Russell Bailyn's Financial Planning Blog

A good financial advisor will try to explain concepts in such a way that their clients can really grasp the knowledge. As obvious as that may sound, many people who work with financial advisors do not learn much about how to make financial decisions, they merely pay to have those decisions made for them. Mutual fund investing is one such financial concept that all investors should know about. If you haven’t already, you’ll likely encounter mutual funds at some point during your financial life, through either your individual savings, or a company retirement plan. According to the Investment Company Institute, which compiles statistics on various investment classes, currently over $9.5 trillion is invested through more than 10,000 mutual funds in the United States.* In fact, many retirement plans require their participants to use mutual funds rather than individual stocks to prevent them from taking on too much risk. Imagine if inexperienced investors decided to put the full balances of their 401(k) plans into the stock of a single company? What if the company became distressed or went bankrupt? They could say good-bye to their retirement nest eggs, possibly forever.

Continue reading "How Do I Pick Mutual Funds?" »

Posted by Russell Bailyn at 04:30 PM | Permalink | Comments (0) | TrackBacks (0)

The chatter surrounding variable annuities is louder than ever. Investors want security regarding their money in the face of increasing amounts of uncertainty about the future. Variable annuities may feed this desire with two features not generally offered together: the opportunity for growth combined with a variety of guarantees protecting both the payment to a beneficiary if the account owner dies, and the income derived from the principal amount invested.

Continue reading "Variable Annuity Pros and Cons: What's all the Chatter About?" »

Posted by Russell Bailyn at 11:37 AM | Permalink | Comments (0) | TrackBacks (0)

An exchange-traded fund (ETF) is a basket of securities that trades on an exchange like a stock. In the event you don’t know how the stock market works, shares of public companies trade at various prices based on demand. The distinguishing factor with an ETF is that, rather than representing ownership in a single company, it tracks an index such as the S&P 500 or Dow Jones Industrial Average. The price of an ETF, similar to a basket of stocks in a mutual fund, will vary based on the performance of its underlying holdings. If an ETF represents an index with thirty different companies and all of them are trading up on a given day, the offering price of the ETF will move up accordingly.*

Continue reading "What Is An Exchange-Traded Fund? Should I Buy One?" »

Posted by Russell Bailyn at 04:01 PM | Permalink | Comments (1) | TrackBacks (0)

Financial Advisor Magazine reported this month an average earnings drop of over 30% this year for financial planners.* Yikes! Why is my industry suffering? Don’t people need the help of skilled advisors now more than ever? My suspicion is that these stats are reflecting changes in the industry rather than a decline in the overall popularity of professional help. In fact, the story confirms that the average lower earnings are reflective of more advisors entering the profession at younger ages, which has the effect of lowering the average earnings figures. What a relief.

Continue reading "Certified Financial Planner Earnings Drop 30%" »

Posted by Russell Bailyn at 03:33 PM | Permalink | Comments (1) | TrackBacks (0)

Sometimes obvious economics can lead us to profitable investment strategies. I think a few such opportunities exist right now and I’d like to share them with my readers. If you have other ideas or comments on mine, please share. Why pass up a potential way to make money?

Continue reading "Investment Ideas for 2008 & 2009" »

Posted by Russell Bailyn at 03:52 PM | Permalink | Comments (1) | TrackBacks (0)

Over the last few months I’ve gotten a lot of questions regarding 401k rollovers and IRA accounts. I’d like to take a moment to answer six questions which I get somewhat frequently and may be good for investors to know:

• Can I withdraw 401k funds while still in service at my job?
• Once my funds are in an IRA, how easily can they be accessed?
• What are the various limitations on making deductible contributions to an IRA account? Who can and who can’t?
• What if I make a mistake on my tax return regarding my IRA contributions? For example, what if I make an excess contribution? Will I be penalized? How will the IRS know?
• What’s the story with RMD? Can I make a contribution in the year in which I turn 70 ½?
• Can contributions be made to an IRA for a non-working spouse?

Continue reading "My Answers to Common IRA & 401k Rollover Questions" »

Posted by Russell Bailyn at 04:38 PM | Permalink | Comments (0) | TrackBacks (0)

Personal finance can be a tricky subject to master. You may feel comfortable with the stock market or perhaps you’ve taken on a mortgage or two, but there probably are a few areas you haven’t mastered yet. For this reason, I’d like to discuss five common blunders people make when it comes to their money. Read carefully, and you could avoid some major pitfalls.

