Shifting to Savings in 2011

As we enter the last week of the year, we hope that all of you are enjoying the holiday season. This week is one of reflection and resolution for the year to come, and for many that includes a somewhat uneasy scan of the December credit card statement to see how much damage was done over the holidays.

There will be countless articles out there in the coming week with suggestions on how to trim the coming year’s budget. To add to those, we’ve compiled a few of the more unique ways to eke out a little more value from your day to day life that we’ve seen over the last few months. Heading into 2011 seemed as good a time as any to walk through a few of them . . .

End of Year Giving

• Problem: You feel charitable and enjoy giving to those causes that are important to you, but have no idea how much you gave, who you gave to and how any of it fits into your budget throughout the year.

• Solution: Be more strategic in your giving. This is not a suggestion to give less, just more efficiently. Sit down now and determine a budget for next year’s giving, divide those resources amongst those causes that are most important to you and give accordingly. Make sure to leave room for other opportunities that move you to add to your circle of giving through the year.

Coinstar

• Problem: You have a mountain of change scattered in various jugs, piggy banks and containers throughout the house. You’d like to put it to use, but who has time to sprawl out on the floor and roll up piles of change? You could go to a Coinstar, one of those little green boxes at the grocery store, but you’ve heard (correctly) that it’s one of the biggest rip-offs out there, charging somewhere in the 10% range for this convenience.

• Solution: Were there items on your Christmas list that you didn’t receive? Did you receive a new iPod and need to beef up your music collection on iTunes? Are you tired of cooking for family and friends and need a night out? Use your loose change to treat yourself. See, Coinstar machines also give you the ability to purchase gift cards at retailers from Lowe’s to Gap to Starbucks and the retailers pick up the fee on your behalf. In fact, now through the end of the year, they’ll kick in an extra $10 for every $40 in change that you process, so grab those coins and pay for that morning cup of coffee for the first few months of the year!

Auto Loans

• Problem: There are great interest rates being offered on auto loans, but you’re in the middle of paying off your current loan and have no plans to buy a new car anytime soon. Have you missed the boat on these great rates?

• Solution: With rates near historic lows, refinancing your car loan may be worth considering. The short term nature of these loans has meant that you need a substantial rate reduction to make the process worthwhile. But, with rates as low as 4.5% on used cars at small banks and credit unions in the area, relatively substantial savings are possible if you have a higher-rate loan. It’s important to note that the refinancing process on an auto loan is much easier than a typical home refinance and can often be done in one visit to the bank.

Gas

• Problem: Did I just see gas for $3.05/gallon?

• Solution: Maximize the benefits of grocery store loyalty programs or your warehouse club membership. Many of us rack up points on a weekly basis at our local grocery stores or have memberships to Costco, Sam’s Club or other warehouse clubs that give us access to discounted fuel. The problem is, when it comes time to fill up, we’re as far away from those discounts as could be. The solution is to be a little more conscientious when you fill up. Time fill ups to trips to the grocery or the warehouse club. For example, if you use a Kroger card and spend $400 in a month on groceries, you can save 40 cents per gallon. On a 25-gallon fill-up that’s $10 back in your pocket.

These may not be cure-all savings tips, but they are a good start in putting your money to work for you and maximizing your budget in 2011. Starting off the year with a plan and the right mindset can do wonders for achieving greater peace of mind.

Much like any resolution, don’t fall into the trap of trying to do too much. When we overwhelm ourselves with choices, we typically wind up doing the same thing…nothing.

From all of us at The Asset Advisory Group, have a very safe & Happy New Year!

The Asset Advisory Group
www.taaginc.com

New Index Returns Astound Wall Street

(from Dan Solin's Huffington Post blog, 12/7/2010 - click here for the original post)

It's hard to be modest about this achievement, but I am going to try.

In January, 2010, I created the Solin Random Stock Index (SRSI). For those skeptics who want to verify this claim, please see this blog I wrote at the time.

