Tax Efficient ETF Investing Benefits

Delayed capital gains taxes - they allow an investor to pay most of his capital gains upon final sale of the ETF, delaying it until the very end.
In this respect your wealth accumulates a lot quicker then constantly being knocked by capital gains taxes from the start to the end.

Simple Balanced ETF Portfolio for high gains that actually can beat the market can make up your entire investment portfolio. ETFs outperform traditional mutual funds by as much as 33% more in realized wealth gains towards your retirement.

Personally I try to invest about 90% in ETFs and I even invest in ETF Bond Funds such as iShares Lehman Aggregate Bond (AGG). They are well diversified, management costs are dirt cheap and they are capital gains optimized. What more can you ask for in headache free investments?

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Rich Guys Modified Harvard and Yale Stock Portfolio

45% Domestic equity

• Vanguard Total Stock Market Index Fund ETF (VTI)
• DJ Wilshire Total Market ETF (TMW)

25% Foreign equity

• iShares MSCI EAFE (EFA)

10% Fixed income

• iShares Lehman US Aggregate Bond Fund (AGG)

20% Private equity

• PowerShares Private Equity ETF (PSP)

This of course is my modified alternative to their portfolio that is a little simpler and takes the most advantage of Exchange Traded Portfolios (ETFs).

You can refine and add as you like but this seems to be the best of the mix without needing a substantial amount of money to start up an nice investment.

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For the next three years from 2008 to 2010 in the tax brackets of 10% or 15% will not have to pay anything on qualified long-term capital gains and qualified dividends. In the above tax brackets to familiar 15% rate will still apply. For the short-term capital gains and disqualified dividends you will pay the marginal tax rate just like other ordinary income.

That means extra money in your pocket and a major tax relief if you do qualify.

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• You can now roll assets directly from a 401(k) to a Roth IRA - In the past you first had to through funds into a traditional IRA and then convert it into a Roth IRA. It makes the whole deal a little simpler but the same taxes still apply. You cannot get over good Uncle Sam. This can be done right away considering that you make less than $100,000. However in 2010, this limit goes away.
• IRA contribution goes to $5,000 - if your under 50 you can now add $5,000 and if your older you can now add up to $6,000. Also, starting in 2008 contribution limits will now be indexed to inflation in $500.00 increments.
• Income limits for deductible IRA contributions go up - now your entire IRA contribution will be tax deductible if your modified adjustable gross income (MAGI) doesn’t exceed $53,000 for a single filer or $83,000 for joint filers.
• Income limits for Roth IRA contributions go up - Now you can make the maximum Roth IRA contribution if your modified adjusted gross income (MAGI) doesn’t exceed $101,000 for a single filer or $156,000 for joint filers.

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Using a comparison between low fee index funds with no-load versus class-A mutual funds that do have load fees plus management fees tied to them. You lose up to 33% in fees right off the top every single time that you purchase more stock.

This not only beats down your potential for high returns but also lowers the amount of money that you can withdraw yearly by drastic amounts.

To fully see the drastic change in compounded wealth that is subtracted you have to check Get Rich Slowly “How Lower Fees and Expenses with Index Funds Could Mean 33% More to Spend in Retirement.”

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Benefits of Owning a House or Real Estate Property

1. Forces you to put away money in the form of mortgage payments.
2. Houses generally and mostly do not go up and down as the stock market does.
3. Most of the time a house always continues to build up equity.
4. If you live in the house, you get the added benefit of enjoying it as well.
5. Later on you can sell it and cash in or turn it into a revenue generating cash box.

If you cannot afford one right now, you should save as much as you can on a weekly basis or a paycheck basis. Save like 20%-5% into a secret account in which you pretend to forget about then throw that money into the stock market and the bonds market.

Simply invest 40% into iShares Lehman US Aggregate Bond Fund (AGG) and put the other 60% into SPDR Trust, Series 1 (SPY).

Keep saving and compounding and you will get there.

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1. Apply for all those cool credit cards like free miles, points and cash rewards. These are good in limited numbers like a maximum of two of these combined.
2. Apply for any credit card that does not give you anything back.
3. Take your credit card and max it out to buy unnecessary things for crazy luxury or to impress your friends.
4. Pay your bills late and then pay late fees.
5. If you have big bills, at least try to pay the minimum payment.
6. Wait till a unpaid bill goes to a collection agency.
7. Don’t pay your landlord or mortgage because you want to buy that sweet new current year vehicle. My friends dad told him “You can’t live in a car and if you could, how long do you think that will last?”
8. Try to runaway from your taxes.
9. Payday loans are for emergency funds in which you pay back high interest rates. Instead create your own emergency fund of about 6 months worth of emergency money.
10. Pride, think you don’t need to budget and put away some side money. Listed as pride but it can be listed as poor thinking.

If you are guilty of any of these things, please call a financial adviser!

LoL, I had fun posting this little folly list because I am happy to report that I am no longer doing these things any more.

