Savant Blog

Savant offers perspective on a variety of topics. Entries range from current events to timeless insights in the world of finance and investments.

14 Aug
August 14, 2008

This is an interesting question that tends to come up more often when the market is experiencing volatility such as we’ve seen this year and the fourth quarter of 2007.

We are all probably familiar with FDIC (Federal Deposit Insurance Corporation), which insures all depositors of a member bank against loss up to a certain dollar amount. The FDIC’s approach to making depositors entirely whole makes sense in the risk-averse bank account world, but what about the world of the stock

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11 Aug
August 11, 2008

As you might have noticed in the news recently, there is a proliferation of discussion pertaining to Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac were both set up by the Federal Government – Fannie in 1938 and Freddie in 1970. Neither deals directly with homeowners. Just to give you a little history on how these two entities fit into the big picture, the following is a brief description of the Subprime debacle.

Lenders and banks drastically

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28 Jul
July 28, 2008

As many of you probably know, your credit score (or FICO score) can affect your finances in many ways.  But you may not know what determines your score and what it is used for.

Your FICO score is derived from a complex formula developed by Fair Isaac Corp.  It is reported by the three major credit agencies:  Equifax, Experian and TransUnion.  Your score can range from 300 to 850.  A score of 760 means that you are

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09 Jul
July 09, 2008

The IRS normally updates the mileage rates once a year in the fall for the next calendar year; however, with fuel prices at record highs the Service decided to act midyear.  The standard mileage rate for business usage will be increased to 58.5¢ for the second half of the year, up from 50.5¢ for the first half of the year.   This rate applies for all business miles driven from July 1, 2008, through Dec. 31, 2008.  This makes

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30 May
May 30, 2008

The President, Vice President, and the presidential candidates all released their 2007 tax returns.  It took Bill and Hillary a little bit of time, but when you pay in millions – you wait until the last minute to file!  Personally, I find the numbers just fascinating and if you haven’t seen them, I hope you do too!

President and Mrs. Bush filed a joint return with $719,274 of taxable income.  Their income was from his salary and investment income from a

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05 May
May 05, 2008

Now that we have put the 2007 income tax year behind us, we need to start planning for 2008.  In 2008, there is likely (unless the lawmakers change the legislation) to be an
attractive tax break for individuals in the 10% or 15% tax brackets.  That break involves the tax rate for capital gains dropping from 5% to 0% for the tax years 2008, 2009 and 2010 for people in those brackets.  Thus, retired individuals or others who do not have

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18 Apr
April 18, 2008

It’s not going to happen to me.

Medicare or my health insurance will take care of it.

My children will look after me.

America as a nation is aging rapidly and many people avoid thinking about the day when they or a loved one will need long-term care services and therefore fail to plan.  Long-term care refers to the many services beyond medical care and nursing care used by people who have disabilities or long-lasting illnesses.  Long-term care insurance helps pay for these

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14 Apr
April 14, 2008

I’m sure way back in my Economics and Finance 101 classes (pre Euro implementation) my professors espoused with great vigor the academia perspective of what currency fluctuations would mean to the United States and world economies.  My response to this lecture was to thank them for the short nap.  Fast forward to today’s nightly news and the constant comments regarding the weakening dollar and I wish I would have paid a little more attention.

So what does all this potentially mean

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02 Apr
April 02, 2008

You may not always consider what your investments and values have in common.

Why not?

It is possible to a lign your investment strategy to increase financial return and social good. This is called “socially responsible investing” (SRI) and it looks at the “bigger picture” when building a portfolio.

Instead of just identifying profitability, socially responsible investors look for companies that bolster environmental responsibility, diversity in the workplace, product safety, and quality. Likewise, a socially responsible investor may opt to avoid investing in

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21 Mar
March 21, 2008

In my last entry, I spent time on a few savvy tricks that parents can use to educate their younger kids to be smarter about money. The idea is not so much to turn them into money-saving automatons, but to start a learning curve. This time we are going to move up the ladder to older kids (middle and high school age).

In a 2006, the JumpStart Coalition for Personal Financial Literacy surveyed 5,000 high school seniors; the survey tested their

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14 Mar
March 14, 2008

Many of you know that 529 plans are a great way to save for your children’s college education.  What you may not know is that there are free programs available that can help you boost your savings amounts.  These programs are free to use and reward you for things you already do – they are like frequent flyer miles for college savings.

