Coverdell Education IRAs and Non-College Expenses

Amid all the talk about the expiring Bush tax cuts and other impending changes to the country's fiscal picture, one change that could have a dramatic impact on Coverdell accounts--and the families who use them to pay elementary and secondary school costs--has gotten little attention.

Coverdell accounts, formerly called Education IRAs, allow for tax-free growth of savings set aside for educational expenses, much like a Roth IRA for education. Families may set aside up to $2,000 per year per child to help cover educational costs from kindergarten through college, and funds may be used for public or private schools. Contributions are not tax-deductible, but gains and qualifying distributions are tax-free. Funds may be added to the account until the student reaches age 18 and must be spent by the time he or she reaches age 30.

Advantages of Coverdell accounts include the fact that they can be used for a wide range of educational purposes and for students of various ages, but also the fact that funds can be invested in so many different ways. Unlike a 529 account, which is limited to investments chosen by the plan and which can only be used for college expenses, a Coverdell account may be invested in whichever stocks, bonds, funds, certificates of deposit, and so forth the account owner chooses.

The downside to a Coverdell is the limit on annual contributions, which, at $2,000, might not get you very far when it comes to tackling the high cost of college.

Education IRAs were first introduced in 1998. Originally, contributions were limited to $500 per child per year. In 2001, as part of the tax cuts signed into law under President George W. Bush, use of the Education IRA was greatly expanded and the measure was redubbed the Coverdell Education Savings Account after Paul Coverdell, a U.S. senator from Georgia who had supported this expansion and who had died the year before. Among the most significant changes were an increase in the annual maximum contribution--to $2,000 per child--and the expansion of covered educational expenses to include those for students in kindergarten through 12th grade.

Fast forward a decade and here we are, with the Bush tax cuts (which were extended under President Obama two years ago) about to expire and taking the expanded Coverdell provisions with them. That means that, unless Congress and the president act, beginning in 2013 Coverdell contributions will again be limited to $500 per year, and proceeds from Coverdell accounts will again be usable only for college-related expenses.

Source: Adam Zoll, Morningstar

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

How To Talk Like An Investor

When it comes to understanding the long and short of investing, most beginner investors must learn what seems like a new language. In fact, the phrase "the long and the short of it" originated in financial markets.

The Long and the Short of It

The financial markets allow you to do a few things that are really common in everyday life and a few things that aren't. When you buy a car, you own that car. In the stock market, also known as the equity market, when you buy a stock, you own that stock. You are also said to be "long" on the stock or have a long position. Whether you are trading futures, currencies or commodities, if you are long on a position, it means you own it and hope it will increase in value. To close out of a long position, you sell it.

Shorting will likely seem somewhat foreign to most new investors, because shorting a position in the equity market is selling stock you don't actually own. Brokerage firms allow speculators to borrow shares of stock and sell them on the open market, with the commitment to eventually return the shares. The investor will then sell the stock at the day's price in the hope of buying it back at a lower price while pocketing the difference. Catalog companies and online retailers use this concept daily by selling a product at a higher price, and then quickly buying it from a supplier at a lower price.

Sentiment Speak

Other terms that are often new to beginning investors are "bullish" and "bearish." The term bullish is used to describe a person's feeling that the market will go up, while bearish describes a person who feels the market will go down. The most common way people remember these terms is that a bull attacks by ducking its head and bringing its horns upward. A bear attacks by swiping its paws down. Chicago is the home of commodity and futures markets; these markets are so ingrained within the identity of the city that the professional basketball team is the Bulls and the professional football team is the Bears. In fact, the Chicago Cubs' mascot is a bear cub. Only the White Sox seem to be the odd one out in this correlation.

It is also common for investors to use the terms "long" or "short" to describe their market sentiment. Instead of saying they are bullish on the market, investors may say they are long on the market. Similarly on the downside, investors may say they are short on the market instead of using the term bearish. Either term is acceptable when describing your market sentiment. It is important to remember that short and long usually imply that you have a certain position in whatever market you are trading but, as you can see, this isn't always the case.

Source:  Investopedia 

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

Why should I pay myself first?

The concept of "paying yourself first" is one of the pillars of personal finance and considered the golden rule by many financial advisors. The basic idea is simple to understand. As soon as you get paid, put money into your savings account first. Before you pay your bills or buy groceries, set aside a portion of your income to save. Thinking of personal savings as the first bill you must pay each month can really help you build tremendous wealth over time. By starting with a small amount like $100 each payday and using automatic payroll deductions, after a few months, you probably won't even notice the withdrawal. You might even find you can increase the amount. There are plenty of benefits from choosing to "pay yourself first" and prioritizing savings. First, there's the obvious one about building a huge savings balance. Regular steady contributions are an excellent way to build a large nest egg. That's money you can use in case of emergencies, to purchase a home or save for retirement. Paying yourself first is also an excellent way to pay for planned larger purchases. Do you need new tires for your car in six months? By paying yourself first, you're almost guaranteed to make sure that money is there when you need it. There's no scrambling at the last minute.

