Years ago, as a newlywed I remember learning that because we were married my boyfriend and I would now pay higher taxes than we did before although our incomes were exactly the same. That was my introduction to the marriage penalty inherent in our progressive tax code, where a married couple pays taxes at a higher rate than if they were two singles earning the same wages. I complained to an older married friend that this seemed really unfair. Her view was that married people get other breaks so maybe paying slightly higher taxes was OK. Recently I recalled that long-ago conversation.
Newly single, I realize how expensive it is for two people who used to live as one household to live separately. When I lived with my husband in one household we had to make the mortgage payment monthly, pay utility bills, grocery bills, property taxes, insurance and other such incidental expenses. Now we are in two separate households and the expenses have doubled. Instead of one mortgage payment, our incomes support the same mortgage payment plus an apartment rental. The grocery bills in my single household seem exactly the same as before, utility bills are no different, neither is landscaping, insurance and various other expenses. The only difference is that these expenses are being replicated across town in my ex's household.
Across the gap of 20+years, I recall that half-forgotten conversation; now I get it and can see for myself the breaks that marrieds get and why net income drops for both parties after divorce.
Veena Kutler
Showing posts with label Veena Kutler. Show all posts
Showing posts with label Veena Kutler. Show all posts
Thursday, January 15, 2009
Tuesday, January 13, 2009
More Thoughts on Madoff
The Madoff affair has stirred up a buzz within the financial press and among financial advisors. Some advisors had client assets with Madoff and were caught in the fallout. Most advisors had no exposure and of these some are now congratulating themselves in the press for having the prescience to dodge the bullet. I find the extent of back-patting going on to be interesting and wonder how many of us advisors were lucky rather than insightful.
I remember a very smart, experienced analyst telling me once that even the best analysis can’t protect against fraud perpetuated by a determined person, because finding fraud requires detective work rather than analysis. Given that, what can be done going forward to protect assets from a fraud like this? Just as a good diet and exercise help us stay healthy there are basic investment rules that we can follow to help keep our portfolio sound. But just as diet and exercise alone can’t prevent every disease, the basic rules won’t always keep you out of the crazy pitfalls of the markets.
Transparency – It’s helpful to have securities that are priced daily and even if it is a fund to have regular reporting so the securities held by the fund are known and valued. This policy rules out using hedge funds that aren’t required by law to report their holdings, and until hedge funds are transparent we don’t believe in investing in them.
Show Me the Money – Having an independent custodian that hold the assets and is independent of the money manager introduces a good check-and-balance. Madoff’s investors sent their money to Madoff. Even large mutual funds use outside custodians (such as State Street Bank) to custody assets and don’t hold the money themselves. Separation of the money manager and the custodian is a good thing.
Diversification – Diversifying among managers, styles and asset classes is still the best and no-brainer way to reduce if not avoid risk. Keep in mind that the biggest losers in the Madoff fraud are those who had all their assets with the Madoff firm.
If it Smells Like a Free Lunch… – I’m not convinced that all Madoff investors were being greedy. My guess is that some felt that the returns of 8% - 10% a year that Madoff was targeting indicated a conservative strategy. Not being market professionals, they didn’t know that target requires a swing-for-the-fences mentality. Think about it – there’s no way 8% - 10% can be achieved consistently in down markets by using low-risk strategies.
Veena Kutler
I remember a very smart, experienced analyst telling me once that even the best analysis can’t protect against fraud perpetuated by a determined person, because finding fraud requires detective work rather than analysis. Given that, what can be done going forward to protect assets from a fraud like this? Just as a good diet and exercise help us stay healthy there are basic investment rules that we can follow to help keep our portfolio sound. But just as diet and exercise alone can’t prevent every disease, the basic rules won’t always keep you out of the crazy pitfalls of the markets.
Transparency – It’s helpful to have securities that are priced daily and even if it is a fund to have regular reporting so the securities held by the fund are known and valued. This policy rules out using hedge funds that aren’t required by law to report their holdings, and until hedge funds are transparent we don’t believe in investing in them.