UPromise and BabyMint are two programs available that allow you to earn rebates on your purchases that can be

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25 Feb
February 25, 2008

I have three sons, ages 8, 6, and 4.  Long ago, my wife and I agreed on trying to impart to them sound building blocks for their future. Like most parents, we want polite, well mannered kids that have good study habits, play sports, go to college, etc. Another important aspect (since it just happens to be my vocation) is the understanding of personal finance and making sound decisions about money. I truly think that a curriculum of

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20 Feb
February 20, 2008

In my previous blog entry, I discussed some basic principles of asset allocation. You now have selected the appropriate assets classes and have purchased the right mix of investment vehicles to meet your targets. However, once you’ve implemented your portfolio, the effects of the market will begin to alter the composition of the portfolio you worked so hard to create.

Let’s use an investor with $200,000 who builds a moderate portfolio of 70% equities and 30% fixed income. Assuming equities average

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21 Jan
January 21, 2008

Yes it is true!  For 2008 through 2010, the long-term capital gains* rate for some investors will drop to zero. But before you start planning a fire sale of your stocks and mutual funds, make sure you’ll be eligible for this tax break.  The zero-percent capital gains tax rate will only apply to those individuals who are in a 10% and 15% tax bracket.

Currently, the top long-term capital gains rate is 15% compared to a maximum ordinary income tax rate

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04 Jan
January 04, 2008

We are in the heart of college football bowl season and right on the verge of the NFL playoffs. You hear a lot of talk by the commentators about winning coaches and the value they add. Interestingly enough, this logic of a “winning coach” doesn’t apply in the world of investing. Check out the attached video clip to see behind the scenes. Savant, long ago, decided to embrace the inherent efficiency that is the market.

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28 Dec
December 28, 2007

Did you see a big dip in your mutual fund values this month?  This was either an actual market drop (things HAVE been bouncy lately), or not.  Likely, at least one of this month’s dips was due to your mutual fund distributing capital gains and dividends.  These mutual funds are really just a collection of stocks.  When stock shares (held inside the fund) are sold for a profit, the funds must distribute 90 percent of realized capital gains and dividends

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19 Dec
December 19, 2007

There are only a few more weeks left in 2007 – Yikes!  If you are currently enrolled in edicare Part D you have until December 31st to review your current plan and possibly change to a new plan.  This annual review is critical!Unfortunately, there are major changes in the Medicare drug plans for 2008, including some significant movements in premiums as well as major changes to the structure of the drug formularies.  According to Avalere Health, the Centers for Medicare

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12 Dec
December 12, 2007

Do you want to simplify your charitable giving plan?  Do you want the benefits of a family foundation without all of the complicated regulations?  If you answered yes, you may want to consider using a Donor Advised Fund (DAF).

DAFs have become very popular in recent years. The concept is quite simple.  An investor (donor) can open an account at a sponsoring company.  Fidelity and Vanguard each offer DAF accounts.  Our local community foundation also offers a DAF.  Once

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10 Dec
December 10, 2007

I will never forget the year Mom received “Buttercup.”  She had religiously collected every ornament from Hallmark’s Mary’s Angels Collection.  But she missed Buttercup one year.  She had come to accept the fact her collection would never be complete.  When she opened her gift and identified the lost treasure, she cried tears of joy.

Ask any child if they would prefer to get a gift or give a gift, the answer becomes abundantly clear.  However, as we mature into young adults

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19 Nov
November 19, 2007

Welcome to SAVANTips!  I am excited to post the inaugural message on my and my Savant colleagues’ new blog.  We intend to opine on a variety of investment, financial, lifestyle, and other topics of interest.  Some postings will discuss current events while others will convey timeless wisdom.  We will also try to capture the thoughts and concerns on our advisory clients’ minds and share them with all our readers.

We hope SAVANTips will be unique.  While I will share an occasional

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11 Jan
January 11, 2007

Did you know that the federal government has established guidelines for gift tax exemptions and gift tax rates for all property? While these guidelines are generous– everyone has a lifetime gift tax exemption of $1,000,000– it’s still important for you to understand them.

In 2007 and 2008, the IRS determined that gifts under $12,000 per person, per year, were exempt from a federal gift tax.  Gifts over the annual $12,000 per person limit are called “taxable gifts.”  In the

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