Investment Strategy #10: For tax-free mutual fund investing, use self-directed annuities
A self-directed or “variable” annuity combines the investment power of no-load mutual funds with tax deferral. Unless you invest in a mutual fund inside a tax-sheltered retirement plan, you’ll owe income tax immediately on every dividend. That’s true even if you reinvest all of your dividends, as most mutual fund investors do. What’s more, if…
Investment Strategy #9: Ginnie Mae funds offer high yields with low risks
Mutual funds are an excellent way to buy Ginnie Maes, which are high-yielding mortgage securities fully backed by the federal government. Securities issued by the Government National Mortgage Assn. (GNMA), a federal agency, are guaranteed, so there’s no risk of default. Yet, Ginnie Maes usually yield anywhere from 0.5% to 2% more than Treasury bonds.…
Investment Strategy #8: Invest in bond funds when interest rates start to fall
The time to move into bond funds is after interest rates have peaked and started to come down, but have not yet reached the point for moving into stock funds. – When you’re evaluating bond fund performance, the key is total return (including principal gain or loss), not just yield The first bond funds focused…
What is a “401(k)” and how does it work?
Per Ameriprise Financial (2023), “A 401(k) is an employer-sponsored retirement savings plan that offers significant tax benefits while helping you plan for the future. With a 401(k), an employee sets a percentage of their income to be automatically taken out of each paycheck and invested in their account. Participants can choose how to allocate their…
Investment Strategy #7: Look to money market funds when interest rates are high
Stock mutual funds no longer have the potential for the greatest profits when the interest rates are high. Money market funds will not only give you the best return but will also be the safest investment since periods of high interest rates are when stock prices tend to fluctuate wildly and bonds decrease in value…
Investment Strategy #6: Aggressive growth stock funds
Investment Strategy #6: Aggressive growth stock funds Stock funds are a low-risk way to invest in the market. Thanks to diversity and professional management, you’re not likely to suffer big losses, even if you invest in areas that would be highly risky if you bought individual issues. Such funds offer the potential for high returns.…
How do the IRA rollover rules work to reduce my taxes?
The IRS is quoted (2022) as saying the following: Firstly – if you have not elected out of withholding, your plan administrator or IRA trustee will withhold taxes from your distribution. Then, if you later roll the distribution over within 60 days, you must use other funds to make up for the amount withheld. Additionally…
Investment Strategy #5: Pay yourself by buying no-load mutual funds
Did you know that mutual funds fall into two categories: load and no-load. With a load fund, you pay a sales charge up front, as much as 8.5%. Suppose you invest in a fund with a 5% front-load. For every $1,000 you put in, only $950 actually goes to work on your behalf. The other…