Show Me the Money – Having an independent custodian that hold the assets and is independent of the money manager introduces a good check-and-balance. Madoff’s investors sent their money to Madoff. Even large mutual funds use outside custodians (such as State Street Bank) to custody assets and don’t hold the money themselves. Separation of the money manager and the custodian is a good thing.
Diversification – Diversifying among managers, styles and asset classes is still the best and no-brainer way to reduce if not avoid risk. Keep in mind that the biggest losers in the Madoff fraud are those who had all their assets with the Madoff firm.
If it Smells Like a Free Lunch… – I’m not convinced that all Madoff investors were being greedy. My guess is that some felt that the returns of 8% - 10% a year that Madoff was targeting indicated a conservative strategy. Not being market professionals, they didn’t know that target requires a swing-for-the-fences mentality. Think about it – there’s no way 8% - 10% can be achieved consistently in down markets by using low-risk strategies.
Veena Kutler
Monday, December 22, 2008
Vote for What??
(Note: Voting on this issue on Change.org ended on 12/31/2008. It did not make it past the first round.)
Does your financial advisor put your interests first? It seems like a simple question with an obvious answer. Who would work with an advisor who did NOT put the clients' interests first at all times?
If you are working with an advisor who is a representative of a brokerage firm or bank, that's what you are doing. By definition, the primary obligation of a registered representative is to the broker-dealer he/she works for, not the clients. Moreover, when recommending products, a registered representative is only required to consider whether the product is "suitable", not whether the actions he or she is recommending are in the best interest of the client.
It sounds like so much legalize, but this is the difference between a fiduciary standard and the lesser standards most people who call themselves financial advisors are held to. This softer standard contributed tremendously to the chain of irresponsible actions that came together to create the sub-prime crisis and the near collapse of our economy.
Now, the Obama administration is asking for Americans to get involved and to vote for new ideas that can help change the course of our country in the future by visiting their website, change.org. Because there are hundreds of ideas already posted on change.org, we've made it easy for you to get started. You can vote for a fiduciary standard for all financial advisors by clicking on the link in our sidebar. This will take you to the change.org site where you can also look for other ideas and causes you may want to support.
This is an opportunity to speak up and say that you want a financial industry that puts consumers first. With enough votes we might make a difference. If we don't speak up the future will almost certainly be more of the same.
Until the law requires all advisors to put their clients first, you can find financial advisors who annually sign a fiduciary oath by visiting NAPFA - the National Association of Personal Financial Advisors. You can also learn more about fiduciary standards at Focus on Fiduciary. Learn what questions to ask and how to find an advisor who is truly on your side. You deserve nothing less!
Annette Simon
Copyright 2009 Garnet Group LLC
Does your financial advisor put your interests first? It seems like a simple question with an obvious answer. Who would work with an advisor who did NOT put the clients' interests first at all times?
If you are working with an advisor who is a representative of a brokerage firm or bank, that's what you are doing. By definition, the primary obligation of a registered representative is to the broker-dealer he/she works for, not the clients. Moreover, when recommending products, a registered representative is only required to consider whether the product is "suitable", not whether the actions he or she is recommending are in the best interest of the client.
It sounds like so much legalize, but this is the difference between a fiduciary standard and the lesser standards most people who call themselves financial advisors are held to. This softer standard contributed tremendously to the chain of irresponsible actions that came together to create the sub-prime crisis and the near collapse of our economy.
Now, the Obama administration is asking for Americans to get involved and to vote for new ideas that can help change the course of our country in the future by visiting their website, change.org. Because there are hundreds of ideas already posted on change.org, we've made it easy for you to get started. You can vote for a fiduciary standard for all financial advisors by clicking on the link in our sidebar. This will take you to the change.org site where you can also look for other ideas and causes you may want to support.
This is an opportunity to speak up and say that you want a financial industry that puts consumers first. With enough votes we might make a difference. If we don't speak up the future will almost certainly be more of the same.