Then there is the psychological aspect. Building savings is a powerful motivator and there are plenty of mental benefits to seeing your savings balance grow and grow. When you prioritize savings, you're telling yourself that your future is the most important thing to you, not the cable company. While money may not buy happiness, it can provide piece of mind. People with fat emergency funds tend to have fewer emergencies than those with lower or zero balances.

Finally, paying yourself first encourages sound fiscal habits. By moving savings to the front of the line ahead of spending, you have a better grasp on the role of opportunity costs and how they affect your choices. By automatically deducting a portion of your income, you're able to set the money aside before you rationalize ways to spend it.

The bottom line is "paying yourself first" truly is the golden rule of personal finance. By using the technique, you can truly benefit over the long run.

Source:  Investopedia

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

Do You Have Too Many Retirement Accounts?

There’s yet another wrinkle in the new age of retirement and job insecurity — keeping track of all those company retirement savings plans you’ve racked up, along with that IRA you opened years ago, and creating a coherent investment strategy with them.

People who shift from job to job, they accumulate them.

Job jumping is particularly an issue for college-educated people born in the latter years of the Baby Boom (1957-1964). Men with a bachelor’s degree or higher held 11.4 jobs between the ages of 18 and 46," according to a Bureau of Labor Statistics report. Women of the same educational status held 12.2 jobs during the same time span.

Combine the emergence of the multiple-401(k) owner with Americans’ long-standing neglect of their retirement plans and you have a problem.

Though retirement experts of all kinds are familiar with the problem, no one knows how many Americans are juggling multiple 401(k)s and IRAs.

The little data out there, however, does indicate that a sizable number of American households have at least two types of retirement plans.

As of May 2011, 69 percent of U.S. households (or 82 million) said they had employer-sponsored retirement plans, IRAs, or both, according to the Investment Company Institute. About a third (31 percent) had an IRA and employer-sponsored plan.

According to the latest data available from Bureau of Labor Statistics, 16.75 percent of the 72.5 million participants in 401(k)-type plans in 2009 had left their money in the retirement plan of former employers.

The plan jumble has enormous ramifications along the road to retirement, from investment strategy and performance, to planning and execution.

First, most people have little time or attention for one retirement account, never mind multiple ones.

At the same time, people know little about investment principles and strategies, which means neglected accounts are more likely to perform badly because they are poorly constructed, without proper diversification and asset allocation.

In most cases, experts say, people should consolidate their accounts; to do otherwise flies in the face of fundamental investing principles.

Problems with multiple retirement accounts can also arise when you actually reach retirement age, at which time regulations force you to draw down your retirement savings on a pro-rated annual basis.

For instance, at 70.5 years (or older if you work beyond that age), 401(k) and IRA holders must make required minimum distributions. The actual amount varies by person and is based on an IRS formula.

You’d be getting small checks from all over the place.

To keep the financial complexity to a minimum, experts say most people should consolidate accounts.

How do you consolidate? In what’s called a rollover, most companies allow people to move funds from an old employer to the new one.

People can also convert their 401(k) into an IRA. Both are without tax penalties and little, if any, transaction costs.

Consolidating funds into an IRA, new or existing, has two main advantages: selection and cost.

Most company 401(k)s have a limited number of investment choices — in many cases, a variety of equity-, fixed income- and cash- (money market) oriented mutual funds. The IRA choices, however, are vast, including more asset classes and financial instruments, and almost any fund you had in your 401(k) plan.

Secondly, IRAs generally cost less in fees, especially compared to the 401(k)s of smaller companies that are unable to negotiate favorable terms with the administrators and the companies providing mutual funds in the plan.

Like with most financial decisions, however, special circumstances can mean exceptions to the rule, and, experts say, there are reasons why people may want to hold onto a (401(k) now and then.

401(k) Exceptions -  In a financial context, 401(k)s are more useful vehicles for people who feel they may be in need of money. For instance, you can borrow from your plan without any penalties or taxes, as long as your pay back the money in five years. (It's not permitted with IRAs.)

Similarly, there are tax benefits. Owners can take advantage of so-called early, hardship withdrawals, beginning at 59.5 years for a number of reasons, without penalty.

And if you lose or quit your job between 55 and 59.5 years, you can take an early withdrawal without the usual 10 percent penalty — although you'll still have to pay income tax, on an ordinary-income basis, on the withdrawn sum.

In the end, whether it’s an IRA or 401(k) may not matter, as much as paying attention and keeping track of your money. In most cases, consolidation is the easiest way to achieve that.

Source:  Albert Bozzo, CNBC

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

Why QE3 makes retirees queasy

The Federal Reserve’s announcement last week of a new, open-ended round of “QE”—quantitative easing, or bond buying designed to grease the wheels of the economy—means downward pressure on interest rates is likely to continue for a while.

As a result, income investors in general are losing due to lower rates. Near zero interest rates have prevented families from building or rebuilding their net worth … because yields are historically low or even negative.

