Saving & Investing
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The Education Savings Account or the ESA is a very good way to invest for the better future of your child. Children grow fast and in no time you will find that your child is ready to go to college. So, it is a very good idea to start saving for the financial needs of your child, when he grows up, as early as possible.
The Education Savings Account is actually a custodial account, where the child owns the money but the account is managed by the parents or a legal guardian of the child. The best attribute of the account is that the money being saved in the account is tax free and if the money is withdrawn and used for the child, then the parents need not pay any taxes for it.
The Education Savings Account can be opened by the parents or relatives of a child, in his name, if he is under the age of 18. The child also needs to have a social security number. The Education Savings Account has a maximum annual contribution limit of $2,000 per student until the child reaches his 18th birthday. But this does not mean that you can actually contribute $2,000 in the ESA. The contribution is also limited by your earnings per year. In some financial institutions and banks, there is a minimum limit of contribution too. It is generally kept at $100 but it may vary with various institutions. At the most, it can be $500 per month.
But before you take the decision to open an Education Savings Account for your child, you must keep in mind that the money that is being accumulated in the ESA of your child may reduce his chances of getting financial aids in future. The ESA may also reduce the availability of certain tax credits to your child.
Written by srini on September 17th, 2009 with no comments.
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Investors are found to bear this common apprehension that all bonds are identical. This idea however, is pretty far from the truth. Bond ratings came into existence and were developed gradually over a period of time with an objective to aid the investors realize the amount of risks involved with regard to the different kinds of bonds available in the market.
It is only those bonds that are issued by the federal government or agencies that bear the least amount of risks but, apart from them, every other variety of bonds does bear a certain amount of risks that the investor ought to be aware of before hand. This mechanism of bond rating allows the investor to comprehend this potential risk that exists by default. He can not only evaluate the various determining conditions of the bond, but also effectively balance this default risk. This takes into account the interest payments that are paid to the investor on the bonds.
Investment in bonds is considered to be safe due to the fact that the investor receives his payment on interest expense prior to the payments to the stock-holders. There is a negligible chance of non-payment unless of course, the company decides to declare bankruptcy.
Although, this risk may mot be a magnanimous one, there might be companies that go default on their bonds. This entails that the said risk is not merely perceived, it is indeed real. In such a situation, the bond-holder or the investor does not receive his interest payment but, he might as well end up losing his entire investment on the bond.
Written by srini on September 16th, 2009 with no comments.
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Savings are required not only for specific events or to supplement the requirement earnings, but also to accumulate capitals to enhance the future securities. The career structures are very predictable in the current economic scenarios. Therefore, we can no longer depend on our states to sustain us in our old age. In such a situation, the investment companies can allocate our capital in a diversified portfolio of assets. These investment companies can be investment trusts, venture capital trusts or off-shore and AIM traded investment companies. After pooling in the investors’ money, these companies resort to the services of a professional funds manager to further the investment process. They help the investors with smaller capitals to acquire exposure at lower costs and into a professionally run diversified portfolio. The risks involved in the investment are also efficiently spread.
The investor stands to attain certain benefits by saving their investment through the investment companies:
You get to pool your money – as the investor purchases shares in an investment company, your money gets pooled along with the other investors and this provided potential to the economies with regard to dealing with costs and administration.
The risks get spread – The investor need not solely depend on the success of shares of just one company. An important point to be noted in this aspect is that the investment company shares are equity investments and the prices of the shares and the associated earnings can fluctuate.
Written by srini on September 15th, 2009 with no comments.
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The high interest checking accounts offered by a lot of banking institutions can be a feasible option. This is particularly for all those investors who do not have the need to harbor a huge amount of on-demand cash. The point to be noted is that the amount you decide to keep in your checking account is not very high considering the status of your overall portfolio. The Federal Reserve has currently slashed off the interests rates, and this has resulted in modest interest rates as offered by the banks. There are a few aspects to be considered with regard to high interest checking:
- You should consider investing your minimum balances in other investment options. If you have around $2,500 in your checking account you may not earn handsome interest on the funds. And, if you end up dropping below the minimum balance, there are fees to be met up with.
- Your interest earnings can fall due to these fees. Prior to investing, one is required to understand every detail regarding the fees within the high interest checking account. If you find the fees higher than your current banking institution, opening a high interest checking account will not be a good option.
- There may be other caveats along with your high interest checking accounts. One needs to check whether the interest you earn is indeed worth it.
Written by srini on September 14th, 2009 with no comments.
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Investment can incur losses and you need to have a way out to beat those losses. This is important if you desire to secure your savings. The loss deductions originating from the net trading losses can be creatively invested.
Here are three basic options:
You can go for the S&P futures – Once you own an S&P 500 Index fund, the 2.5% yield is sure to benefit you. With Obama planning to raise the dividend tax by just 20%, the investor will be able to effectively secure his savings. It is usually noticed that the stock yields are higher compared to the short-term interest rates. If the Treasury’s yield 0.5%, the stocks yield 2.5%, the futures offer you 2% annualized discount to the spot price. For you, the capital gains will be tax-free.
Go for the Short Treasury Bonds – If you’ve suffered trading loss, the investment income will be tax-exempt. The interest rate that is currently 0% for you will rise as the bond matures. Here, you need to take investment advice from an investment broker. It is advisable to lock the bond with a term-purchase agreement.
