Financial Advisory Briefs

April, 2008

Presented by Legend Financial Advisors, Inc.®

 

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“BRIEFS” identifies a number of current financial planning and investment market issues.  For more information, you are invited to contact our Director of Marketing Christopher J. Kail at (412) 635-9210, Extension 230, to schedule a conference call with the advisor listed at the bottom of each brief.  You may also reach us via E-mail at legend@legend-financial.com.  For more information on Legend Financial Advisors, Inc.’s ® (Legend’s) award-winning financial advisory team, please view their Professional Biographies by going to http://www.legend-financial.com/f_biographies.htm.

                                                                                             

 

 

TABLE OF CONTENTS

 

1. Economic Indicators That Matter

2. Unemployment And 401(K)s

3. Debit And Credit Cards For Kids

4. Umbrella Liability Insurance Coverage
5. Collecting On Insurance Claims
6. Knowing The Difference Between Market Orders And Limit Orders Can Significantly Enhance The Result
7. Preferred But Not By Everyone

8. Home Sweet Second Home

9. CD’s And Their Hidden Costs

 

 

 

 

ECONOMIC INDICATORS THAT MATTER

 

Consumers’ attitudes are important when attempting to gauge the direction of the stock market and the economy.  There are also many other economic indicators that economists keep an eye on.  They include:

1)       The Consumer Confidence Index tracks spending trends in relation to the overall economy.

2)       The Consumer Price Index measures inflation by examining the prices for goods and services. 

3)       The National Association of Purchasing Management (NAPM) Index asks managers of companies about their business in order to judge economic trends.

4)       The Employment Situation Report tracks the unemployment rates, the number of new jobs and changes in wages or hours.

5)       Leading Economic Indicators are a compilation of indexes that evaluate everything from interest rates to manufacturing orders to housing starts.

Monitoring these indicators can offer excellent insight as to where the market is going.

 

For more information, contact Legend’s Lou Stanasolovich, CFP™ at (412) 635-9210, ext. 221.

 

Briefs: 04/08 - 1

 

 

UNEMPLOYMENT AND 401(K)S

 

Many people who have lost or changed jobs or were forced into early retirement question what to do with their 401(k)s.  They could take the money out immediately, but unless the cash is needed, the tax penalty will not likely be worth it.  Some other options include:

·         Leaving the assets in the former employer’s plan if the investment options are good.  However, there may be limited control over the assets, such as limitations on the ability to switch investments. 

·         Taking a job that offers a 401(k) and possibly being able to deposit assets from previous employers whether the portfolio options, rules and fees are desirable or not.

·         Establishing an IRA rollover with a custodian and placing assets from any and all previous employers into it.  An IRA rollover can include potential benefits such as lower fees, a possible conversion to a Roth IRA, as well as well as assistance from a financial advisor.

 

For more information, contact Legend’s Diane Pearson, CFP™, PPC™, CDFA™ at (412) 635-9210, ext. 120.

 

Briefs: 04/08 - 2

 

 

DEBIT AND CREDIT CARDS FOR KIDS

 

Until recently, parents who wanted their children to have spending money had few options; they could either give them cash or their own credit card.  However, parents had little control over how much they spent and what they spent it on.  One option is a card with a specific amount of cash for spending which debits the account when the child makes a purchase.  Another company offers a credit card where the purchases can be viewed online and restricted by the parent.  These cards allow for more parent control, but they usually come with annual fees and many various other charges.

 

For more information, contact Legend’s Jim Holtzman, CFP™, CPA at (412) 635-9210, ext. 119.

