suggesting it is time to 'rebalance and diversify' your portfolio.

What does this really mean? He wants you to sell some of your holdings and buy something else. Probably sell stocks and buy bonds "because of market uncertainty". Sounds good, but it really means he needs some commission and you are "it". Yes, I agree it may be time to sell all your stocks and mutual funds and put everything in a money market account until this bear market is over. Your broker doesn't like money market funds because he doesn't make any commission. That may be why he never recommends them.

Rebalance doesn't have any true stock market meaning. It is one of those Wall Street words they use to confuse you. It sounds good, but that's all.

Diversify is another broker and financial planner favorite. Have part of your money in stocks, some in mutual funds, bonds and maybe 5% in a money market so you can take advantage of an initial public offering when a new one comes along. Yeah! Now let's try the true meaning of diversify: put some here, put some there and a little there (and all of this does generate commission, of course) because I really don't know what to do so we will spread it around and hope for the best.

No, I don't hate your broker or financial planner. It is just that I know they have not been trained to protect your capital or how to make money. How do I know that? I used to own a brokerage company and I know how these guys consistently lose their customers and their own money. Yes, they even do it to themselves. That's how dumb they are.

If you have lost money this year in your nice "safe" mutual fund you are not alone. Did you know that 99% of all stock mutual funds have a loss? Scary isn't it. Is there any thing you could have done to have protected your capital from a major loss? Yes there is.

For example, in 1998 you could have bought Janus 20 mutual fund for about $40/share. You and several hundred thousand others did. All of you watched as it went up to $94/share. Wonderful! Uh oh, it is now selling for $35. If you had been told by your broker (and you weren't) that it is a good policy to protect your profits with a mental stop-loss order of about 10% you could have sold out at about $80/share, but you are in for the long haul and you are a conservative investor so you won't sell.

The term conservative investor is an oxymoron. There is no such thing when you have your money on the line. You are a speculator. It happens to be that you are a long-term speculator. And they get just as burned as the day traders. It just takes longer.

Don't fall for the nonsense of rebalancing and diversifying. When one of your holdings starts down more than 10% just sell out. You want to diversify and rebalance into cash until this bear market is over.

Peer Groups

Whenever I see common monetary monetary fund comparisons in the trade publications and in the financial subdivision of the newspaper they almost always advert a specific fund and state you how good it is in relation to its equal group. A equal grouping is a specialised sector of common finances that all put in about the same type of pillory or countries of the human race or size of companies or some such as categorization.

Does this aid you do money?

No.

Why?

You have got respective dogs. A minature poodle, a regular poodle dog dog dog and a very large poodle. On the outside they look very similar, but in public presentation they can be very different. In a race with a greyhound they will all lose. In a trailing competition with a beagle they will not be able to happen the possum. In a competition with a retriever they will not get the bird as quickly. However the large poodle dog is bigger stronger and can make more than than its counterparts. So what? You have got the incorrect domestic dog for the job.

When you travel hunting you don't desire a poodle dog you desire a pointer, compositor or beagle depending upon the prey. When you put your hard-earned money in a common monetary fund you desire the best performing artist for the type of Hunt in which you are engaged and that Hunt is for upper limit grasp of your investment. Your quarry may change word form (from a duck to a possum) and as the quarry changes so should the animate being (fund) you utilize (invest) also change.

If you had stayed invested in the best engineering monetary monetary fund you could happen a twelvemonth ago, the best one in the full equal group, I can vouch you have got lost money. The sector have lost more than than 75% of it value. It do no difference if you have got the best domestic dog of that breed. If it can't make the occupation you must change dogs. (Pun intended.)

The of import thing to retrieve when choosing a common monetary fund is to happen one that is in a sector that is strong NOW, not a twelvemonth or 3 old age ago. When you travel back for 3 old age or 5 old age you will happen that there have been a clip period of time when that sector had or have a very large diminution in value. When ANY monetary monetary fund starts down more than than 10% to 20% (you decide) it is clip to sell it for another fund that is still increasing in value.

When we are in a bear market, as we are now, you may not be to turn up one that is going up. Bash not listen to any broker who states that a grouping cannot travel any lower. You must wait until you see it increasing in value every hebdomad for at least 2 calendar months or more than before committing any funds.

You only desire to be invested in the best no-load fund in the strongest equal grouping at all times.

How Much Information Do You Need?

You have got decided to purchase some stock or common funds, but wonderment which one to buy. You need more than information so you name your broker for advice. A so-called “full service” broker will bury you with all sorts of reports, analysis sheets and other pretty pieces of paper, but will probably seek to sell you something that brands him the most commission.

Let’s see. What makes Wall Street believe you should know? Of course, you will desire a company that is currently advantageous or “hot” – like WorldCom used to be. Then you need to look at their financial statement that have been audited by a large accounting firm. – like Chester A. Arthur Andersen. You really should check to see if they have got got any large outstanding financial duties that have small stars next to them in the Annual Report – like under funded pension plans.

