Despite all of the doom and gloom news that surrounds us on a daily basis regarding the economy, Maryland is still considered one of the top ten richest states in America, according to Huff Post’s 24/7 Wall Street.  Sitting at #4 behind New Hampshire, Connecticut, and New Jersey, Maryland continues to be a place many would like to call home.  Known for its crab cakes, patriotism, and diversity, it continues to lead the pack in other areas as well.  Click on the links below to learn more about our home sweet home in Maryland:

Maryland Economic Overview from the Senate

Maryland at a Glance

1.)    Do your research 

You may not be invested in highly volatile areas or investments.  Warren Buffet is a good example.  He does not invest in the stock of the day.  He invests in stocks of solid companies with strong balance sheets and sound fundamentals that are held for the long term.  Some of your portfolio could very well be structured this way. 

2.)    Refrain from Market timing based on emotion

Too many investors make the decision to exit the market based on emotion alone rather than technical analysis.  Sometimes the technical analysis will dictate that the market risk is too great, and it makes sense to reduce your exposure to the market.  Letting your emotions dictate the direction of your portfolio can be costly long term. 

3.)    Market Chaos can breed opportunity

There are investments that can perform well despite a weakened broad economy.  For example larger companies with international exposure and strong balance sheets have historically performed well as they may reduce overall volatility by advantages of economies of scale.  Mid cap growth stocks strive to do well during this type of economy and are large enough to take advantage of international opportunities.  Mutual funds that are actively managed with a conservative strategy are an option for an investor seeking a slow and steady return without unnecessary risk.  Gold and precious metals become big players when investors are seeking out alternative investments.

4.)    Personal Reflection

Ask yourself, where are you in your life right now?  How many more years until retirement?  What are your immediate financial needs and what are your long term goals?  What is your overall risk tolerance and time horizon?  Have answers to any questions changed from the last time you asked them? 

5.)    Consult a Registered Investment Advisor

Consulting an experienced professional will help you understand the market cycles every investor is subject to, how the various indicators, hype, and world events play a part in overall market volatility, and ultimately help you make the decision whether staying in the market or making an exit is the appropriate strategy for you.

Mutual funds are collective investments that pool money from several investors to buy stocks, bonds, money market instruments, and various other securities.  There are three basic types: Open-end funds, Closed-end funds, and Unit Investment Trusts (UITs). This article will focus directly on the advantages and disadvantages of mutual funds as a whole.   

There has been a huge surge of interest in mutual funds since their beginning due to the many advantages they bring about. 

• Extensive diversification, which means an investor is able to get instant access to tons of individual stocks or bonds with a low minimum investment, is one of them.
•  Daily liquidity is another strong advantage.  If you want to sell your mutual fund, the proceeds are available the day after you sell the fund. 
• Government oversight and transparency tops the list as well with mutual fund holdings being publicly available to investors (keep in mind there are reporting delays).  Mutual fund companies are also required to maintain performance track records for each mutual fund and have them audited for accuracy, which means there is no question as to the validity of the returns being stated.
• There is an increased selection of investments available to you when using mutual funds.
• Professional management and convenience also make the list.  Systematic investing and withdrawals can be set up, and an investor can also have capital gains and dividends reinvested automatically into their mutual fund without a load or extra fees.   
• Safety is another reason investors look to mutual funds.  If a mutual fund company goes under, the mutual fund shareholders receive an amount of cash equal to their portion of ownership in the fund. 

Of course there have also been disadvantages cited regarding mutual funds, and so in the spirit of fairness and completeness, we will share those with you as well. 