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I am not going to talk about looking for coupons or impulsive buying. When you work so hard to save money into a savings account you want to keep it there.

Save Money and Keep your Saved Dollars

1. Create a personal budget - very important first step. The best way to save money is to trim what doesn’t need to be spent.
   • Depending on your income and expenses you will know a reasonable number to set aside solely for savings. Declaring a realistic figure like $25-$50 per week or maybe even bi-weekly.The point is something is always better then nothing so don’t get discouraged if it seems like a small amount.
2. The 3 Bank Account Difference - the 3 accounts all serve a distinctive purpose.
   • Spending Account - this account can be a checking or savings account. This account will receive paychecks and will take the role of dealing with daily expenses. This one is okay to have an ATM card in order to withdraw money for day to day activities.
   • Rainy-day/Emergency Fund Account - this will be your emergency blanket. This will cover any unforeseen emergencies. Job loss, car repairs, household repairs, house tax increases and so on.This account should have no ATM card and should be emergency use only.
   • Savings Account - this account also should not have and ATM card and you will not transfer out money from this account for day to day purposes or things like groceries and so on.I use currently use Paypal’s money market account for this and I also use Sharebuilder money market account.
3. Fill up Emergency Funds Account - this account should be filled up before the savings account.As a rule of thumb try to save enough to cover all of your expenses for at least the next 6 months or do like me and save enough for 10 months
4. Save Money Now - when you have a nice emergency fund setup and ready only then would you start saving.Try to set an automatic transfer that occurs every two weeks or every month. Automatic transfers makes sure that you do it and you never have to worry about remembering.I picked up this from David Bach and his Automatic Millionaire book.

No worries about tracking where your money goes and wondering if you put money in.

That’s it to automatic savings and novice budgeting.

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Making Money Methods

• Set Goals - What do you want to do? Make money, attack debt or plan for retirement. Hopefully you will like to do all of these things at once. I planned to set my goal to increase wealth and in that respect to increase wealth.
• Read Personal Finance - Read every web article, book and subscribe to personal finance magazines.
• Track Spending - Track all of your expenses so you can see where your money is going. I realized that I spent about $60 per week at Duane Reade. You know that was cut later on.
• Cut Expenses - This goes hand in hand with tracking expenses. You then analyze where you spend too much and then trim them out of your budget.
• Decrease Debt - Start cutting down credit card debt. Start with the smallest debt then work your way up to the big ones. Shop around better interest rates then call up your current credit card and tell them to rate you can get and see if they will negotiate. If they do fine but if not then transfer the debt to the new one and close the old credit card immediately. Cut your total credit cards down to 2 maximum cards.
• Extra Income - Look into alternate streams of income. I use dividend stocks, Google Adsense, web advertisement, regular 9 to 5 job, high yield money market account for liquid money, rent house/apartment.
• Purchase Stock - I would say to purchase dividend stock because they increase per share and they still function as stock.
• Purchase Property -By purchasing a property, you increase your wealth automatically and fast. You force yourself to save and properties increase with inflation.

This simple but highly effective methods are so simple when you think about it, but highly effective. These cover making money, removing credit card debt, gaining extra income, cutting expenses with a tighter budget and planning for retirement by learning steps to increase wealth.

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Advantages

• Fast.
• Free.
• A rival to Quicken even in its beta stage.
• Easy setup.
• Accessible anywhere.
• Beautiful Ajax design.
• Tons of graphs and charts.
• Easy way to see trends.
• Nice feature named “Ways to Save.”

Truly one of the best rivals to Quicken and it is free to use with no installs to worry about. It is built on a web technology that allows it to load various parts of the web page in an auto update way. I just added my user name and password for my various accounts and waited a short minute or less for account history to be updated; then I was ready to rock. They added a plethora of charts and graphs to show spending habits in a glance. You can even check spending habits as easy as just viewing your personalized trend reports page. Mint.com truly tries to make personal finance as easy as checking your email. A good feature that I really like is the “Ways to Save” money section. I love it because what it proposes to do is automatically check different banks and get you the best rates that it can find all automatically. I feature still has some bugs but it shows a lot of promise.

Disadvantages

• Didn’t know my credit card info like interest rate and total rewards.
• Misclassified a Countrywide Mortgage Payment as an Electronic Boutique Purchase.
• Still in Beta.
• Suggestions to save money section named “Ways to Save” needs work.

With all good things there are the disadvantages or the minor short comings. I plugged in my information for one of my credit cards and up to now it doesn’t know the exact interest rate or APR. Mint.com also tries to categorize all info automatically but still false short in this aspect as well. One of my mortgage payments was classified as a Electronic Boutique purchase but was then replaced by transfer. The suggestions to save money is still a major point but however still needs some work as well. I don’t want to be too mean because the web application is still in beta.

Conclusions

All I can say is try it out and see what you can get from it. It’s free and over round pretty good. Just remember that it is in beta still so don’t go by everything that it has to say without first thinking it thoroughly through. That goes especially for the ways to save money section.

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