Of course of study you will desire to get their financial statement to check their P/E ratio. That’s Price/ Earnings or how many old age of earnings it will take to do back the terms of the stock today. The lower that number the better. For many old age the average have been about 14. If it is above 20 or 30, well ??? We won’t factor in the rate of rising prices that volition thin the purchasing powerfulness twelvemonth after year. And there are tons of other numbers like this Wall Street states you should be studying.

Maybe it is easier to purchase a common fund. You can travel to Morningstar for every spot of information about a monetary fund you can believe of. They will demo the dislocation of the funds’ portfolio, but that tin easily be 6 calendar months old. They make have got those star ratings. From 1 to 5 stars, but I can’t recollection seeing any one star finances and hardly any 2 stars. Why? Well, I believe they don’t desire to pique the monetary fund manager even though he is not making money for his clients.

In fact, they love to give 5 stars to finances that have got had losing old age 1 after another. Unfortunately some of their information is out of date. They make listing all the pillory the monetary monetary fund owns, but the fund may have got sold them so you can’t state for certain what they are investing in.

Brokers desire to direct you reports, graphs, company updates, interim reports and Iodine don’t cognize what all, but halt and inquire yourself, “If I can get this so can everybody else so what good is it?” Now you’ve got it. None. All that information will not state you that after you purchase it it will travel up – and that’s all you desire to know.

Basically there are two things you desire to know. 1. Are it going up? 2. If it travels down where make I sell it to protect my capital? That’s all the information you need.

Hold 'Em and Fold 'Em

When most analysts, financial planners, monetary fund specializers and investors seek to make up one's mind whether to purchase a peculiar stock they immediately travel to the financial statements to determine the growing potentiality of the company. Numbers and more than numbers. Then management analysis and industry speculation. Unless you are an experienced financial analyst (and there are not very many good ones) the numbers in the reported statements can be very misleading - just as the company Accountant desires them to be.

Let's not see fraud as there have been plentifulness of that both here and abroad. They are all honorable (I hope). Most corporate executive directors desire to stay within the law so they report statements that are true to the FASB - Financial Accounting Standards Board.

As the old expression goes, "Numbers don't lie, but prevaricators can figure". If you are good with accounting techniques you can do a bankrupt company expression good - on paper. On CNBC-TV many folks watch the CEOs telling a great narrative about their company. You sure don't anticipate them to state you the whole truth and nil but the truth, make you? That is why I always hit the tongueless button. And many modern times when you look to see what the insiders are doing in this fantastic (?) company this executive director and his brothers are selling out.

Then there is Morningstar that gives us those twinkling celestial bodies. Nothing like a 5-star common monetary fund - that have lost money for the past 4 years. So much of their information is old and if they cognize it you can be certain that have already been factored into the current price. How about those equal groups? Suppose this peculiar equal grouping is ranked 99th out of 100 or even 15th or lower. One question: why make you still ain it?

Why are you putting your money in the stock market at all? The thought was to do more than money. Right? Yet the bulk of small investors will throw a stock or common monetary fund while it travels down and down. Wouldn't it do more than sense to sell out once it loses a certain percentage from its highest terms after you purchase it? If you bought it at $20 and it is now $40 is it now clip to sell? I don't cognize so why not allow the terms action state you. If you only wanted to put on the line 10% when you bought your stop-loss would have got been $27. It now should still be 10%, sol you will be out at $36 if it begins down. Suppose you tracked that halt all the manner up to $80? This is why I have got always preached that Michigan do you money.

The best (?) analysts cognize very small more than than you. They just have got a bigger vocabulary about the market. You and your dart board can make as well. All any truly smart investor needs is common sense and the ability NOT to fall in love with any position. Know when to throw 'em and cognize when to fold up 'em.

Gurgle Gurgle

Caught in a whirlpool and being sucked under. No life vest or other device to save you. Gurgle, gurgle. Down you go.

This last couple of weeks in the stock market kinda feels like that whirlpool when you look at your financial statements. Of course, your broker will tell you this is a "normal correction and it gives you a chance to buy more so you can dollar cost average. He could be right about this being a correction, but dollar cost averaging down is 100% wrong. The proper way to average into a financial holding is buy more as it goes up in value, never down.

There is a basic law of physics that applies equally well to many things including the stock market. An object in motion will remain in motion in the same direction until interrupted by another force.

Keeping that in mind before you buy any stock or mutual fund is very important. Just because something looks cheap does not mean it will increase in value because you bought it. Usually there is a compelling story to go with it, but that doesn't mean anything.