 

Briefs: 04/08 – 3

 

 

UMBRELLA LIABILITY INSURANCE COVERAGE

 

Umbrella insurance coverage is always a good idea for a homeowner or even a renter for that matter as well as anyone who owns an automobile.  It is usually sold in million dollar increments at a reasonable annual premium of approximately $150.00 to $175.00 annually for the first $1,000,000 of coverage and then decreases per million of coverage thereafter.  Having a minimum of $2,000,000 or at least equal to one’s net worth, whichever is greater, provides in most cases an adequate safety net.  Coverage can be purchased from one’s property and casualty insurer.  It is necessary to ask important questions such as, where does underlying homeowner’s and automobile coverage end?  Where does umbrella liability coverage begin?  Are there any restrictions or ambiguities that would restrict coverage?  Some insurance companies may require a person to buy their maximum homeowners and automobile coverage plans before allowing the purchase of umbrella coverage.

 

For more information, contact Legend’s Diane Pearson, CFP™, PPC™, CDFA™ at (412) 635-9210, ext. 120.

 

Briefs: 04/08 - 4

 

 

COLLECTING ON INSURANCE CLAIMS

 

Receiving the full insurance coverage amount needed to repair damage is not always an easy task.  Adjusters are professionals. They unfortunately work for the insurance company and can be tough minded about paying out claims. If a substantial insured loss has occurred, it may pay to hire an independent adjuster in order to level the playing field with the insurance company.  However, most adjusters charge a percentage of the total amount collected or take a cut of the difference between the original offer and the final settlement.  With the complexity of most insurance company’s policies, it may be a big help to have a professional evaluate the situation.

 

For more information, contact Legend’s Jim Holtzman, CFP™, CPA at (412) 635-9210, ext. 119.

 

Briefs: 04/08 – 5

 

 

KNOWING THE DIFFERENCE BETWEEN MARKET ORDERS AND LIMIT ORDERS CAN SIGNIFICANTLY ENHANCE THE RESULTS

 

Many people, even those with sizable equity portfolios, do not understand the mechanics of the stock market or how stocks are actually traded.  When a person decides to sell their stock, they can do one of two things; they can place a market order, which means that stock will be sold at the best current market price, or a limit order, which specifies the lowest price that the seller is willing to accept.  By placing a market order, the stock will be sold immediately, but when a limit order is placed the stock cannot be sold until it reaches the specified price.  Knowing the options can sometimes save tens of thousands of dollars.

 

For more information, contact Legend’s Diane Pearson, CFP™, PPC™, CDFA™ at (412) 635-9210, ext. 120.

 

Briefs: 04/08 - 6

 

 

PREFERRED BUT NOT BY EVERYONE

 

In many of today’s corporate mergers and acquisitions, it is stock rather than cash that changes hands.  Although common stock is usually involved, it is uncommon for preferred stock to change hands as well.  This more exotic form of security has several important differences, and is more like bonds than stocks.  It is important to understand the differences between these two types of options as well as the benefits of preferred stock.  In the end, preferred stock is not for every investor.

 

For more information, contact Legend’s Lou Stanasolovich, CFP™ at (412) 635-9210, ext. 221.

 

Briefs: 04/08 - 7

 

 

HOME SWEET SECOND HOME

 

Forget the taxman’s hard-hearted reputation; sometimes he really does want individuals to have that vacation home.  It seems that way at least with all the tax breaks that make a vacation home possible without being rich and famous.  Of course, there are a few rules that must be followed, and some small mistakes could cost the taxpayer dearly during tax time.

 

For more information, contact Legend’s Jim Holtzman, CFP™, CPA at (412) 635-9210, ext. 119.

 

Briefs: 04/08 – 8

 

 

CD’S AND THEIR HIDDEN COSTS

 

Few things are safer than traditional CDs, also known as certificates of deposit.  Usually issued by a bank, they are just one step from a passbook savings account.  Unfortunately, recent interest rates and a shaky stock market have sparked fresh interest in this dull, old saving vehicle.  New versions, while offering tempting inexpensive rates, have special provisions that could severely cost investors.

 

For more information, contact Legend’s Diane Pearson, CFP™, PPC™, CDFA™ at (412) 635-9210, ext. 120.

 

Briefs: 04/08 – 9