Here is an example of the implications:

Couple X is retiring. They’ve decided to split a $600,000 portfolio into three equal piles and invest it in 10-year Treasurys, 5-year CDs and a mix of investment-grade corporate bonds that yields the average for that sector. And because they’re a hypothetical couple, they’re making all these investments on the same day.

If they’d retired five years ago —before our most recent recession kicked in—they’d have nailed down annual yields of 4.81% a year on the Treasurys, roughly 5% on the CDs and roughly 6% on the investment-grade bonds. Annual pre-tax income from their portfolio: $31,620, not a bad supplement to the monthly Social Security checks.

But If they’d retired today, based on recent closing prices they’d be earning 1.83% on their Treasurys, 1.37% on the CDs, and 2.92% on the corporate portfolio. Now they're taking annual income of $12,240—less than 40% of what they might have earned with different timing.

Without making some other aggressive moves or trimming their spending, this couple is more likely to be eating into their principal to pay for living expenses each year.

Bottom line: Today’s monetary policy creates a pool of retirees who feel they have to take some bigger investment risks, whether they like it or not. Spread that calculus over some 40 million retirees over the age of 65, and about $5.2 trillion in assets held in IRAs , and you’ve got a lot of money roaming into some very unfamiliar places.

Source:  Matthew Heimer, Moneywatch


The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

Money Management Tips Before You Marry

You've set the wedding date and planned the honeymoon, and now you're dreaming of kids, relaxing vacations and a happy retirement together. But have you talked about how money management will play into those events?

Money -- or more specifically, the lack of communication about financial issues -- tops the list of reasons that marriages fail. Every marriage will face issues regarding budgets, spending, debts and investments. How those matters are approached can often be what makes or breaks a relationship.

Here are some money management tips to get off to a healthy financial start before saying "I do."

1.  Check credit reports. It may be less romantic than a candlelit dinner, but finding out how each other is doing credit-wise can have a big impact. Read through a copy of each other's credit report. There maybe something in it that's a surprise.

A look at one another's credit report will reveal any outstanding debts or financial obligations, including student loans, credit card debt or even child support payments. Consumers can visit AnnualCreditReport.com and receive their report from each of the three credit bureaus once a year.

2. Correct and plan.  Once you've looked over the credit reports, make a chart together to identify what is owed. If there are errors on the report such as a medical bill your insurance company covered but was marked as a late payment, ask for corrections. Then, if needed, talk about strategies to boost low credit scores.

Be open about what financial skills you want to utilize in your marriage, such as setting aside money each month for an annual vacation. This should include habits you want to avoid, such as maxing out credit cards.

3. Forecast your financial future. Once you're aware of each other's financial background, it's time to think about the future. Talk about what financial matters are important to each of you.

Do you want to buy a new house, save for your children's college days, or spend time with family members? Discuss your goals. Then sit down with an adviser who can help you fuse them to create a plan both of you can follow.

4. Don't forget about taxes. Before getting married, especially if this is a second or third marriage, consider asking each other for copies of tax returns.

By looking at tax return records, you may see that your significant other is squared away with the Internal Revenue Service. You might, however, be in for a surprise. In some instances, you may find your future spouse hasn't filed tax returns, or owes a sizable balance from previous years.

If one person owes a significant amount, look into setting up a system to make payments to the IRS. In cases with a large amount due, think carefully before tying your finances together.

5. Decide on a banking setup that works for you. If one of you is more detail-oriented, you may decide to have that person manage the daily finances. For couples who want to maintain their independence, keeping separate accounts may be an easier plan.

For couples just starting out, opening a joint bank account may make sense. However, if both of you have an established set of bank accounts and investments, you may opt for a more flexible plan. Consider setting up individual accounts as well as a joint account for incomes and payments.

These money management skills will not only help you to avoid future financial skirmishes; they'll also give you the tools you need to avoid other marriage problems. The key is to leave emotions out. Talk about each other's position, and then come to an agreement, Wrenn says. The rest will be icing on the anniversary cake.

Source:  Rachel Hartman, Bankrate.com

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

What is quantitative easing?

Short answer: It’s an unconventional monetary tool used by central banks to stimulate the economy.

Answer that might make more sense: Normally, when there’s a recession or the economy is limping along, the Federal Reserve will reduce short-term interest rates in order to spur more lending and spending. But right now, the Fed has already cut interest rates as far as they can go and the economy is still struggling.

So, instead, the central bank can try quantitative easing. Since the Federal Reserve can just create dollars out of thin air, it can buy up assets like long-term Treasuries or mortgage-backed securities from commercial banks and other institutions. This pumps money into the U.S. economy and reduces long-term interest rates further. When long-term interest rates go down, investors have more incentive to spend their money now. In theory.

Source:  Washington Post

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

How to invest like a child

Everything investors really need to know they learned in kindergarten -- and these childlike traits can get you through the roughest market.