How can you know if what you are going to purchase has a chance of going up so you can profit from it? Let's go back to the basic law of physics. Is it going up now? Many professional traders will want to see an equity that has been moving steadily higher for at least 3 or 4 months and rising at the rate of at least 3% per month. They also don't like sky rockets that are going almost vertically as these are too dangerous and many times will fall as fast as they climbed.

You must also protect your capital at all times. Anyone who purchases stock or mutual funds without an exit strategy is doomed to lose his money over time. How? Very simple. You may very easily put a stop-loss order in place that will not allow you to lose more than 10% of your investment. Brokers discourage these as they have to watch them - and you should too. Your stops orders should be placed immediately after your purchase and before you hang up the phone. At the end of each month if your equity has gone up you should move up your open stop loss to lock in any profit that is accumulating.

If you will go back to study the price action of stocks and funds you will see that once an equity starts in a certain direction - either up or down - that course will be maintained for many months and sometimes years.

People hate to lose money, but one of the important rules is never to lose a lot of money. Small losses will not kill you, but big losses can make that gurgle, gurgle sound.

Roth IRA secrets - 7 reasons why a Roth IRA trumps a Traditional IRA

TAX-FREE COMPOUNDING

Contributions inside a Roth IRA can turn and chemical compound each twelvemonth in your investing portfolio on a tax-free basis. This cannot be said for investings within a 401k plan or traditional IRA, which only experience tax-deferred growth compounding. At some point in clip the investings held within 401k and IRA plans will have got to pay the tax man.

TAX-FREE EARNINGS

Accumulated wealthiness inside a Philip Roth individual retirement account is 100% tax-free and will not be taxed at the clip of withdrawal. The powerfulness of this benefit is truly realized when there are important capital additions within the portfolio, or in investings with longer clip apparent horizons (which allows greater clip for combination growing and magnification of your portfolio size).

TRUE CAPITAL GAINS

The Philip Roth individual retirement account is the lone investing program that truly allows you capture 100% of capital additions on a tax-free basis. If these same capital additions where made inside a 401k or traditional individual retirement account plan, at the clip of backdown they are CONVERTED to ordinary income at are taxed as earnings in that year. Traditional individual retirement account bes after and 401K programs have got got the consequence of converting your portfolio capital additions into taxable income at the clip of withdrawal.

LONGER COMPOUNDING

Unlike traditional individual retirement account plans, Philip Roth IRAs have no required compulsory backdown days of the month based on your age, and therefore allow you a longer clip apparent horizon for portfolio combination and capital additions growth. Inside traditional individual retirement account bes after you are required to made compulsory minimum backdowns (that volition be taxable) after 70 old age of age.

ESTATE TAX REDUCTION

Your inheritors will not be required to pay tax on the benefits received from your Philip Roth individual retirement account plan. In contrast, taxed would be need to be paid by your inheritors to have the benefits of a traditional individual retirement account plan.

EARLY WITHDRAWALS

In the event you need to access finances in the event of an emergency, the Philip Roth individual retirement account bes after dainty backdowns differently that a traditional IRA. You don't pay tax on backdowns from a Philip Roth individual retirement account until the amount transcends your existent part amounts paid in. This is not true of an IRA, and you will also confront an further early backdown punishment in many cases.

IS A Philip Roth individual retirement account RIGHT FOR YOU?

In this article we have got covered 7 of the powerful investing benefits you can harvest holding a Roth individual retirement account plan. Only your professional investing advisor can counsel if a Philip Roth individual retirement account is right for your circumstances. Take the clip to learn more than about the powerfulness of a Philip Roth individual retirement account program and contact your advisor today. It may be the best investing move you ever make.

How to Finance a Business For Your Son or Daughter

First, how not to travel about it:

A cash loan is not the manner to go.

Neither is signing as surety for a bank loan

A gift of the amount required? Again, not the best approach

But these are the three most common but incorrect ways by which parents seek to assist
their children get started in business.

So what is the best way?

For United States occupants and citizens, Internal Gross Code 1244 supplies the answer.

If you give your girl $50,000 state to begin a new venture, and the business
travels abdomen up with the loss of the $50,000, there is no manner that the Internal Revenue Service will
allow you to claim this loss as a deduction.

Or say you loan her business $50,000. Again, if things make not work out, the
business will maintain paying you the interest until it runs out of cash, leaving
you with a worthless note.

Tax-wise, you have got a capital loss, which is deductible at the pitiful rate of
lone $3,000 per twelvemonth against your ordinary income. Or you can utilize the loss to
offset capital gains.

The same sad tax fate, somes capital loss, consequences if you subscribe as surety and must
pay Sue's $50,000 loan from the bank.

Tax-wise, a gift to your girl is even worse. The $50,000 is hers. As a
result, the tax loss is hers, not yours. Under the circumstances, opportunities are
that Sue have small or no income, and the loss is almost totally wasted.