• High capital gains are one of the frequent gripes with regard to mutual funds.  However, not all mutual funds make annual capital gains, and many mutual funds are low-turnover funds that do not make capital gains distributions on an annual basis. Keep in mind there are strategies to avoid capital gains such as tax-loss harvesting, and that capital gains does not even apply to retirement plans. 
• High sales charges are also on the list.  However there are a ton of “no-load mutual funds” that do not participate in sales charges.
• Fees.  There are fees associated with investing in a mutual fund, however many mutual fund companies cap their total fund operating expenses by waiving or limiting their fees and assuming the various expenses of the fund.  For example, our firm has a no – load conservative allocation mutual fund, the Geier Strategic Total Return Fund (GAMTX) with total fund operating expenses not exceeding 1.95% (that figure includes the 1.10% management fee) due to making the decision to limit fees for investors.  This information can be found in the prospectus. 

Although mutual funds remain one of the most popular investment vehicles of our time, it is clear there is a ton of information available to the investor to research and process prior to investing in one.  You should ensure you have done your homework by reading the proper literature such as the prospectus, and reviewing the performance available as well as the background of the fund manager prior to investing.  Most of this information can be found right on the fund’s web site or by visiting a popular site such as Morningstar. 

  The views expressed in this article are as of 6/20/111, and are not intended as a forecast or as investment recommendations.  Information provided as to the Fund’s holdings, sector weightings, number of holdings, performance and expense ratios are as of dates described in the article are subject to change at any time.

Investments in real estate investment trusts (REITs) and real –estate related securities involve special risks associated with an investment in real estate, such as limited liquidity and interest rate risks and may be more volatile than other securities. In addition, the value of REITs and other real estate – related investments is sensitive to changes in real estate values, extended vacancies of properties and other environmental and economic factors. 

 Investments in international markets present special risks including currency fluctuation, the potential for diplomatic political instability, regulatory and liquidity risks, foreign taxation and differences in auditing and other financial standards. Risks of foreign investing are generally intensified for investments in emerging markets. 

An investment in an exchange-traded fund (ETF) generally presents the same primary risks as an investment in a conventional fund (i.e., one that is not exchange traded) that has the same investment objectives, strategies, and policies. The price of an ETF can fluctuate up or down, and the Fund could lose money investing in an ETF if the prices of the securities owned by the ETF go down. In addition, ETFs may be subject to the following risks that do not apply to conventional funds: (i) the market price of an ETF’s shares may trade above or below their net asset value; (ii) an active trading market for an ETF’s shares may not develop or be maintained; or (iii) trading of an ETF’s shares may be halted if the listing exchange’s officials deem such  action appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

The Fund may use derivative instruments. Derivatives are investments the value of which is “derived” from the value of an underlying asset (including an underlying security), reference rate or index. The value of derivatives may rise or fall more rapidly than other investments. For some derivatives, it is possible to lose more than the amount invested in the derivative. Derivatives may be used to create synthetic exposure to an underlying asset or to hedge a portfolio risk.  If the Fund uses derivatives to “hedge” the overall risk of its portfolio, it is possible that the hedge may not succeed. This may happen for various reasons, including
unexpected changes in the value of the rest of the Fund’s portfolio. Over the counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the Fund.

The Fund may engage in short selling activities, which are significantly different from the investment activities commonly associated with conservative stock funds.  Positions in shorted securities are speculative and more risky than “long” positions (purchases) because the cost of the replacement security is unknown.

The views expressed in this article are those of the participants as of a specific date, and are not intended as a forecast or as investment recommendations. Information provided with respect to the Fund’s Portfolio Holdings, Sector Weightings, Number of Holdings, Performance and Expense Ratios are as of the dates described in the article and are subject to change at any time. 

You should carefully consider the investment objectives, potential risks, management fees, and charges and expenses of the Fund before investing.  The Fund’s prospectus contains this and other information about the Fund, and should be read carefully before investing.  You may obtain a current copy of the Fund’s prospectus by calling 1-877-747-4268.  Past performance is no guarantee of future results.  The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

Distributed by Unified Financial Securities, Inc., 2960 North Meridian Street, Suite 300, Indianapolis, IN  46208. (Member FINRA)

• Make sure that, at a minimum, your financial planner has one of the three leading designations. You can check CFP status by visiting the Certified Financial Planner Board of Standards. Contact the American Institute of Certified Public Accountants’ Personal Financial Planning Center to check PFS title status. For the ChFC designation, visit the Society of Financial Services Professionals.