Continue reading "Top 5 Personal Finance Blunders" »

Posted by Russell Bailyn at 03:15 PM | Permalink | Comments (0) | TrackBacks (0)

Recently I had a client call in to sell his position in a fertilizer stock in which he made a 20% profit. His reason for selling was that the stock showed signs of weakness and he thought the Federal Reserve speech might spook the market into a downtrend. Fair enough. A few hours later I had a different client call to buy the same stock, saying he saw signs of weakness and thought it might be a good time to buy the stock. Plus, he thought the Fed speech might be positive and give the markets a boost. Two smart guys with totally different opinions. The experience reinforced my belief that most investors don’t know a thing about the markets. Trying to guess the short-term direction of a stock is usually a losing proposition. I’ve been thinking for the last few hours about what strategy a moderately conservative investor could use to seek out some growth in their portfolio without taking on too much risk. The below strategies should help you mitigate risk and hopefully teach you a thing or two about the movement of stocks.

Continue reading "Simple Rules for Making Money with Stocks" »

Posted by Russell Bailyn at 05:09 PM | Permalink | Comments (2) | TrackBacks (0)

There was a spread in the Wall Street Journal at the end of 2007 in which a variety of seasoned financial experts were asked where the markets were headed in 2008. The predictions were mostly bullish - Dow 14,000 - Dow 15,000 - Dow 16,000 - true dreamers. A couple of people more accurately predicted flat markets in the face of staggering oil prices and a weak housing market. But nobody--none of the experts--expected a 10% decline in the first quarter alongside a massive credit crisis. I’ve listened to hundreds of bulls and bears make predictions about market direction over the past five years and I keep returning to the same conclusion: these people have no clue where the market is headed.

Continue reading "Are Market Predictions a Waste of Time?" »

Posted by Russell Bailyn at 12:57 PM | Permalink | Comments (0) | TrackBacks (0)

As we continue to question the softening economy, I’ve noticed lots of finger pointing in the media. Originally it was let’s blame Greenspan and the old Fed for keeping interest rates too low for too long. Now people are blaming Bernanke and the current Fed for not anticipating the credit crisis earlier and brainstorming a solution. Yet others blame the mortgage brokers and banks for not adequately disclosing the terms and risks inherent in certain loans which we now know to be junk. And of course, why not blame Bush? The president has driven up our federal deficit by paying for a war which is totally out of favor with the public. So who should really take the heat for the current economy? You should.

Continue reading "Market Turmoil: Taking Personal Responsibility" »

Posted by Russell Bailyn at 02:21 PM | Permalink | Comments (0) | TrackBacks (0)

There was an article in Boomer magazine this month about prospective retirees who may be thinking twice about their retirement plans in light of the recently sour economy. It sounds like a reasonable concern to me. If your investment portfolio is off 15% over the past three months and your home price is steadily declining, your confidence about retiring is probably lower today than it was last year. How can you handle this situation?

Continue reading "Reconsidering Retirement?" »

Posted by Russell Bailyn at 03:31 PM | Permalink | Comments (1) | TrackBacks (0)

We’re entering the heart of tax season so I figured now would be a good time to do this post. If you are a client and haven’t brought in your tax documents for 2007 yet, please get in touch with us sooner than later. For those who read my blog from other parts of the world besides New York, here are a few tips that may help you this tax season. Let’s start with the best part: free money the government may give you this year as an ‘I’m sorry’ for the recessionary pressures hanging over all of us. I’d like to thank the broader financial services sector for creating a $500 billion liability we all must grapple with.

Continue reading "The Economic Stimulus Package + Other Helpful Tax Strategies" »

Posted by Russell Bailyn at 03:27 PM | Permalink | Comments (0) | TrackBacks (0)

Becoming wealthy is not only about how good you are at earning money. It’s also about understanding and protecting your money. Below I’ve outlined a few concepts which plenty of people—plenty of very smart people—often overlook. Perhaps you can pick up an idea or two which improves your own personal financial life.

Continue reading "Five Smart Ideas for Your Money" »

Posted by Russell Bailyn at 10:38 AM | Permalink | Comments (1) | TrackBacks (0)

A common misconception is that all mortgage rates drop when the Fed cuts interest rates. The truth is that the exact opposite may be the case. When you hear that the “Fed cut rates today” the reference here is the Federal Funds Rate, the overnight lending rate that the Fed uses with other banks. The stock market often gets excited about the lowering of this rate because short-term borrowing becomes cheaper, generally increasing economic activity for businesses. However, homeowners with 15 and 30-year fixed mortgages shouldn’t be so sure that a lower federal funds rate will equal a refinancing opportunity.

