Financial Advisory Briefs

May, 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. Growing Older And Managed Care

2. Using A 401(K) For A Loan

3. Shopping Around For Low Credit Card Interest

4. Just The Facts Please: Life Insurance
5. Beta Testing An Investment Portfolio
6. Another Shock To The System
7. Good News For Buyers

8. Slow And Steady Wins The Race

9. Not A Surprise, Planning Ahead Can Save Thousands

 

 

 

 

GROWING OLDER AND MANAGED CARE

 

It used to be that when a person qualified for Medicare they could forget about HMOs and PPOs that restricted a patient’s access to a doctor.  Now the government is beginning to integrate managed care into their Medicare plans in order to control spiraling health costs.  It is offered as a cheaper way to fill the gaps in government coverage.  Before joining any managed care plan, it is necessary to compare coverages, costs and procedures because once a person joins, if they are unhappy their only option is to drop out of the plan.

 

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

 

Briefs: 05/08 – 1

 

 

 

USING A 401(K) FOR A LOAN

 

When borrowing money, a person has several options.  Often, there is a temptation to take money out of a 401(k) to finance a vacation, car or house.  However, it is best to adhere to a strict hands-off policy when it comes to retirement money.  Money taken out of a 401(k) only earns the lending rate. It is unlikely that what the borrower receives on the loan will make up for the return lost by not having the money invested as it normally would be.  There is also the chance of a job change, which will result in the IRS asking for a quick repayment on the loan.  The safest bet is usually a bank loan because a worse case scenario involves repossession, not losing a house or retirement money.

 

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

 

Briefs: 05/08 – 2

 

 

 

SHOPPING AROUND FOR LOW CREDIT CARD INTEREST

 

Lower interest rates are good news for those people with credit card debt.  Now it is possible in some cases to lower interest rates by transferring a balance to a card with a lower rate.  Many credit cards have variable-rates, which means that it depends on the prime rate, but fixed-rate customers are not as fortunate.  The interest rate they are charged is less responsive to the market and the average charge is just over 14%.  Before transferring a balance, however, it is important to check how long the initial rate will last, how much it can increase in the future, and if there is a large fee for transferring a balance.

 

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

 

Briefs: 05/08 – 3

 

 

 

JUST THE FACTS PLEASE: LIFE INSURANCE

 

Contrary to what may be expected, death isn’t what we fear most.  It’s barely a respectable fourth, after public speaking, divorce and torture.  Contemplating our ultimate demise is not a particularly pleasant topic, although the complex process of life insurance must be completed.  There are many different types of policies, therefore it can be hard to choose which one is appropriate for each circumstance.  The ultimate decision usually depends on how much coverage is needed, the associated cost, whether the coverage period will be long or short term, what the insured’s  income tax bracket is and what rate of return to expect on other investments with a comparable level of risk.

 

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

 

Briefs: 05/08 – 4

 

 

 

BETA TESTING AN INVESTMENT PORTFOLIO

 

If investors follow the stock market, sooner or later, they will stumble across modern portfolio theory (MPT).  Developed several decades ago, MPT transformed stock picking from an art into something similar to a science.  One virtue of MPT is that it quantifies how securities behave in relation to each other and to the overall market.  Why is beta important?  And why does volatility matter?  The matter has to do with risk and how much one can tolerate.

 

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

 

Briefs: 05/08 – 5

 

 

 

ANOTHER SHOCK TO THE SYSTEM

 

For consumers already struggling from a declining economy, an over-priced stock market, and falling interest rates on the bank deposits and money markets, sharp health insurance hikes may have seemed almost anticlimactic.  Yet the increases are so steep that almost everyone feels the pain.  Even worse, for employers who pick up that tab for most of the nation’s health benefits, it could be the push that shoves more of them toward radical solutions.  To make health costs more predictable, many large companies are considering a switch to “defined-contribution” plans, such as HSAs and HRAs.  There are benefits and disadvantages, so it is important to be as educated as possible.

 

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

 

Briefs: 05/08 – 6

 

 

 

GOOD NEWS FOR BUYERS

 

The housing bubble market is continually in the news.  Homeowners are trying to sell, and home prices in many parts of the country are falling.  This creates quite an opportunity for buyers.  Of course, in a recession or at least during an economic slowdown, purchasing a new home could be a bit dicey.  Several factors should be considered before deciding how much to spend on a home.  Aside from the price, the age of the home, the cost of fix-up and/or improvements, the size of the down payment, interest rates, the length of the mortgage, and the cost of private mortgage insurance ultimately affects one’s purchasing decision.

 

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

 

Briefs: 05/08 – 7

 

 

 

SLOW AND STEADY WINS THE RACE

 

During a bear market, it is wise to invest assertively rather than aggressively.  Although a more aggressive portfolio may provide average annual return relatively equal to that of a portfolio with slow, steady earnings over the long run, the portfolio with less losses will provide a more consistent performance as well as peace of mind.  A truly diversified portfolio is the key to lowering volatility, cutting losses and steadying growth.  Choosing a variety of assets in which to broaden your investments can be the first step to smoothing the path to every investor’s primary goal: making money consistently over the long run.

 

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

 

Briefs: 05/08 – 8

 

 

 

NOT A SURPRISE, PLANNING AHEAD CAN SAVE THOUSANDS

 

One of the largest breaks that taxpayers get is one that is often overlooked.  The federal estate tax exemption of $2.0 million can be wasted if assets are not titled correctly.  Also, if assets exceed the $2.0 million amount set forth, they can be heavily taxed.  These problems can be bypassed through the use of trusts, joint titling and a variety of other avenues.  However, careful planning is needed to optimize the results.

 

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

 

Briefs: 05/08 – 9