So you think that investing in the current market environment is tricky? Only a highly skilled professional analyst is able to navigate the shifting currents created by the Eurozone crisis and the looming "fiscal cliff" in the United States, not to mention the prospect of emerging markets ceasing to provide as much of an upside to global growth. On the contrary, all that's required to stand a chance of doing reasonably well is to adopt some of the behavioral traits of a typical 4-year-old.

Nonsense? Not at all. Of course, 4-year-olds are prone to throwing temper tantrums when they don't get what they want, which we would advise against. But there are some characteristics of 4-year-olds that, appropriately deployed, might put you in a better frame of mind to cope with turbulent and uncertain financial markets. Consider the following:

1. Don't be afraid to fall down and get bruises - Four-year-olds do this all the time -- and they get back up on their feet, dust themselves off and get back to what they were doing. But they don't brood over past errors, microanalyzing every last movement before the tumble. In financial markets, it's much the same. You need to accept the idea that you'll make mistakes and hurt your portfolio, but also recognize that you need to move on quickly. Learn from that mistake, but don't let it haunt you.

2. Be picky - Have you ever watched a 4-year-old eat dinner? Vegetables that are the wrong color, the wrong type or in the wrong position on the dinner plate are greeted with scorn. Parents tend to be driven to distraction by such picky eaters.

Such fastidious pickiness can serve an investor well. A company CEO who chooses to duck tough questions during an earnings conference call or annual meeting? An industry like the energy sector, whose members are continuing to spend money hand over fist on new projects even as the prices they can get for their oil and natural gas decline? Those may just be a few of the things that you choose to turn up your nose at. Decide for yourself what kinds of corporate traits don't pass muster with you -- and stick to it.

3. Don't listen - A bit of a no-brainer for 4-year-olds; not listening is their default mode. Investors can learn from this approach, too, since they are constantly bombarded by advice, guidance and myriad forms of punditry.

Sometimes you need to stop listening to the noise. Rarely are the opinions of others in sync, and when they are, it's too late to pursue an investment idea. (For instance, everyone agrees that the U.S. corn crop is in trouble this summer, thanks to the drought -- but the price of corn futures has already soared to $8 a bushel.) Learn when to turn off the noise, or when not to pay attention. And understand when it's important that you do listen, like when your parents told you not to touch that stove top because it was hot.

4. Take a nap -- or a time out - Preschool is exhausting, and so are the financial markets. An investor who doesn't opt for a nap voluntarily is likely to be confronted with some kind of adult variation of a time out, as he licks his wounds after letting emotion get the better of him during a volatile period. To stay calm, step back from the fray and try to view it dispassionately. Think of the "nap" or "time out" as a chance to gain perspective, to think about the longer-term issues that are likely to affect both your personal finances and your portfolio.

Instead of worrying about what the Chinese GDP will be in the third quarter of 2012, ponder the outlook for China and the countries surrounding it for the next decade or two. When you've finished your time away from the markets, come back refreshed and better prepared to make big strategic decisions.

5. Keep tabs on your favorite toy - If you're 4, and your Iron Man mask is your favorite possession, you don't let it out of your sight, do you? Equally, if you've got a favorite stock in your portfolio, don't take your eyes off it. Odds are, because it is your favorite it plays a disproportionately large role in your portfolio.

Think of all those avid iPhone and iPad owners who cherish their stake in Apple.  That's all well and good, but in this case, keeping it in sight means tracking what's happening at Apple or any other investment that plays a disproportionate role in your financial well-being.

Regardless, if you cherish it, you need to be aware that sentiment could distort your judgment. A 4-year-old isn't going to be willing to relinquish her stuffed monkey, even to be washed and stitched together again. That's where an adult needs to show that there always comes a time when you need to put your favorite toy to one side and branch out a bit, as you grow up.

6. Be open to new things -  The one advantage any 4-year-old possesses over pretty much any adult -- including almost all investors -- is a sense of wonder and excitement, a boundless curiosity about the world and a viewpoint that is anything but jaded. To the extent that you can combine that outlook with the kind of common sense an adult acquires over time, it will help keep you alert to new investment ideas. The folks who saw the possibilities of the Internet back in the early 1990s and went on to make a fortune by buying stakes in eBay and Amazon.com were those who understood that what looked like a dream or a fantasy could be transformed into a very profitable reality.

We all grow older -- it's one of those laws of nature. We suddenly discover that we need reading glasses and hair dye, or that our bones start to ache in cold weather. But maintaining some childhood traits may actually give us an edge in the very adult and all-too-serious world of investing. And if these behaviors do lead to profits in your portfolio, remember another kindergarten lesson: Have fun.

Source:  Suzanne McGee, The Fiscal Times

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

Creating A Dividend Portfolio For Young Investors

Dividend growth investing definitely appeals to an older audience. After all, steady reliable dividend payments are exactly what retirement is made of. On the flip side, younger investors with plenty of time on their hands often choose growth and capital appreciation as their major goal. Why invest in a boring consumer products firm like Kimberly Clark when that money could be socked into shares of the latest highflier tech company?