I wish I could report that my index was a complex algorithm, but it was really very simple. I just took the spelling of my last name, and punched each letter into a quote engine. I selected the first two stocks (listed on a U.S. stock exchange) that appeared for each letter. Here's the list of ten stocks that comprised the SRSI:

1. Sprint Nextel (S)
2. Sirius XM Radio (SIRI)
3. Realty Income (O)
4. Oracle (ORCL)
5. Loews (L)
6. Las Vegas Sands (LVS)
7. Intel (INTC)
8. International Business Machines (IBM)
9. Netsuite (N)
10. Nvidia (NVDA)

Now that we are coming to the end of the year, I thought this would be a good time to see how the stocks in my index have performed. I know my competitors are busy getting the performance data of their funds together so they can show how well they did. Morningstar will be analyzing this information in order to figure out which funds get the highest "star" ratings.
Investors rely on performance history. High performing funds can expect an influx of revenues. More revenues means more fees. It's a high stakes game. I want a piece of it.

So, how did the SRSI do from January, 2010 through November, 2010? Hold on to your hat. It's up an astounding 45.14%! No kidding.

The S&P 500 is only up 5.87%.

Let's put this stellar performance in perspective so you can really appreciate it. In an article published February 24, 2010, US News recommended its top mutual funds for 2010. It's methodology was impressive. It relied on "some of the brightest minds conducting investing analysis" and used ratings from Morningstar, Lipper, Zacks, TheStreet.com and Standard & Poor's.

Hard to see how you could miss if you followed these recommendations.

Let's compare some of these top funds with the SRSI. The performance data is as of October 31, 2010.

The Yackman Fund (YACKX) is up 9.07%. It was the top ranked Large Value Fund;
The FMI Large Cap Fund (FMIHX) is up 5.15% It was the top ranked Large Blend Fund;
The Parnassus Workplace fund (PARWX) was up 8.35%. It was the top ranked Large Growth Fund.

The SRSI clobbered the returns of all these top rated funds. I didn't have access to any of the "brightest minds" who do sophisticated analysis and I don't even have a subscription to any of these ratings services.

So what can I expect next? I assume invitations from the cable financial shows so that I can educate investors on how I did it. Maybe all those impressive ratings services will start to follow the SRSI. If I was set up to receive funds, I assume I would have to brace for a massive influx. I would wear "back office problems" as a badge of honor.

My real goal is to win Morningstar's Fund Manager of Year award. Bruce Berkowitz was the pick for U.S. stock-fund manager in 2009 for his stellar performance running Fairholme Fund (FAIRX). His fund has $10 billion in assets. Mr. Berkowitz is a highly regarded stock picker, holding only about 20 stocks. The SRSI holds 10 stocks, so we have the over-concentration thing in common.

Fairholme is only up 12.96%. Clearly, my stock picking skills are vastly superior. It should be no contest for 2010. I'm a shoo-in.

I'll still have time to write this blog. I really enjoy it. But I suspect that being known as a "stock picking guru" will have its perks as well.

Sorry, I have to run now. The phone is ringing. I'm hoping it's Jim Cramer. Maybe he will anoint me as "one of the great ones in this business", an accolade he is reported to have bestowed on

Lenny Dykstra, the ball player turned stock picker.

Dykstra filed for bankruptcy in July, 2009.

I'm no Lenny Dykstra.

The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.

Preparing for the Unexpected

I was planning to write this week’s blog on the provisions of the most recent tax bill, but Congress isn’t cooperating. It’s interesting that a major point of contention is the estate tax. Most people were hoping to go back to the $3.5 million exemption and the 45% tax rate we had in 2009. As many of you know, when the Republicans and President Obama originally negotiated the newest tax bill, a $5 million exemption and 35% rate were included. It’s anyone’s guess when a new bill will be negotiated. We didn’t expect to get this far into 2010 without any estate tax at all. As you make your to do list for 2011, don’t let an act of Congress prevent you from preparing for the inevitable.

One aspect of estate planning covers the disposition of your property after your death but just as important is who will manage your property or oversee your healthcare if you are no longer able to during your lifetime.

