Russell Bailyn's Financial Planning Blog

The Labor Department has finally decided to increase disclosure requirements by retirement plan service providers regarding compensation arrangements and other potential conflicts of interest. In a nutshell, service providers of all types will be required by DOL regulation 408(b)(2) to have a written agreement which clearly elaborates on the various compensation arrangements within the plan which ultimately get paid by plan participants. The way it currently works, most investors in defined-contribution plans (401k & 403b) don’t have a clue about how, where, and when they pay the sum of these fees which often total up to 5% per year. The new regulations also apply to defined-benefit plans, but for the purpose of this article I’m primarily concerned with 401k and 403b (defined-contribution) plans. I’ve also touched below on some of the specifics of the desperately needed 403b regulations which will likely take affect next month.

Continue reading "New Retirement Plan Rules & Regulations Kicking In" »

Posted by Russell Bailyn at 02:35 PM | Permalink | Comments (2) | TrackBacks (0)

Volatility is a very important discussion to have with clients before they invest. In many cases clients will choose bonds over stocks because of a perceived lower level of volatility found there. Historically, that’s a fair assumption--rarely if ever in the past 20 years has a portfolio of municipal bonds represented a similar level of risk to stocks. People are also taught to buy bonds for the yield and to not pay close attention to daily fluctuations in price. Well, like a lot of other things, 2008 has changed the rules. Bond volatility combined with mark-to-market accounting rules has helped crush the daily trading prices of many bonds. It has also caused a phenomenon of highly rated bonds offering competitive yields. So, does this present an opportunity for investors? Here are a few things to know:

Continue reading "Making Sense of Bond Yields" »

Posted by Russell Bailyn at 04:46 PM | Permalink | Comments (0) | TrackBacks (0)

Now that Hank Paulson is a lame duck, and we’ve seen the majority of his contributions as Treasury Secretary, we can begin to assess whether he has been handling the unfolding economic downturn effectively, or as some might suggest, made it worse. As is usually the case with economic policy, we can rarely determine with certainty what was a ‘correct move’ for several months if not years afterwards. My opinion is that Paulson has done an adequate job so far in terms of avoiding a deeper recession or depression, but has made some questionable moves and has been less than sensitive to the needs of Wall Street.

Continue reading "Has Hank Paulson Been A Good Treasury Secretary?" »

Posted by Russell Bailyn at 10:31 AM | Permalink | Comments (1) | TrackBacks (0)

Whether or not you liked George Bush, his budgets over the past four years have consistently called for more tax cuts and extensions for expiring tax provisions which would otherwise hike taxes. Last year, Bush extended the lower marginal tax rates on ordinary income and the preferential rates on capital gains and dividend income. The goal of these tax cuts was to raise individual incomes, add jobs to the economy and lower unemployment. Well, no luck so far on reaching those goals. On Friday we learned of 240,000 more job losses last month and a national unemployment rate of 6.5%. So now the question becomes, what can we expect from President elect Obama? Lots of people on Wall Street are scared of a scenario in which Obama raises taxes shortly after getting into office presumably in the middle of a recession. Herbert Hoover did the same thing in the early 1930’s. It led to the Great Depression. Are we in a similar predicament? What can we expect over the next four years from Barack Obama in terms of taxes?

Continue reading "Obama and Taxes: What We Can Expect" »

Posted by Russell Bailyn at 03:44 PM | Permalink | Comments (3) | TrackBacks (0)

As many of my clients and readers already know, life as a money manager has been immensely stressful over the past few months. It isn’t that my clients have lost an amount of money beyond recovery, or that my business model has failed: it’s more a feeling of defeat not just as an investor in the market but as a passionate advocate of the free market system. However, I try to push my emotions aside and think beyond the next 30 days: money gets made during times like these. I can bring true value to my clients, friends, and family if I can get them to see the big picture. And at this point it seems this may be a very good opportunity to buy.

Continue reading "The Best Buying Opportunity in History?" »

Posted by Russell Bailyn at 11:09 AM | Permalink | Comments (2) | TrackBacks (0)

Last week Nancy Pelosi announced that the completed version of the Economic Stabilization Act of 2008 is now available on the House of Representatives website. I spent a few hours reading through the bill and would like to highlight what I think are the most important parts. What was immediately clear from my review was that the bill sends us into a new period of financial regulation after a decade of deregulation and leverage. As most of you may already know, the bill was passed late last week in both houses and was signed into law by the President. At this point, considering the market turmoil is worse than it was before the bill passed, we wait to see if these new provisions will be successful in the way of instilling confidence to a market system which by most measures appears nearly broken.

Continue reading "Emergency Economic Stabilization Act of 2008" »

Posted by Russell Bailyn at 03:39 PM | Permalink | Comments (1) | TrackBacks (0)

I’ve been hesitant to offer my opinion about the proposed $700B bailout package since the news pertaining to that plan is ongoing and constantly changing. But now that rumors are flying and I’ve had clients call in to ‘blame this on Bush’ and to complain that it dumps a massive debt directly on the heads of taxpayers, I feel the need to spell out some truth as I understand it and perhaps some more realistic scenarios. Regardless of what portion of this proposed legislation passes, I don’t think we’re heading into the next Great Depression. The biggest problems with this market the way I understand it is a lack of liquidity, the perils of bank interdependency, and a need for some new regulations in an era of leverage and risk. These are problems we can cope with as a nation with a little cooperation. Here is some clarification about this historical event:

Continue reading "It’s Not a Bailout -- It’s a Government Investment They Say" »

Posted by Russell Bailyn at 02:51 PM | Permalink | Comments (3) | TrackBacks (0)

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 (3) | 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 (3) | 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 (2) | 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)