Well, younger investors couldn't be more wrong if they tried. The truth is that younger investors need to realize that 44% of stock market returns come from dividends and dividend growth. Albert Einstein called compound interest one of "the greatest mathematical discoveries of all time." The basic idea is that compounding is the process of generating earnings on an asset's reinvested earnings. To work, it requires both the re-investment of earnings/dividends and time. The more time you give your investments to compound, the more you are able to accelerate the growth and income potential of your original investment. Younger investors have an unfair advantage versus their older peers in this regard.

Given that dividends and compounding play such an important role in future returns, exactly how do younger investors switch focus and turn their attention toward dividend growth investing? Here are some tips.

Building a Better Mousetrap -  Building a portfolio of stable dividend-paying equities is simple and represents the true heart of investing - buying ownership of a company. By focusing on the strategy when young, investors have more time to let compounding work its magic.

Famed value investor Benjamin Graham outlined the rules for building a core portfolio of stocks in his book, "The Intelligent Investor." Two of those rules are incredibly important when it comes to creating a dividend portfolio. Firstly, each stock held should be large, prominent and conservatively financed. Secondly, each company should have a long record of continuous dividend payments. By focusing on these factors, investors can find sustainable dividend payers.

Ratings agency Standard & Poor's does much of the legwork for investors when it comes to these two rules. Each year, the agency publishes its S&P Dividend Aristocrats list, which features firms that have raised their dividends for 25 years or longer. While there are no guarantees that these firms will continue to crank out the dividends, the Aristocrats are as close to a sure thing in the investing world as you can find. The list provides a great starting point for would-be dividend growth investors.

Using that list as a framework, younger investors should focus their efforts on targeting companies that produce products likely to remain in demand 20 or 30 years from now.This is a crucial point to consider, as building wealth through dividends is a long-term commitment. There have been plenty of firms in the Dow Jones Industrial Average that were standard-bearers for their industries back in the day, only to be passed by technological advances (like Eastman Kodak, for example). Choosing businesses that have a transparent growth trajectory will make it easy to see how they'll grow earnings over time. For example, it's easy to see how ExxonMobil will do because it's tied to growing worldwide energy demand. Finally, setting aside a consistent amount of money every month is key to seeing the plan work.

Taking the Broad Approach - For those young investors without the time to sift through a wide universe of dividend payers or who still do not want to bother trying the style, they may want to consider a dividend-focused exchange-traded fund (ETF) or a mutual fund. A number of funds provide portfolios with broad exposure to dividend-paying equities.

The Bottom Line - They say that youth is wasted on the young. In terms of dividend investing, that fact holds true. By focusing on this style, younger investors can truly put the magic of compounding to work. The previous tips are a great way to get started in the search for long-term dividend growth.

Source:  Investopedia


The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

Reasons to invest in dividend-paying stocks

There are a number of compelling reasons to invest in dividend-paying stocks today. Consider this:

• US stocks offer income that rivals or outstrips that of traditional fixed income investments today, while also providing capital appreciation potential not available from bonds.
• Dividend-paying companies in the S&P 500 historically have outperformed non-dividend payers and the broader market over the long term, with lower volatility.
• While the highest-yielding stocks have been overbought and are expensive, high-quality companies with track records of growing their dividends are still available at reasonable prices.

Besting Bonds - For yield-seeking investors, the traditional sources of income simply are not making the grade today. US Treasury yields are at all-time lows. A 10-year Treasury, with a yield of 1.70% on September 11, will leave an investor with a flat to negative return after factoring in the current inflation rate of 1.70%. Stocks can offer a much better proposition.

Of the top 50 stocks in the S&P 500, 39 offer a higher current yield than the 10-year Treasury. And many more company's stocks are providing yields greater than the same company’s bonds. While future dividends cannot be assured, stocks also offer the potential of income growth over time, where bond coupons are fixed throughout the life of the bond.

Proof in the Performance - According to a study from the French bank Societe Generale, dividend growth was the single-largest contributor to investment returns across modern economies over the past 40 years, providing more return than capital appreciation. As a result, dividend-paying stocks have outperformed non-dividend payers — and the broader stock market — over the long term. Through the power of compounding, the benefits of dividend yield and dividend growth become increasingly pronounced over time.

It is also worth noting that, in down markets, stocks that pay dividends have gone down, on average, about half as much as those that do not pay dividends.  Dividend payers historically have outperformed in bull markets as well, affording investors an average of 3% more per year during the last 10 US bull markets.

Quality Matters - Not only have dividend stocks provided relative outperformance over the long-term, but they have done so with less volatility. This is because companies that pay and grow dividends typically are of high quality. They have better business models, stronger balance sheets and a higher degree of confidence in their growth capabilities. These characteristics historically have helped these stocks outperform in difficult and volatile times.