The documents that should be included in your estate planning include:

Durable Power of Attorney – to give another personal person legal authority to act on your behalf to do things such as:
• use your assets to pay your everyday expenses and those of your family
• buy, sell, maintain, pay taxes on, and mortgage real estate and other property
• collect Social Security, Medicare, or other government benefits
• invest your money in stocks, bonds, and mutual funds
• handle transactions with banks and other financial institutions
• file and pay your taxes

Durable Power of Attorney for Health Care – to allow you to name someone to oversee your healthcare wishes and make any necessary medical decisions for you.
Living Will – this is your written declaration regarding life support if you are unable to speak for yourself. In most states you will specify whether or not you want to receive life-prolonging treatments at the end of life.

HIPPA Release – the Health Insurance Portability and Accountability Act of 1996 requires healthcare providers to make reasonable efforts to limit the release of protected health information. This document will allow you to name one or more persons to have access to all of your medical information. It is especially important because you want to ensure your Healthcare Power of Attorney has all of the relevant medical information if they need to make decisions on your behalf.

Once you have take the time to draw up your estate plan, it is critical to make sure it remains current. If you no longer want one of your representatives (such as your executor or healthcare proxy) to serve in this capacity, or they are no longer able to do so, make sure you update your documents. Moving to another state may also be a reason for an update. State or Federal law changes can impact your plan, so at the very least, make sure to review your documents with your estate planning attorney every five years.

Christine L. Carleton, CFP®
clcarleton@taaginc.com
http://taaginc.com/

Holiday Stuff

For those of us that celebrate and haven’t realized it yet, Christmas is about 2 ½ weeks away. Up until yesterday, I was completely in the dark on this, and I know I’m not alone. Didn’t I just carve a turkey last week? Didn’t the pool just close a few weeks before that? Maybe they changed the date this year.

Saturday, my family participated in our annual drive out to the country in search of this year’s Christmas tree. Yes, we pass several tree farms on the way and countless tree lots, but it’s something we truly enjoy every year. Some light snowfall and a great stock of trees made this year’s trip that much richer.

Sunday brought another favorite tradition, lunch with Santa Claus. For my four year old, when Santa walks in the room, time stops. Clifford, Curious George and Sid the Science Kid (think Clooney, Roberts or Hanks for the uninitiated) could appear in the flesh and she wouldn’t take her eyes off the big man for a second. She spent close to a month preparing her list and planning the precise words she’d say. When she arrived in St. Nick’s lap, she just stared and smiled. We finally had to approach her and remind her of some of the things she hopes to find under the tree.

I don’t want to make this too much of the clichéd “remember what’s important this time of year” blog, but I’m afraid that’s exactly where I’m headed. I won’t pretend this will be the year we all admit that the gifts are truly unnecessary and just another way to fill the basement, attic, or storage unit with more Stuff (it deserves a capital S these days). There’s little that can be done to stop the precious moments captured this weekend from being quickly replaced by mad dashes to various stores, outlets and kiosks all to make sure every “i” is dotted and “t” is crossed. But, much like financial planning, small incremental improvements and regular reminders about which of our goals are truly important can have a dramatic impact in shifting our focus in the long term.

In the meantime, I hope this reaches you all early enough in the season to take it to heart. Truly enjoy the experiences you have with your family, friends and others around you. Worry less about the Stuff and more about the moment. When thinking of unique gifts, give the gift of time, whether it’s dinner and a play, a sporting event or some other outing, the experiences we share with those we care about truly do make the best gifts of all. There is no whatzit, whirligig or doohickey that could possibly bring as much joy.

For my last blog of 2010, I mostly just want to wish you all a very happy holiday season and best wishes for health, happiness and balance throughout the year. We appreciate you taking the time to read the blog and hope that, at least on occasion, the topics discussed provide real value, whether financial, health related or just as a good time to reflect for you and those around you.

Chip Workman, CFP®
cworkman@taaginc.com
www.taaginc.com