Continue reading "Catch the Falling Mortgage Rate" »

Posted by Russell Bailyn at 04:11 PM | Permalink | Comments (1) | TrackBacks (0)

Not all corporate employees realize that Roth 401k deferrals have been allowed since January 1st of 2006. The Roth 401k, like a Roth IRA, allows accounts to grow tax-free and allows for tax-free withdrawal of contributions, earnings, and interest. Funds are eligible for withdrawal at age 59 1/2 assuming you’ve held the account for at least 5 years. The ‘drawback’ is that you can’t take a tax deduction at the time of deferral the way you can with a traditional 401k. Many financial advisors feel that Roth plans, if you qualify for them, are more valuable than traditional plans. Technically, it depends on a few different factors including your current tax bracket, your retirement tax bracket, and which direction marginal tax rates are headed for in the future.

Continue reading "Consider the Benefits of a Roth 401k" »

Posted by Russell Bailyn at 02:01 PM | Permalink | Comments (0) | TrackBacks (0)

The Real Deal posted a front page article earlier this month on the growing popularity of mortgage contingency clauses found within buyers’ purchase contracts. For those who aren’t familiar, this is a provision in the purchase contract in which the buyer is only obligated to the sale if he/she is able to get a mortgage. Put another way, the buyer doesn’t risk losing their deposit--often 10% or more--if factors affecting the credit markets force them out of a deal.

Continue reading "The Mortgage Contingency Clause" »

Posted by Russell Bailyn at 02:01 PM | Permalink | Comments (0) | TrackBacks (0)

I understand the value of a dollar extremely well. Each day I break the world around me down into dollars and cents. I try to assign a value to the meals I eat, the clothing I buy, and the services I pay for. If I can’t justify my purchase, I won’t make it based on principal. Because I’m in my mid 20’s, there are plenty of expenses which I haven’t covered yet. College tuition would be a good example. Clearly this is a good thing because shelling out for education expenses is hardly what I feel like doing right now. The big-ticket purchase which I’m curious about today is weddings. I’ve been to plenty and have a pretty good idea about what the financial breakdown looks like, but I still have to wonder, why does it need to be so expensive?

Continue reading "How to Pay for a Wedding" »

Posted by Russell Bailyn at 09:17 AM | Permalink | Comments (1) | TrackBacks (0)

I have a hunch that food inflation is about to take center stage. Some may have noticed the increase in chatter about farm subsidies and commodity prices already in the early rounds of presidential debate. This is likely to continue into 2008 because agriculture prices are currently in ‘spike’ mode. Take a look at the Deutsche Bank Liquid Commodity Index--up 18.6% since January 1st--as proof.* This index covers wheat, corn, soybeans, and sugar among other commodities. So what’s driving these prices higher? And what can you do to protect a portfolio against agflation (agriculture inflation)?

Continue reading "A Simple Breakdown of Agflation" »

Posted by Russell Bailyn at 05:15 PM | Permalink | Comments (1) | TrackBacks (0)

At times like this, old-fashioned advice such as ‘buy, hold, and don’t pay attention’ works extremely well. I’ve had several clients call over the past few weeks concerned about the day-to-day volatility in the stock and bond markets. I try to quickly remind everyone that asset allocation, diversification, and a solid financial plan are the ways to help achieve wealth--not cashing out a stock when it’s making money and trying to time getting back in after the price drops. That strategy, known as market timing, is a losing proposition over the long run and is better to avoid altogether. So what has the market in such a panic? I’ll give you a few different perspectives:

Continue reading "Is a Recession on the Horizon?" »

Posted by Russell Bailyn at 04:24 PM | Permalink | Comments (2) | TrackBacks (0)

There was a great article on Bankrate last week called “Surviving the Sandwich Years.” The reference here is to people typically in their 40’s and 50’s, grappling with paying for aging parents while saving for both kid’s educations and retirement. The article points out that only 20% of people can rely on an inheritance and proper planning should really disregard any potential windfalls. Here are the ‘survival tips’ pertaining to estate planning which are offered by the article along with some of my own commentary:

Continue reading "Surviving the ‘Sandwich Years’" »

Posted by Russell Bailyn at 05:09 PM | Permalink | Comments (1) | TrackBacks (0)

An interesting article in Worth magazine this month talks about how many of the country’s leading attorneys are helping their clients grapple with how to pass money along to their kids. The problem, of course, is making sure the wealth is treated as an opportunity and not as a tool to derail motivation and the desire to succeed. The lawyers in the article point out that in the 70’s and 80’s, a typical meeting between a client and his or her attorney or financial advisor would be comprised of strategies which ensure giving the IRS as little money as is legally possible during a wealth transfer. The goal was to maximize the amount of money being transferred to younger generations and minimize the tax implications. Nowadays, the shift is away from taxes and onto the effects of inherited wealth.

Continue reading "Wealthy Parents & Inheritances: Transmitting Values with Money" »

Posted by Russell Bailyn at 03:55 PM | Permalink | Comments (0) | TrackBacks (0)