• Review a copy of their form ADV, Parts I and II. This document must be filed with the Securities and Exchange Commission.  It describes whether the adviser accepts fees, commissions or both. If the adviser’s practice is too small to be regulated by the SEC, ask for whatever form the state uses.

• Read the ADV form, which includes disciplinary histories. Your local courthouse will have what lawsuits may have been filed against your potential advisor. Contact your state’s insurance department and securities regulator to see if there has been any disciplinary history there. Check with FINRA and the SEC as well as with the groups cited above as to any disciplinary history.

• Members of the fee-only National Association of Personal Financial Advisors are required to take a fiduciary oath promising “to act in good faith and in the best interests of the client.”  Ensure there is language to that effect being used by your potential advisor.

• Experience…the more the better (at least 10 years)

• Look them up on www.brightscope.com to see what legal issues they have run into, if any, as well as the general background information on the firm and its advisors

• Ask them about their investing style and methods and frequency of communication.  Ensure their style meshes with yours, and that they can speak intelligently about the investments offered.  If they can’t explain it, they shouldn’t be advising you on it.

• Discuss your expectations with them, and ask that they kindly reciprocate so there is clear understanding of the relationship. 

• Ask about the fee structure if they haven’t shared that information with you yet.  Most charge a percentage of assets under management (ranging from 1% to 2% in most cases).  However some still operate off of commissions.  Be mindful of the commission situation… as there is room for conflict of interest.

• Talk with your friends and neighbors to see if anyone has heard of them. Oftentimes a direct referral is the way to go especially when trust and finances are being used in the same sentence.   

Start by writing down your short-term, as well as long-term goals.  Seek out a professional financial advisor to help you choose the appropriate vehicles to attain those financial goals outlined.  Every professional advisor will gauge their client’s risk tolerance by utilizing questionnaires and having in-depth discussions with their clients.  Risk tolerance, time horizon and goals outlined will determine the appropriate investment vehicles.  Investments should be monitored consistently by both you and your advisor, which greatly increases your chances of financial success.  However, if someone wants to attempt to manage their investments themselves, web sites such as Motley Fool (www.fool.com) can give a basic investment education.   

The second stop along the path for beginner’s investing is recognizing savings opportunities already within your reach.  You should ensure you are taking advantage of your company’s 401K plan (if one is available).  Contribute as much per paycheck as you can afford.  Oftentimes companies offer to match whatever your contribution is.  Free money is a no brainer.  There are advantages to having your contributions flow directly from out of your paycheck.  The first advantage is not needing to remember to do it yourself.  The second is that 401K contributions are not taxed.

Next, you should ensure you have 3-6 months worth of savings socked away in an Emergency Fund.  This will cover you in cases of emergencies, and will help you avoid from maxing out credit cards, which will threaten your overall financial health and credit report rating.

Look to establishing an IRA or Roth IRA.  This is one of the best vehicles available for saving toward retirement.  Even if you can only fund it with $500 or $1,000 per year, that money is a great start to building a retirement nest egg after compounding and time are factored in.  With an IRA you are reaping the benefits of tax deferred earnings growth. With a traditional IRA, you can generally deduct the contribution from your adjusted gross income (AGI).  However, the distributions will be taxable.  With a ROTH IRA you can enjoy tax free growth in addition to tax free qualified distributions. However, you cannot deduct the contributions from your adjusted gross income (AGI). Another key difference is that there is no distribution age limit with that of a ROTH IRA, but with a traditional IRA, distributions must commence once you reach age 70.5. 

Consider U.S. treasuries through Treasury Direct.  You don’t have to pay commissions or fees to buy or hold treasuries and they are considered very conservative, which makes it an attractive portfolio option.  Two types to choose from are savings bonds and treasury inflated protection securities (TIPS).  Both protect against inflation and allow investors to start in small increments ($25 for savings bonds and $100 for TIPS). 