Source:  Robert Shearer, BlackRock

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

The difference between investing and trading

Investing and trading are two very different methods of attempting to profit in the financial markets. The goal of investing is to gradually build wealth over an extended period of time through the buying and holding of a portfolio of stocks, baskets of stocks, mutual funds, bonds and other investment instruments. Investors often enhance their profits through compounding, or reinvesting any profits and dividends into additional shares of stock. Investments are often held for a period of years, or even decades, taking advantage of perks like interest, dividends and stock splits along the way. While markets inevitably fluctuate, investors will "ride out" the downtrends with the expectation that prices will rebound and any losses will eventually be recovered. Investors are typically more concerned with market fundamentals, such as price/earnings ratios and management forecasts.

Trading, on the other hand, involves the more frequent buying and selling of stock, commodities, currency pairs or other instruments, with the goal of generating returns that outperform buy-and-hold investing. While investors may be content with a 10 to 15% annual return, traders might seek a 10% return each month. Trading profits are generated through buying at a lower price and selling at a higher price within a relatively short period of time. The reverse is also true: trading profits are made by selling at a higher price and buying to cover at a lower price (known as "selling short") to profit in falling markets. Where buy-and-hold investors wait out less profitable positions, traders must make profits (or take losses) within a specified period of time, and often use a protective stop loss order to automatically close out losing positions at a predetermined price level. Traders often employ technical analysis tools.

Source:  Investopedia

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

Computer Security and Financial Records

Is your teenager or grandchild putting your financial security at risk online?

While it can be handy to have a tech-savvy younger person in the house, it also can make your financial and personal information less secure. The best and latest antivirus software won't help much if someone is downloading virus-laden computer games and fake iPad apps for "Fruit Ninja."

Kids often know the technology better, but they aren't necessarily more careful when they use it.

The more computer users there are in your home, the greater the need to take precautions—regardless of their sophistication.

Since kids can be cavalier when it comes to downloading, parents need to secure extra-strong antivirus protection.

Several studies conducted by Consumers Union in recent years found a correlation between households with people under age 18 and a larger incidence of computer viruses and other malware. Some 14% of home networks were infected with malware in the second quarter.

Many households have a computer with several users, or have wireless networks that all share the same router. This increases the risk that the computers will become infected with viruses, which can delete your files; adware, which triggers annoying pop-up windows; and spyware, which can track your keystrokes to steal your passwords, turn on a webcam remotely or cause other mischief.

Crucially, you need to keep your antivirus software up to date and set to run automatically. If you don't know whether your virus program is up to date, it probably isn't.

The most secure option is to keep all your sensitive financial records and irreplaceable documents and photos on a separate computer that only you have access to, and which you connect to the Internet only while transacting business online.

Remind household members of the hazards of downloading apps without first checking them out, or clicking on links in emails supposedly from banks, phone carriers or other entities claiming there is a problem with your account. These are likely to be phishing schemes intended to capture your passwords and personal information.

Newer phishing schemes include emails supposedly from your Internet or email provider warning that you have run out of storage space and will lose your files unless you take action immediately.

With household members using multiple devices, it's almost certain they all are connected to the Internet by a single wireless router. If your router isn't secure, your computer isn't secure, either.

Make sure it is password-protected. Without a password, neighbors or someone sitting in a car parked near your home can piggyback on your wireless, which can eat up bandwidth and cause your Internet browsing to slow to a crawl.

Source:  Ellen Schultz, Wall Street Journal

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

Risky and Inappropriate Investments

Recently, a client withdrew several thousand dollars from his retirement account.  He was intending to "invest" that money in a nationally-advertised internet-based advertising business.  He had previously made a modest investment there that was paying him back so he figured he would double down.  As luck would have it, the FBI and SEC shut down the business as it was a Ponzi scheme.  Fortunately for my client that withdrawn retirement money never made it there and his overall losses were minimized.  Many times, things advertised as "opportunities" are anything but.

But outside of such scurrilous schemes, there is a new threat to the common investor.

On Aug. 29, the Securities and Exchange Commission proposed a rule permitting issuers to promote private offerings to the general investing public for the first time.  Under the Dodd-Frank financial-overhaul law of 2010 and the JOBS Act of 2012, Congress allowed companies to market their private securities to anyone they care to pitch to.

The end result: rules that make some of the biggest changes to the investment world in more than a quarter of a century.

The new regulations will ease capital-raising for many legitimate companies. But they also could subject unwary and vulnerable investors to deals that offer limited financial disclosures and even less liquidity.

Once the rule goes into effect, anyone can be pitched on stakes in hedge funds and other exclusive investment pools, as well as oil-and-gas partnerships, real-estate securities and a host of other offerings that long have been sold privately under an exemption to the federal securities laws known as Regulation D.

So-called Reg D securities aren't listed on an exchange and rarely trade, and their issuers don't have to file financial statements publicly with the SEC.

Until now, companies generally could market private securities only to wealthy investors with whom they (or their representatives like stockbrokers and the like) had "pre-existing relationships." The new rule enables private securities to be marketed anywhere, by any means.

You could see ads on the Shopping Channel or the checkout screen at your neighborhood nail salon.

Under the new rule, in order to buy into a publicly marketed private offering you must verify that you have at least $1 million in net worth, excluding the value of your home. The SEC is leaving it mostly up to companies and brokers to determine how they will verify the net worth of prospective investors.