Note too that a loan or a bank surety is often questioned by the IRS. Why? The
Internal Revenue Service postulates that the $50,000 was a gift because you never intended to seek to
accumulate in the first place. You had no sensible outlook of being repaid is
the manner the Internal Revenue Service sets it.

But now let’s look at Internal Revenue Service Section 1244 – the right way.

Section 1244 allows you to claim an contiguous tax deduction for a loss on stock in a
small business corporation. Your loss is fully deductible against ordinary
income, rather than a limited capital loss.

And you can claim a upper limit Section 1244 loss of $100,000 (joint return) in a
single twelvemonth or $50,000 on a single return

The upper limit amount you can claim as a Section 1244 loss in a single twelvemonth is
$100,000 on a joint tax tax tax tax return or $50,000 on a single return.

So instead of a gift, a loan or a bank surety, you and your girl set up a
corporation for her new business. You get $50,000 of stock in the corporation
that measure ups for Section 1244 treatment. Your daughter, who runs the business,
pulls a salary

If the business succeeds, your girl can gradually purchase back your stock (or,
better yet, you can gift it to her) over time. Any net income you do on the
redemption will be a low-taxed capital gain.

If the business fails, your loss will be fully deductible under Section 1244 (up
to the $100,000/$50,000 limits).

Here's another nice thing about Section 1244: The
tax benefits are
easy to get. The good tax treatment is automatic and no written program is
necessary.

A concluding point: Section 1244 is the manner to travel not only for your kids, but also
for your partner who might desire to begin a new business. And the same strategy
uses if you desire to venture into something new while keeping your present
business.

Emotions: A Trader's Worst Enemy; Get Rid of Fear and Greed - You'll be Glad You Did

You hear it over and over and over in books, forums, and chatrooms. Fear and greed, fearfulness and greed, fearfulness and greed. Emotions are a trader’s worst enemy. What are we supposed to make about it? We are human after all. Person beingnesses have got emotions. We can’t just throw a electric switch and suddenly act like “Data” on Star Trek the Adjacent Generation.

So what’s the reply for the aspirant trader?

It all furuncles down to 2 chief components:

1. Having a plan

2. Having an appropriate trading style

You hear the first point often. Objectionable small phrases like “Plan your
trade, Trade your plan” are thrown around like it was really just that simple. But without the second part, the first portion is useless. What good is a program if
you don’t cognize what type of program is appropriate?

For example, you could be after your commute to work expecting to do the 30
mile trip in 20 minutes, but if you’re on ft that program isn’t going to work
very well is it? The program was simply not appropriate for you in that situation.

There are an limitless number of possible trading methods and styles, from
chart reading to cardinal analysis, rhythms to Fibonacci retracements,
intra-day, Dogs of the DOW, Options, Futures, FOREX, Pork Bellies, Arbitrage –
it can do you experience like your caput will explode! But what you merchandise makes not
matter nearly as much as how, or perhaps why you trade.

Why make you trade?

Are you the kind who wishes to play picture games, loves fast action, and have no
problem being glued to a silver screen all day? Then maybe intra-day trading 1 and 5
minute charts of high volatility equity options is for you.

Rather check your trades maybe every few days, or maybe once a week? Then
perhaps swing trading currency braces is more than your style.

Prefer sleeping easy at all times, never distressing in the least about your
trades because you knew up front that they would profit? Then my friend,
arbitrage trading is calling your name.

Every style have its advantages and disadvantages, its hazards and rewards, but
most of import is that the style must fit the trader. If you leap into trading
believing that just because person else can make it this way, then so can you –
you may be in for a very painful surprise.

Never merchandise person else’s plan. Never merchandise person else’s style. You
absolutely must cognize your ain disposition well adequate to determine what you will
trade, and exactly how you will merchandise it. Your money management rules, your
tolerance for losses, i.e. costs, , your willingness to change the trade if your
market sentiment is proven incorrect – these are the true secrets to trading that
separate the novitiate from the veteran. With these in place, emotions can be
reduced if not eliminated.

After all, which would set you most at ease? Drive through an unfamiliar
city alone with no guidance, drive with a map, or driving with a full colour
street-level-detail general practitioners pilotage system?

I’ll take the GPS, give thanks you.

So before you put your first, or next, trade, see the following:

a. Make you understand what you are trading and why?

b. Make you cognize what you will make given any of the possible outcomes?

c. Are you ready and willing to acknowledge you were incorrect about the trade, and if so what will you make about it and when?

d. Are you comfy with the idea of losing the money you are putting into the trade, and will your trading account last to merchandise another twenty-four hours if you do?

These are all portion of what you need to have got in your plan. I urge you to have got
considered them thoroughly before risking the slightest amount of money in a
existent trade.

Emotions – “You can’t merchandise with ‘em, and you must trade without ‘em.”