Deciding on a set dollar amount to be allocated toward investments on a monthly basis no matter the market environment is a good idea.  Being systematic in your investing approach will keep you disciplined with regard to your overall plan. Mutual funds are ideal investment tools. They allow for regularly scheduled, modest contributions without large fees.  Also look to index funds.  They are mutual funds that are diversified across particular sectors.  Diversification is extremely important.  If one area of your portfolio is doing poorly you want the other areas to counteract that poor performance.  Ensure part of your portfolio is invested in stocks to counteract inflation and yield a return that can help get you to your goals more quickly than that of a money market account or savings account.  Make sure you revisit your overall financial plan and portfolio with your advisor on a semi-annual basis to ensure your positions are still aligned properly with your goals, as life events can happen and dreams can change over time.  

Do your research, read the fine print, ask a ton of questions, and rely on friends and family for referrals to trustworthy sources.  Investing doesn’t have to be rocket science.

The AICPA web site does an excellent job of offering a resource center, which address all of these issues and more.  They call it 360 degrees of Financial Literacy.  It can be found at http://www.360financialliteracy.org/. 

Keep in mind the most important part in all of this is playing an active role in understanding your finances, and taking the steps toward reaching your goals.  Don’t worry so much about not having a lot to put toward certain buckets.  The fact that you’re thinking about it and working on it puts you one step closer to your personal financial success.

Deductions

Ensure you deduct all “ordinary and necessary” business expenses from your revenues to reduce your taxable income.  Examples include; business travel (if more than half a business trip is devoted to business you can deduct the traveling costs and other business-related expenses), equipment, salaries, rent, principal and interest paid on your business loan, and even business losses.  Business losses can be deducted against the owner’s personal income to reduce taxes.  If their losses exceed their personal income for the year, some of the year’s business losses can be used to reduce taxable income in future years.

Charitable Contributions

Charitable contributions typically flow through the business and are claimed as deductions on the individual tax returns of the shareholders (unless you own a C Corporation).

• Contributions to charities listed as “qualified organizations” by the IRS are deductible.
• Contributions may only be deducted in the year they were made.
• Volunteer time or services cannot be deducted

Estimated Quarterly Payments

• Businesses with a total tax bill exceeding $500 during a given year will more than likely need to pay estimated quarterly payments.
• By year end, 90% of the tax owed or 100% of last year’s tax must be paid.

Other General Tips

• Always accelerate deductions in the year you are doing  your taxes and always defer income, if possible, into  the next year, which will lower your current year tax bill.  Deferral strategies are dependent on the legal structure of the business itself, and your profit and losses for the year.  Before implementing such a strategy you must consider any potential changes in tax rates. 
• Purchase items your business will need in the near future to maximize deductions for the current tax year if cash flow permits.
• If you haven’t already, consider “Going Green.”  Federal and state governments provide dollars to small businesses via tax incentives for environmentally friendly initiatives.
• Check the IRS web site for available business credits your business may qualify for.
• Small Businesses should consider offering health insurance to employees.  By doing so they can receive a 35% tax credit.
• Attending business seminars and conferences is advantageous, as owners can deduct attendance fees and room/board expenses.
• Make payments to your retirement plan before year end to reduce income for the current year.
• Consider paying your kids to help you at the business.  You can take a tax deduction of up to $5,800 per child depending on job performed, the child will not have to pay income taxes if under the age of 18, and you won’t have to pay employment taxes.  Great way to reduce income from your tax return.

If you are faced with the ugly reality of divorce, chances are you are overwhelmed with emotion and asking yourself the question, “What do I do now?”  Here is a quick “To Do” list to help you get organized and address some of the important points.

Credit Report

If you opened any joint credit accounts while married those accounts and credit history might still be on your credit report. You are still liable, and it will still be seen on your credit report even if an agreement with your ex-spouse was made that they would pay off the account, unless other terms were negotiated with the lender.