If you are approached to invest in a private deal, get a second opinion.

Source:  Jason Zweig, Wall Street Journal

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

The national debt topped $16 trillion

Last week, the national debt topped $16 trillion.

But if you thought China's been doing most of the bankrolling, you might be surprised to learn who really holds our federal mortgage.  Fully two-thirds of the national debt is owed to the U.S. government, American investors and future retirees, through the Social Security Trust Fund and pension plans for civil service workers and military personnel. China, it turns out, holds less than 8 percent of the money our government has borrowed over the years.

But China is the largest foreign owner of our debt.

Just under $5 trillion of the national debt is owed to the Social Security Trust Fund and federal pension systems. A little more than $11 trillion is owed to foreign and domestic investors and the Federal Reserve, which buys up treasuries in order to drag down interest rates through quantitative easing.

China has actually decreased its holdings of U.S. debt over the past year, dropping from $1.31 trillion in June 2011 to $1.16 trillion a year later, according to the Treasury Department. Japan holds nearly as much, at $1.12 trillion. Those countries are by far the biggest foreign holders, but dozens of other nations, including Brazil, Russia, Taiwan, Switzerland and the United Kingdom hold trillions more.

Inside the U.S., private investors hold nearly $1 trillion in federal debt, while mutual funds, insurance companies and state and local governments hold nearly double that amount.

But politics aside, President Obama has been unable to slow the rapidly mounting debt. The nation owed $10.6 trillion on Jan. 20, 2009, when he was sworn in, and has added another $5.4 trillion since – more than President Bush piled up in two terms.  U.S. national debt now equals approximately $136,260 for every household in the country.  Since President Barack Obama was inaugurated on Jan. 20, 2009, the debt has increased by $45,848 per household—or about 50 percent per household.

Derived from Multiple Sources

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

What are: DJIA, S&P 500 and NASDAQ?

When referring to stock market activity on any given day, television and print media will cite the latest reading from one or all of the three major stock indices.

But for the average investor, what do these indices mean?

Here is a quick summary.

The Dow Jones Industrial Average is a stock market index created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow.  It was founded in 1896, and is named after Dow and one of his business associates, statistician Edward Jones. It is an index that tracks how 30 large publicly-owned companies based in the United States have traded during a standard trading session in the stock market.  The Dow is among the most closely watched U.S. benchmark indices tracking stock market activity. Although Dow compiled the index to gauge the performance of the industrial sector within the American economy, the index's performance continues to be influenced by not only corporate and economic reports, but also by domestic and foreign political events that could potentially lead to economic gains or losses.

The S&P 500, or the Standard & Poor's 500, is a stock market index based on the common stock prices of the 500 top publicly traded American companies. It is one of the most commonly followed indices and many consider it the best representation of the market and a bellwether for the U.S. economy.

The NASDAQ Composite is a stock market index of over 3,000 common stocks and similar securities listed on the NASDAQ stock market.  It is highly followed in the U.S. as an indicator of the performance of stocks of technology and growth companies. Since both U.S. and non-U.S. companies are listed on the NASDAQ stock market, the index is not exclusively a U.S. index.

Derived from Multiple Sources

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

Mistakes to Avoid: Tips and Tactics for Investing Wisely

Achieving success with these long-term investment plans requires that you consistently make contributions, adopt a long-term mindset and not allow day-to-day stock market swings deter you from your ultimate goal of building for the future. To make the most of your earnings when you're young, avoid these common mistakes.

Not Investing

To many, investing seems like a challenging process. It requires focus and discipline. In order to avoid it, many young investors convince themselves that they can invest "later" and everything will be OK.

What many people don't realize is that the earlier you start putting money away, the less you'll have to contribute. By investing consistently when you are young, you will allow the process of compounding to work to your advantage. The amount that you invest will grow substantially over time as you earn interest, receive dividends and share values appreciate. The longer your money is at work, the wealthier you will be in the future and at the lowest possible cost to you.

Being Unrealistic

When you are investing at a young age, you can afford to take some calculated risks. That said, it is important to have realistic expectations of your investments. Don't expect every investment to immediately start delivering a 50% return. When the markets and economy are doing well, there are stocks that do have returns like this, but these stocks are generally very volatile and can have huge price swings at any time. By expecting paper losses in bad years and an average return of 8 to 12% per year over the long run, you can avoid the trap of abandoning your investments out of frustration.

Not Diversifying

Diversification is a strategy that will reduce your overall risk by having investments in a variety of different areas. This allows you not be too exposed to an investment that might not be doing so well and helps keep your money growing at a consistent, steady rate every year. Investing in index funds is a great way to diversify with minimal effort.

Letting Your Emotions Drive Your Investments

Another mistake that many investors make is becoming emotional about their investments. In some cases, this means believing that an investment that has done well in the past, like a high-performing stock, will continue to do well in the future. Buying an investment that has a high price because of its past success can make it difficult to profit from that investment. Conversely, many people will sell their investments, or stop making their investment contributions when the markets are down or the economy isn't doing well. This behavior will lock in your losses, hurt your compounding and take you nowhere.