Exit the bonds prior to the dividend – Once you redeem the bond before the stipulated date, a good section of your interest incomes can be converted to capital gain. If you are tax-deferred, the distribution of your taxable income need not bother you.
Written by srini on September 13th, 2009 with no comments.
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The day is not far off when every part of the planet would experience scarcity of safe drinking water. A number of countries in the world are found to impose restrictions on the water supply and are observed to issue hose-pipes and sprinkler bans in order to combat this rapidly escalating shortage. We need to save water, use it wisely and preserve it for our future and save the planet.
Here are a few tips for saving water:
- A huge amount of water goes wasted due to leaky taps. Imagine, a tap losing one drop of water per second, amounts to 15 liters a day!
- A bath can be relaxant but it uses up to 100 liters of water. An average shower will help you to conserve two-thirds of it.
- Small changes in practice can save water in the kitchen. Wash vegetables in a bowl instead of running water.
- Go for water-efficient appliances. A hippo or a save-a-flush can help you save 2000 gallons of water every year! The washing machines and dishwashers should be replaced with energy-efficient ones. They save energy as well as use lesser water. Wash only full load in a washing machine.
- Get your water-pipes and external taps lagged before the winter months. This will make them resistant to freezing and bursting; thereby, saving huge amounts of water from being wasted.
Written by srini on September 12th, 2009 with no comments.
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You might think about savings and investment in isolation. But, what you really need to focus on is the fact – what would you like your money to do for you? Once we are decided about the manner in which the money is slated to be used in future, an effective investment strategy can be formulated. This is also related to the prospective performance of your investments, as it would be a marker for your savings and your financial status.
Asset allocation plays a big role here. It will help you determine the portfolio returns and aid you to devise mechanisms through which you can improve them. It can aid you in mitigating the risks involved. If you are able to devise a effective plan to diversify your major asset classes, in the form of cash, commercial property, fixed interests and equities investment, to name a few, you would find yourself in a better position to manage your investment.
Each investment portfolio incurs a specific variant of risk. So, as you develop a precise idea of your investment requirements, building the rest of the strategy would become easier. Be it the purpose of investment, the time horizon for the investment, the amount of risks undertaken or the corresponding security you stand to attain. These are all vital factors that need to be considered to efficiently safe-guard your savings.
Written by srini on September 11th, 2009 with no comments.
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Index investing can be an amazing savings option. As an investor, you first get to have a clear idea about what are Indexes. Well, The Dow, S&P 500, Nasdaq 100 or the Wilshire 5000, all of them are indexes. Indexes are basically groups of stocks that are carefully selected in order to effectively represent certain sections or portions of the stock market. Majority of the index investments are based on S&P 500 or the Wilshire 5000. As you invest in them, you become a part-owner of these companies
As you delve deep into this investment pool, you would notice that the broad market index does match very closely to the return of the overall stock market. Majority of the mutual funds do not really manage to achieve this. The statistical data of the last ten years would reveal that less than 20% of the large-cap mutual funds have managed to outperform the S&P 500. This makes index investing a great option.
Then, the cost-efficient factor makes it a great way to save your investment too. Investment through the index funds are carried out only in those companies that are enlisted in the index. You don’t require an analyst to get this data! So, this way, you are saved on the operating fees that are usually charged by the funds from the shareholders. This indeed offers you high savings option.
Written by srini on September 10th, 2009 with no comments.
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As you go green, you can do your part to save the environment. In this process you just don’t do well for the planet but, effectively save your money too.
- Use CFLs. Although, they are expensive, they last long and use less energy helping you to attain bigger savings over a longer period of time.
- Opt for energy-efficient appliances. Be it heater, washer or dryer, they can really reduce your power bills. Reduce the usage of hot water and run for the clothes-line when you want to dry your clothes.
- Buy used stuff. Hunt garage shops, thrift sales and eBay. You help the product to last longer and reduce the pressure on environment. You also save big-time.
- Avoid the coffee shop and make your own coffee. Small efforts can save you precious cents and add up big with time. Bulk buying is also a good saving method.
- Eat in instead of eating out. Expensive sit-down restaurants can be substituted by eating at home. Avoiding fast food joints can help you save more. Go for car-pools, bikes or take a walk. The lesser you drive, the more you save. You can commute to do your bit in helping global-warming. Go for a fuel efficient care if you need to drive.
- Finally, waste less, insulate your heating and cooling systems and run the motor-less push mowers.
Written by srini on September 9th, 2009 with no comments.
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In order to prepare for a successful investment or building your capital, it is important to cut back and save effectively on your electricity. Electricity bill is one such area. Here are several options that would aid you to lower your electric bills:
- Close the blinds and the curtains – If your windows lack the mini-blinds, you need to ensure that they are in place. They act as wonderful insulators.
- Get energy-saving windows installed in your rooms – The old single-pane windows allow a lot of heat and air-conditioning to escape.
- The filters in your air-conditioners and furnaces should be regularly changed – This helps your system to run at optimum efficiency, thus helping you save electricity and the air in your home is also kept healthy.
- The window air-conditioners should be placed in the shadiest side of the building – This will result in lesser consumption of power and it will also work less hard.
- The air-conditioner and furnace must be of the right size – Well, if it is too small, it has to work harder, if it is too large, its efficiency will go wasted. In either case, the consumption of electricity will go high.
- The systems should be regularly checked – This way, they not only run smoothly but the problems are detected right on time, thereby saving you money and power.
Written by srini on September 8th, 2009 with no comments.
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