Until the law requires all advisors to put their clients first, you can find financial advisors who annually sign a fiduciary oath by visiting NAPFA - the National Association of Personal Financial Advisors. You can also learn more about fiduciary standards at Focus on Fiduciary. Learn what questions to ask and how to find an advisor who is truly on your side. You deserve nothing less!
Annette Simon
Copyright 2009 Garnet Group LLC
Tuesday, December 16, 2008
Life Happens
When you least expect it!
Just when you think life is stable and will run on even keel forever or at least for the foreseeable future, everything changes. For many women, the biggest life alterations involve children and spouses. When a child is ill, or leaves home the balance in the household shifts. When a spouse departs via death, separation or divorce a similar void is created. As women, we tend to respond to these changes emotionally and our first thoughts tend not be about our finances but rather about how we feel and how we can cope with these changes.
Life happened to me. A few years ago, I thought that my marriage was stable and the day my oldest child started college seemed safely far away. This summer, two things happened close together: my husband and I separated and my daughter left for a college several states away. My very busy life took an abrupt turn and changes both big and small started tumbling in. Luckily, I still had my teen-age son and my dog at home but the departure of half the household within a few weeks was noticeable. Here are some of the differences I noticed – interestingly, not all bad, and listed in random order.
- My girl-fun buddy was gone. My daughter and I were in the habit of going together to the movies, shopping, and getting our nails done. Now I was on my own.
- My son eats on a very different schedule than I do. So family dinners that had occurred almost nightly dwindled and I found myself cooking for my son and then grabbing a bowl of cereal or soup for myself at a different time.
- The house was a lot cleaner and tidier. We went from a household of very messy (2), messy (1) and slightly messy (me) people to one very messy and one much neater person (me again). Cleaning up for 2 is a lot easier than cleaning up after 4.
- I had time on my hands and nervous energy to expend. My gym – 3 blocks away – was seeing more of me and the dog was getting more walks. Soon, people were commenting that both of us – me and the dog – were looking svelte.
- Decision making as a solo pursuit. Financial and decisions about the house and kids had been made in conjunction with my husband. Now, since I am the one remaining in the house and am the main care-giver for my kids I began making decisions on my own and to suit myself.
- My net worth was cut and cut again. The separation mentally reduced my net worth by half and then the subsequent sharp market decline cut into it again. In the course of a few short months, I experienced the double whammy of separation and a major stock bust – not an experience I would wish upon anyone!
- Friends and family popped up with offers of help and support. My evenings and weekends began to fill up with activity.
Stay tuned. Over the weeks and months ahead I will be blogging about the impact on women of major life changes such as the one I am experiencing myself currently.
Veena Kutler
Friday, December 12, 2008
It's Harvest Time
The market this year has been absolutely punishing – there’s just no way around it. But there is a thin silver lining on the cloud if you have losses in your taxable investment accounts. This is a great opportunity to harvest tax losses you can use to reduce your income taxes, perhaps for years to come.
Harvesting losses refers to a two-step process:
2. Immediately purchase another under-valued security. We use low-cost, diversified mutual funds. By doing this, you capture the loss, which has great value for tax purposes, but you are NOT losing anything because you’re holding a basket of securities that will rise when the market recovers.
Most people have an immediate gut reaction to this idea – “I don’t want to take a loss! I’m going to wait for it to come back.” Some people grow attached to the securities they have picked. Others feel it would be wrong to sell stocks they inherited from their parents or grandparents.
Let it go!
Harvesting losses is a smart tax strategy, not an admission of defeat. Avoiding it makes no sense at all – it is passing up an opportunity to reduce the risk in your portfolio and your future taxes, an opportunity that costs you almost nothing at all (there may be incidental trading costs).
Annette Simon
Copyright 2009 Garnet Group LLC
Welcome to Our Blog!!
Welcome to our blog! Veena and I hope to provide valuable financial information for women of all ages in this space. We’ll talk about what’s happening in the world and the markets as well as the financial challenges in our own lives that might be affecting many of you as well. We want to hear from you as well so please share your questions and comments.
Annette
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