Late payments made by your ex-spouse and accounts that become delinquent or go into collections, will have a negative effect on your credit score.  You should contact lenders to try and reach an agreement where your name is removed from an account sooner rather than later. Until you take these precautions, you will be on the hook whether it is “your fault” or not.

It is a good idea to monitor your credit report online after a divorce to make sure your score does not get lowered unjustly. Requesting a written report be sent to you via mail can take over a week.  Utilizing one of the online services is much quicker and easy to use.  www.freecreditreport.com/Official

 Tax Returns

Consult your accountant regarding the possible tax savings now that married filing joint provides, as well as the potential liability that is possible in the future should returns be found incorrect.  Keep in mind whether you have first-hand knowledge of the information found on your return or not, the responsibility will be shared if the return was signed jointly. 

Insurance Review

Become familiar if you haven’t already of your insurance policies, including P&C insurance, health, dental, vision, life, etc. Check who the account owners and beneficiaries are and contact the companies to make any changes you want to have made when law permits.  Check your current coverage as well.  Oftentimes lifestyle changes warrant coverage changes. 

Document Recovery

Ensure you have copies of all important financial and legal documents such as titles to cars, houses, policies, deeds, wills, tax related documents such as W-2’s and most recent return, bank statements, brokerage statements, stock certificates, etc… You will need this to prepare for the divorce and share with your attorney.

Estate planning

Make sure your wills and powers of attorney are updated to reflect your current wishes.  Ensure you still feel comfortable with the same guardians originally selected for your children, etc…

Get your Financial House In Order

Meet with a financial advisor/planner to discuss your current financial standing, goals both short and long term, and main financial concerns.  Work with them to create a budget based on your new single income and revised monthly expenses.  If possible set up a monthly savings plan whereby a certain dollar amount flows from your checking to your savings automatically.  If this is not possible due to income constraints, obtain a home equity line of credit and tap into this in emergency situations.

Many of us are often looking for creative ways to save a little extra money every month. However, that challenge can certainly feel like a tall and overwhelming order to fill at times.  With that in mind, we wanted to share the following tips to get you headed on the right track to saving money:

• Establish a personal budget to track income and expenses and get realistic about where you can and should cut expenses

• Set up an automatic savings plan: Have a set amount deducted from your checking account to a savings account each pay period or even on a weekly basis.  According to Consumer Federation of America, this method is the most popular amongst Americans who have been able to contribute to emergency savings funds.
• Add to your retirement savings:  Increase your 401(k) plan contributions.  If you don’t have one, open up an IRA (individual retirement account) and begin making contributions on a regular basis; set it up so it automatically flows in from your checking or savings account.  If your employer matches with regard to your 401(k), contribute as much as you can as this is free money.
• Put any tax refund, raise or bonus into a savings account rather than spending it
• If you currently owe a lot on credit cards, create a get-out-of-debt plan.  Begin paying off the small balances first, and then tackle the balances with the highest interest rate.  Put any extra cash toward the debt with the highest interest rate.  Look at option of transferring your outstanding balance to a different credit card company offering 0% for specified time period and work on paying the debt off during that time period.
• Consolidate loans to make your financial planning/debt solution goals attainable.  Move higher interest loans to a single lower rate loan and cease incurring new charges.
• Keep only one or two major credit cards.  Cut up the other cards and call the credit card companies to cancel the accounts. 
• Clean up your credit score so you can get better interest rates on loans
• Look at combining your cable, Internet, and telephone service
• Use Ebates for up to 25% cash back
• Get rewards cards that pay out in cash or points, which can be redeemed for travel or products.
• Pay life insurance annually and car insurance semi – annually or quarterly
• Consider term life insurance over other life insurance products as it is typically more cost effective
• Consider eliminating home phone land line and just utilizing cell phones.  If you don’t feel comfortable eliminating it completely, reduce your service to the bare minimum and only use home phone in emergencies.
• Buy energy efficient appliances
• Use a programmable thermostat
• Eat in instead of eating out
• Install CFLs to save energy
• If you have a good credit score, equity in your home, and currently employed consider refinancing since rates have dropped over the past year

Good luck and let the saving begin.