The Bottom Line - Ignore short-term highs and lows in both the overall market and your individual investments and stay focused on the long-term. By diversifying and remaining realistic and unemotional about your investments, you will be able to build wealth comfortably over time.

Source:  Investopedia

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

Young Investors: What Are You Waiting For?

Many young adults don't take the time to understand how to invest wisely. In many cases, this is because they are concerned about the here-and-now, not the future.

While you don't have to forgo your lifestyle when you are young, taking a long-term focus and investing consistently over a long period of time will ensure that your savings and net worth are there when you need them. In this article, we'll explore the different ways to invest as well as specific tactics for investing wisely.

Ways to Invest

Let's take a look at the most popular long-term investment vehicles you can choose from:

401(k)s

A 401(k) is a retirement plan offered by a company to its employees. It allows you to invest on a tax-deferred basis (meaning you don't have to pay taxes on any of the money you put into the plan until you withdraw it). As an added bonus, in many instances, the company will match at least part of the amount that you contribute to the plan.

Young investors should put their 401(k) contributions into an index fund, which is an investment product consisting of many stocks bundled into one neat package, that is designed to mimic the performance of a major stock index such as the S&P 500. Participating in this type of plan means that you will take home a smaller paycheck, because your contributions are deducted directly from your pretax pay. However, you probably won't miss the money as much as you might think; because the contributions are made pretax, most young professionals (who are in the 25% federal tax bracket) will only take home $75 less for every $100 they contribute to a 401(k).

In exchange for this small sacrifice in current pay, you'll experience several important benefits. In addition to the immediate tax savings we just mentioned, you'll also experience tax deferral of all earnings and gains that you make. Also, as long as you invest part of your money in low-risk investments, you can contribute liberally to your plan without worrying about keeping too much money outside of it for emergencies, since it's possible to take a penalty-free loan from your 401(k). Finally, if you decide to leave your current job, you won't lose what you've invested - you can convert your 401(k) into an IRA through what is known as a rollover.

It is important to note that the quality of your investment options can vary depending on your employer. Also, not all companies offer 401(k)s and, contrary to popular belief, the ones that do are not required to offer an employee-matching program. Luckily, this isn't your only investment option.

403(b)s

A 403(b) plan is like a 401(k), but it's offered to certain educators, public employees and nonprofit employees. Like a 401(k), what you contribute is deducted from your paycheck and will grow on a tax-deferred basis; you can roll it all over into an IRA if you change employers. Most 403(b)s will allow you to invest in mutual funds, but others can limit you to annuities. Some will allow you take loans out against the plan, but this option can vary from plan to plan.

Individual Retirement Accounts (IRAs)

There are two types of individual retirement accounts (IRAS): the Traditional IRA and the Roth IRA. These are plans you can contribute to on your own, regardless of whether your employer offers a retirement plan. Both can be opened at a bank or brokerage company and allow you to invest in stocks, bonds, mutual funds or certificates of deposit (CDs). The contribution limits are much lower than what you can contribute through an employer-sponsored plan; in 2012, the IRA contribution limit for those age 49 and under is $5,000, or your total 2012 taxable compensation, whichever is lower.

A Traditional IRA is a tax-deferred retirement account. Much like a 401(k), you contribute pretax dollars, which grow tax free. Only when you begin to withdraw the money will you start paying tax on the withdrawals. Traditional IRAs can have limits on contributions if your modified adjusted gross income (MAGI) exceeds a certain threshold. The earliest age you can start withdrawals is 59.5; if you take the money out before this time, you could be subject to a 10% penalty. Once you reach age 70.5, there are mandatory minimum withdrawals that you must take.

With a Roth IRA, you pay the taxes before you make your contributions. Then, when you withdraw the money during retirement following the rules of the plan, there are no tax consequences. The Roth IRA also has income limitations, but there is no mandatory distribution age and your contributions (although not your earnings) can be withdrawn before age 59.5 without penalty.

The Bottom Line - It is important to start investing early and consistently to take full advantage of compounding and to use tax-advantaged tools such as 401(k)s, 403(b)s and IRAs to further your goals.


Source:  Investopedia

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

Over 10-year periods, the stock market goes up

Since 1937, the stock market has gone up 91% of the time over 10-year periods.

It may be a tough slog going forward, but that’s not much different than other difficult periods in history. The 1970s was no cakewalk. Vietnam, Watergate, gas lines, double-digit inflation, yet, including dividends, investors made money in every 10-year period involving the 1970s (i.e. 1967-1976, 1973-1982, etc.)

World War II didn’t do much to stop the stock market. Only the 10-year period ending in 1946 finished down — and that included several years of the Great Depression.

Over 10-year periods, the stock market goes up, and it goes up a lot. Including dividends, the market rises an average of 129% over 10 years, more than doubling investors’ money.

Source:  Marc Lichtenfeld, Market Watch

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville