Tax Gain Harvesting

You may not have heard of tax gain harvesting but you probably are already be familiar with tax loss harvesting. The process of tax loss harvesting is to sell a stock that is currently worth less than your cost basis in order to claim the loss on your taxes. When you do this you have to watch out for the wash sale rule which states that you can’t replace the stock you sold with the same or a substantially similar investment in the next 30 days or your loss will be disallowed.

The idea of tax gain harvesting is to sell a stock that is currently worth more than your cost basis in order to claim the gain on your current year’s taxes. The reason you would do this is because you expect your tax rate for capital gains to be higher in the future. The current 0% and 15% rates on capital gains are scheduled to go up to 10% and 20% next year. This may change due to the fiscal cliff negotiations, but it seems likely that there will be some sort of increase in the near future. Also, there is a 3.8% Medicare tax on unearned income that starts in 2013 for high income filers, which is defined as those with an AGI over $200,000 or $250,000 for married filing jointly. This means that even if the current capital gain rates hold, higher income filers will have an extra 3.8% tax on capital gains. It makes sense for higher income filers to do their tax gain harvesting this year.

One thing that confuses many people in regard to tax gain harvesting is the wash sale rule. The wash sale rule is only for capital losses. If you are doing tax gain harvesting you do not need to worry about the wash sale rule. You could sell your stocks and buy them back the next day. You would have a capital gain to claim and you would have a new basis.

If you have capital gains in your portfolio, now is a good time to look at whether tax gain harvesting is a good move for you. If you wait until January, you might be stuck with higher capital gain rates.

Super Storm Sandy Investing Idea

Super Storm Sandy has caused damages that are estimated to total between $50 to $100 billion.  Even if those estimates are high it is clear that a humongous amount of money will be invested in the areas damaged by Sandy.  Many investors see this as an opportunity and are looking for ways to make money from the Super Storm Sandy rebuilding process.  Here is one Super Storm Sandy investing idea that is easy to implement.

If you go to you can invest in their “rebuilding after Sandy” motif. The Sandy motif is a collection of 14 stocks in sectors like building supplies and generators, which may all see a lift due to the post-Sandy recovery. If you don’t like the stocks they have chosen for their Super Storm Sandy investing you can customize the rebuilding after Sandy motif. You can customize it by adding and removing stocks or changing stock weights. This allows you to basically create your own Super Storm Sandy ETF.

Super Storm Sandy Investing

One of the best thing about using a motif is the low cost. If you do your Super Storm Sandy investing by buying the rebuilding after Sandy motif your commission is only $9.95. If there is an investing idea you like this allows you to save a lot of money compared to buying all the stocks individually.

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How the Federal Stimulus Will Affect Investors

The federal government has always respected the division between private business policy, and fiscal policy. However, in late 2008, the government felt that they could lighten the debt load, and give some federal stimulus to investors who had fallen into debt. This had the effect of lowering the debt obligations of most borrowers, but little is understood about the effects of this program. Although the government thought that they would provide this bail-out, and people would restructure their private lending habits, to avoid a similar collapse, the bail-out still continues today, and many investors have not as yet changed their strategy, to avoid relying on this bail-out money.

The federal stimulus program was structured with certain goals in mind. The initial stimulus package of 500 billion dollars, would lower mortgage rates, and force banks to lend out more money, brought about by the excess liquidity. Consumers and businesses would benefit greatly from these lowered lending rates, and the strict lending policies of banks would be made somewhat lax. The optimism generated by these predictions would also uplift the economy and create investor confidence.

The federal stimulus, as mentioned above, would lower mortgage interest rates, and there would be a surge in the number of homes bought. Any investor in the real estate industry would be looking at making increased profits from the sale of more homes. The inflation of the confidence in the housing industry would dispel fears, causing more people to invest in real estate.

However, financial consultants are advising investors not to look at the industries that are nearly collapsing from financial liabilities. Although the stimulus package is aimed at these industries, they may not respond as expected. They are advising investors to think about companies that are already capitalized, prior to the federal stimulus being released. The response of the crippled companies, to the stimulus package, may not be as quick as anticipated, meaning that investors would have to wait a long while, before getting any returns on their investments.

The federal stimulus package requires you to research investment opportunities, and see which ones will prove more profitable to you, as a result of the said stimulus.

Dealing with Market Volatility

The pace at which the value of financial securities has fluctuated is stunning. The market trends in the past have shattered the investors’ confidence and the recent trends in no way promise a secure future. Evaluating investment options for what remains with investors has become a cumbersome task. Disinvestment in the money market has left investors with limited options to make returns on their capital−in−hand. Prudent investors have a hard time coping with the market volatility.

Here are some investment techniques and options that may suit the current circumstance in the  market.

Diversify Investments
Instead of putting all eggs in one basket, evaluate viable options, available. This would also mean keeping the capital secure in exchange for low profit margins. This also requires an effort to remain updated with prevailing economical situation and market trends.

The Long Term Approach
The recent market trend does not reflect an overnight hike in the price of shares and stocks; capitalizing the upward moving graph is no longer an option. Evaluating options that may defer immediate returns but may pay off in the long term, and considering investments in Initial Public Offers by companies with a sustainable position, may prove to be a wise decision.

Securities Backed by the Government
Investments in fixed return investment schemes offered by the government is also an option. The capital is always safe for sure, the returns are guaranteed. It is a secure mode of investment.

Guaranteed Financial Instruments
Private companies offer short and long term investment plans paying a low but a guaranteed return. It is a low risk, low return option. It is availed by those who wish to keep their capital secure.

The Right Time to Buy the Right Stock
Financial consultants and traders are discouraging investment, the immediate future is bleak no doubt, but a wisely speculated move could take a favorable turn. An overall study of the market trends and industry will help shed light on the sectors that would flourish in the near future. Investing in companies that have a reasonable opportunity to grow a few years down the line may become profitable.

Saving and Retirement Plan Offered by Life Insurance Companies
Signing up for a secure retirement plan offered by an insurance company may prove viable; the insurance company will allow the investor to pay the premium all at once for a certain number of years. Not only is the capital safe and the returns fixed but a few features (riders) in the policy provide a cover for the investors health and well being.

Know the available options and wisely diversify investment in order to gain small but stable returns and sustain capital. The existing market trends may not permit returns on investment neither security for the capital invested. Coping up with the market volatility would perhaps mean investing in prize bonds, guaranteed instruments and investment certificates.

Premium Bonds – Combining Bond Investing with a Lottery

An interesting investment that I first heard about just a couple of months ago is buying a Premium Bond.  You can buy Premium Bonds in the United Kingdom. Instead of paying interest, Premium Bonds are entered into monthly prize draws.  You receive a unique Bond number for every £1 you invest. So if you invest £100 you get 100 unique Bond numbers and 100 chances to win every month. As well as the £1 million jackpot, there are over a million other prizes from £25 to £100,000 every month.  Prizes are exempt from UK Income Tax and Capital Gains Tax.  You can cash in your Premium Bond for the original price you bought them.

To me, Premium Bonds seem to be a combination of a bond and a lottery ticket. They are apparently very popular in the United Kingdom with a third of the population owning Premium Bonds. I wonder if these types of bonds would be popular in the U.S.  What do you think?


Investing in P2P Loans

is a form of lending that connects people who want to borrow money with people who want to lend money. Two of the biggest players in the P2P industry are Lending Club and Prosper Marketplace. The average returns from P2P loans are much better than you would get from a savings account or CD. Of course, the risk is also much greater. I would put P2P lending in the category of stocks as far as risk goes.

I have had pretty good luck with P2P lending. My portfolios at both Lending Club and Prosper returned over 10%. There was a bit of luck involved in this since both sites were riskier when I first started lending. They have strengthened their lending guidelines since then.

If you are going to invest in P2P loans my suggestion is to diversify as much as possible. You can invest as little as $25 in a loan. I only invest $25 per loan so I can diversify my investment across as many loans as possible. I also like to diversify across the grades of loans. I mostly invest in the higher grade loans, but invest a little in the lower grade loans as well to boost my overall return.

I don’t have any money in P2P right now, because I’m concentrating on building up my dividend stock portfolio. Once I have my stock portfolio complete I plan to invest in P2P loans again. Since they are risky and you can potentially lose all of your investment I will be keeping them to a small percentage of my portfolio.


Motif Investing $150 Bonus

A motif is a carefully researched and intelligently weighted portfolio of up to 30 stocks that reflect real-world trends and investment ideas. You’ll get great exposure to the idea, while spreading risk. And, when you buy multiple motifs, you also get diversification across ideas. You can customize a motif to your liking. Because you own each individual stock in the motif, you can add stocks, delete stocks or change their weightings. You’ll pay just one low commission of $9.95 to buy a motif and pay no management fees. Some of the many motifs available are biotech breakthroughs, home improvement, and pet passion. Search their catalog and you’ll probably find a motif to your liking.

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When to Sell a Stock

It would be nice to buy a stock and be able to hold it forever, but that is usually not the case.  There can be several reasons for selling a stock.  One of the most common reasons for selling a stock is that the stock has changed since you bought it and it is no longer desirable.  I will share a couple of examples of when I sold a stock to illustrate a couple of reasons for selling a stock.

If you follow the Money Pros Index Challenge, you might have noticed that one of the stocks in my portfolio is ERF, which is down 38% this year.   That is a pretty big drop, especially considering the stock market is up about 12% for the year.  The good thing is that I sold all of my stock in ERF in May, thus avoiding most of the decline.  One of the reasons I sold the stock was because I needed cash.  No explanation is necessary for that reason, you should know when you need cash.  The other reason I sold the stock is because it no longer satisfied my reasons for buying it.  I bought it because I thought it would be a relatively stable stock with a nice dividend payout.  It turns out that the stock is much more sensitive to natural gas prices than I thought.  I still think natural gas prices will rebound, but I wasn’t  going to hold onto the stock all the way down while waiting for prices to rebound.  It also appeared likely that the dividend would be cut.  I try to invest in stocks with rising dividends and sell stocks with declining dividends.  The company did end up cutting their dividend after I sold the stock and the price went down even more.  This ended up being a good sell.

A stock that I sold for a completely different reason is GSBC.  This is a bank stock that had its share price hit hard during the 2008 recession.  I thought that the stock price wasn’t a fair value of the company because the bank didn’t have nearly the exposure to failing mortgages that most banks did.  I bought the stock at around $9 and as bank stocks rebounded the price went up to $20.  At that point I felt that the company was no longer undervalued and sold half of my stock.  This allowed me to lock in a profit for the stock and continue to get a free ride on the remaining stock.  The stock price has since gone up to $30 so maybe this wasn’t a good sale.  I am okay with that decision though.

What are some of your reasons for selling a stock?

Investing in Rental Real Estate

Investing in rental real estate is something I have not done, but I am interested in this type of investment.  With the current mortgage rates being at historic lows it seems that this might be a good time to invest in a rental property.  Home prices are still much cheaper in most places than they were during the housing boom, but in many places the rent has not come down at the same rate.  That should make for a favorable environment for owning a rental property.

When buying rental real estate there are some things to consider.  Although I think now is a good time to buy a rental property that doesn’t mean it is a good deal in every market.  And of course, you also have to consider whether the specific property you are wanting to buy is a good deal.  To determine whether a property is a good deal you first need to know how much you could rent the property for.  Then you need to figure how much it would cost to own the property. There can be unforeseen expenses when owning a property. Things such as a new roof or new windows from Roofing USA LLC should be saved for and expected.

  This isn’t just the amount of the mortgage and insurance, but also the costs maintenance, repairs, taxes, and other miscellaneous expenses. Once you know these figures you can determine what a fair amount to pay for the property is and whether a specific rental property would be a good deal at the offered price.

Of course, there is a lot more to real estate investing than this.   To properly learn about investing in rental property you need much more knowledge than you can get from a blog post.  You need to do a lot of reading and it would be helpful to have advice from an experienced investor before you make your first deal.

You also need to consider the risks of investing in rental property.  There is a possibility that your property could sit vacant for a long time making you no money while you still have to shell out monthly mortgage payments.  It is also possible that you will have tenants constantly calling you with various complaints and maintenance requests.  Hiring a good property management company can help alleviate that problem.  You also have to worry about your tenants trashing the property.  Buying some cheap landlord insurance can help offset that risk.  Proper screening of tenants will help too.

Now is a good time to start investing in rental real estate, but you still need to do your homework before buying a property.

My Dividend Stock Portfolio

These are the dividend stocks I currently own. I plan on adding a few more for a total of 15-20 stocks which I believe is enough to be reasonably diversified.

Atlantic Power – This is a utility stock that pays a nice dividend.

Consolidated Edison – This is my other utility stock. I bought this one back in 2008 so I’ve had a nice bit of appreciation as well.

GGN – This is a play on gold and natural resources. I think natural resources will go way up in the next few years. In the meantime I get to collect a nice dividend.

Great Southern Bank – I bought shares of this bank back in 2008 during the financial crisis because I thought the shares were being undervalued. This bank didn’t have near the risky mortgage exposure of other banks. I bought at $9 and the stock went over $20. I sold half the stock and am taking a “free ride” on the rest.

Coca-Cola – They pay a reliable dividend and slowly increase it. This stock is a dividend aristocrat, meaning it has increased the annual dividend consistently for 25 years consecutively. This gets me some international exposure as well.

McDonalds – Since I eat there too often I might as well get some money from them. They are a dividend aristocrat also.

Realty Income – This is one of my favorite stocks. It has a high yield and it pays a monthly dividend. It might be a little overvalued now but I’m getting a great yield on cost.

Powershares International Dividend Achievers – I bought this fund to diversify my holdings a bit and it has steadily paid a nice dividend.

Universal Health Realty Income Trust – This a REIT that pays a nice dividend and has managed to appreciate a little as well.

That is all I own for now. It will probably be next year before I have enough money to invest more. I’m not sure what stock I’ll buy next. Since I already own two REITs and two utilities it will be in a different sector than those.