• Income tax brackets: 10% bracket would have disappeared and brackets would have reverted back to15%, 28%, 36% and 39.6%.  However the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” extended federal income tax rates for additional 2 years leaving brackets at 10%, 15%, 25%, 28%, 33% and 35%. 
• Capital gains rate: Existing tax rates for long – term capital gains and qualifying dividends are also extended through 2012.  They will continue to be taxed at a maximum rate of 15%.  For individuals in the 10% or 15% marginal income tax bracket, a special 0% rate will continue to apply.  
• If you converted a traditional IRA to a ROTH IRA in 2010, the taxable ordinary income from the conversion would normally be reported on your 2010 return.  You now have option to report half the income that results from the conversion on your 2011 return and the other half on your 2012 return.

 Education

• American Opportunity tax credit (Hope credit): The American Opportunity Tax Credit’s higher maximum credit amount, increased income limits, expanded applicability to the first four years of college, and potential refundability, as laid out in 2009 and 2010, are extended through 2012.
• Coverdell education savings accounts: Current rules that apply ($2,000 annual contribution limit, education expenses expanded to now include elementary and secondary school expenses) are extended through 2012.
• Student loan interest deduction: Increased income limits and the suspension of the 60-month rule are extended for 2 years.  (Prior to 2001 the deduction was limited to interest paid in the first 60 months of repayment).
• Deduction for qualified higher education: This deduction which expired at the end of 2009, is retroactively reinstated for 2010, and extended through 2011.

 AMT

• Temporary patch: exemption amounts slightly increased and personal nonrefundable tax credits allowed to offset AMT liability through 2011. 

Exemption amounts               2011

Married filing jointly               $74,450

Single or head of household   $48,450

Married filing separately         $37,225

 Estate Tax

• Estate tax exemption amount will be $5 million per person (indexed for inflation in 2012); the top estate and gift tax rate for these years will be 35%
• The $5 million exemption amount and 35% top estate tax rate will apply retroactively to 2010 but for those individuals who died in 2010, an election can be made to choose the estate tax provisions effective prior to this legislation
• Starting in 2011, the gift tax will have a $5 million dollar exemption amount; the generation – skipping transfer tax, with a $5 million exemption effective Jan. 1, 2010, will have a 0% tax rate for 2010, and a 35% rate for 2011 and 2012
• For 2011 and 2012, when one spouse dies, any unused portion of that spouse’s estate tax exemption amount may be transferred to the surviving spouse.

 Employee payroll tax

• Employee portion of social security retirement component of FICA employment tax is reduced by 2%.  Normally equal to 6.2% of covered wages up to the taxable wage base, for 2011 this rate is reduced to 4.2%.  Self – employed individuals also benefiting from a 2% reduction. 

 Other provisions

• Exclusion of up to $5,250 in employer-provided education assistance for undergraduate and graduate education
• Increased earned income tax credit for families with 3 or more children, and increased EITC income limits for married couples filing jointly
• Increased child tax credit amount with ability to refund expanded (15% of earnings above $3,000)
• Expanded credit for child and dependent care expenses
• An increased adoption tax credit and employer – paid adoption assistance exclusion amount; the credit also remains refundable
• Tax credit for energy – efficient improvements reinstated to existing homes for 2011, but as it applied prior to the American Recovery and Reinvestment Act of 2009 (10% credit rate generally applies).
• Itemized deductions and personal dependency exemptions will not be reduced for higher-income individuals
• New “Marriage penalty” relief as an expanded 15% tax bracket and an increased standard deductions amount for married persons filing jointly.

Please be advised due to SEC rules/regulations Geier Asset Management, Inc. can not and will not accept or respond to any reader comments or feedback with respect to any blogs Geier Asset Management, Inc. posts.   You should always consult with your personal financial advisor before making decisions based on blog content. 

“Securities offered through Triad Advisors. Member FINRA/SIPC.”