Adjustable (ARM) Rate Mortgage

Angel Investors

Annual (APR) Percentage Rate


Automobile Insurance

Bear Market

Blue Chips

Brokerage Houses

Bull Market

Buy Sell Agreement

Casualty Loss

Certificates (CD's) of Deposit

Closing Cost

Condo Insurance

Credit Cards 101

Credit Report

Credit Scoring

Day Trading

Debt-to-Equity Ratio

Dow Jones Averages

Education IRA

Family Limited (FLP) Partnership

Federal Reserve

House Flipping

Good Credit 101

Hedge Funds

Home Buying

Home Equity Loans

Home Selling

Home Foreclosure

Home Owner Insurance

Identity Theft

Limited Partnerships

Limited Liability (LLC) Company


Municipal (Munis) Bonds

Mutual Funds

Net Asset (NAV) Value

Options Trading

P/E Ratio



Renters Insurance

Reverse Mortgage

Shorting Stocks

Tax-Lien Investing

Term Vs Whole Life Ins

Treasury(T-bills) Bills

Variable Annuities



Private Equity Funds


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  If it sounds too good to be true, it usually is!


   P.T. Barnum (Barnum & Bailey Circus) once said that "a sucker is born every minute",

 don't be one!



Regarding the minimum wage, it was certainly a good idea to move it up, as long as those gainers realized that someone must provide the new monies they now receive. Unfortunately, the local and federal government championed this increase, as it now provided a wind fall in new taxes due to the increase in wages.
Compounding this situation, those who now enjoy the sought-after increase in wages are having to pay increases for everything to the tune of between 8-19%, and in some cases doubling, as their employers had to raise their prices in order to meet the new wages and everything went down-hill as to their new buying power. Every single provider of products and services had to pass cost down the line, as well as now every aspect of middle class and those in poverty are now experiencing run-away cost due to dramatic inflation.
Who really gained?

  The Five Factors of Credit Scoring


Payment History (has a 35% impact)

Outstanding Credit Balances (has a 30% impact)

Credit History (has a 15% impact)

Inquiries (has a 10% impact.

Each hard inquiry can cost you 2-50 points on a credit score)  




Adjustable Rate Mortgage (ARM): Is also called a variable rate mortgage. A mortgage in which the interest rate is adjusted periodically, usually at intervals of one, three, or five years, based on a measure or an index, such as the rate on US Treasury bills or the average national mortgage rate. In exchange for assuming some of the risk of a rise in interest rates, a borrower receives a lower rate at the beginning of an ARM than if he or she had taken out a fixed-rate mortgage.



When you receive a telephone call pertaining to any questions about your personal information, be it a Bank, the IRS, Credit card company, including the Social Security administration, always inform them that you are in the midst of something, ask them for their telephone number so you may call them back in a few minutes. When you call back, you will know whether this is for real and not a Scam. A few minutes delay could very well protect your Identity and your Finances. If they balk, well; you know they were a scam.



When you purchase a municipal bond, you lend money to the "issuer," the government entity (states, cities, counties and other governmental entities) that issued the bond. In exchange, the government entity promises to pay you a specified amount of interest, usually semiannually, and return your money, also known as "principal," on a specified maturity date. The money they raise from these bonds is used for build highways, hospitals and sewer systems, as well as many other projects for the public good.

Not all municipal bonds offer income exempt from both federal and state taxes. There is an entirely separate market of municipal issues that are taxable at the federal level, but still offer a state—and often local—tax exemption on interest paid to residents of the state of issuance. Most of this booklet refers to ‘munies’, which are free of federal taxes.

Repayment periods can be as short as a few months, which is rare, to 20, 30, or 40 years, or even longer.

he issuer typically uses proceeds from a bond sale to pay for capital projects or for other purposes it cannot or does not desire to pay for immediately with funds on hand. Tax regulations governing municipal bonds generally require all money raised by a bond sale to be spent on one-time capital projects within three to five years of issuance. Certain exceptions permit the issuance of bonds to fund other items, including ongoing operations and maintenance expenses, the purchase of single-family and multi-family mortgages, and the funding of student loans, among many other things.

Because of the special tax-exempt status of most municipal bonds, investors usually accept lower interest payments than on other types of borrowing (assuming comparable risk). This makes the issuance of bonds an attractive source of financing to many municipal entities, as the borrowing rate available in the open market is frequently lower than what is available through other borrowing channels.

Municipal bonds are one of several ways’ states, cities and counties can issue debt. Other mechanisms include certificates of participation and lease-buyback agreements. While these methods of borrowing differ in legal structure, they are similar to the municipal bonds described in this article.

One of the primary reasons municipal bonds are considered separately from other types of bonds is their special ability to provide tax-exempt income. Interest paid by the issuer to bond holders is often exempt from all federal taxes, as well as state or local taxes depending on the state in which the issuer is located, subject to certain restrictions. Bonds issued for certain purposes are subject to the alternative minimum tax.

The type of project or projects that are funded by a bond affects the taxability of income received on the bonds held by bond holders. Interest earnings on bonds that fund projects that are constructed for the public good are generally exempt from federal income tax, while interest earnings on bonds issued to fund projects partly or wholly benefiting only private parties, sometimes referred to as private activity bonds, may be subject to federal income tax.

The laws governing the taxability of municipal bond income are complex; however, bonds are typically certified by a law firm as either tax-exempt (federal and/or state income tax) or taxable before they are offered to the market. Purchasers of municipal bonds should be aware that not all municipal bonds are tax-exempt.

The risk ("security") of a municipal bond is a measure of how likely the issuer is to make all payments, on time and in full, as promised in the agreement between the issuer and bond holder (the "bond documents"). Different types of bonds carry different securities, based on the promises made in the bond documents:

  • General obligation bonds promise to repay based on the full faith and credit of the issuer; these bonds are typically considered the most secure type of municipal bond, and therefore carry the lowest interest rate.
  • Revenue bonds promise repayment from a specified stream of future income, such as income generated by a water utility from payments by customers.
  • Assessment bonds promise repayment based on property tax assessments of properties located within the issuer's boundaries.

In addition, there are several other types of municipal bonds with different promises of security.



If you are considering starting a partnership, the relationship always exists between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business.

Partnerships are easy to form since no registration is required with any governmental agency to create a partnership (although tax registration and other requirements to conduct business may still apply). Although not required, it is an excellent idea to prepare a written partnership agreement between the partners to define items such as ownership percentages, how profits and losses will be divided and what happens if a partner dies or becomes disabled. A partnership must file an annual information return to report the income, deductions, gains, losses etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return.



One of the Federal Reserve’s responsibilities is attempting to maintain full employment while keeping inflation low. This is obviously a difficult task, due to so many other factors associated with it. The Federal Reserve has the ability to influence the up or down of interest rates in one of two ways. The first is by raising or lowering the discount rate, that banks pay. The second is by indirectly influencing the direction of the Federal Funds rate. The Fed operates 12 Federal Reserve Banks around the country that serve as banks to commercial banks, providing a variety of services and ensuring a stable financial system.

The tool of choice is the Fed’s ability to influence the direction of interest rates. When interest rates are low, working capital is easier to obtain. This can spur economic development because, the more cash you have available, the more you are likely to pay for something you want. Left unchecked, however, and the result is “too much money chasing too few goods,” as the saying goes. Unfortunately, this leads to inflation as businesses realize they can charge higher prices for their goods and services. Suddenly, it costs you more for just about everything, as they are most often tied together in one way or another, the cost increases passed on from one supplier to the next, and of course, ends up at the checkout stand. 

If interest rates are too high, however, the result can be a recession and, in extreme cases, deflation; the result of which can be devastating for most of the economy.

The discount rate is the interest rate banks are charged when they borrow funds overnight directly from one of the Federal Reserve Banks. When the cost of money increases for your bank, they are going to charge you more as a result. This makes capital more expensive and results in less borrowing. Spending goes down, this, it becomes more difficult for prices to rise; the opposite being true when capital becomes less expensive due to a decrease in the discount rate.

The Federal funds rate is the rate that banks charge each other for overnight loans. The first question comes to mind, why do banks borrow from each other, the answer, the Fed can (and does) require banks to keep a certain percentage of assets in the form of cash on hand or deposited in one of the Federal Reserve banks. From time to time, it will establish a required ratio of reserves to deposits; when this ratio is increased, more cash must be kept in the vault at night, making it more difficult (and expensive) for funds to be acquired. When the reserve requirement is lowered, the money supply is loosened; because less cash has to be kept on hand it becomes easier to acquire capital.

The much-heralded monthly Federal Reserve meeting is piloted by its Federal Open Market Committee, it targets a specific level for the federal funds rate. This rate directly influences other short-term interest rates, such as deposits, bank loans, credit card interest rates, and adjustable rate mortgages. 

The stock market watches the monthly FOMC meetings very closely, as it has a profound and sometimes dramatic effect on the market. It might seem a small amount, but, a 1/4 point decline in the rate not only stimulates economic growth, but sends the markets higher, unfortunately if it stimulates too much growth, inflation will raise its ugly head.

Surprisingly, a 1/4 increase in the rate will curb inflation, but has the ability to slow growth and prompt a decline in the markets. Stock market analysts are ever watchful and with a cocked ear for any casual uttered statement by anyone on or associated with the Federal Open (FOMC) Market Committee, trying to get a clue as to what the Feds next move might be.



How you handle your credit cards and other loans affects your creditworthiness. Remember to use your credit responsibly and be sensitive to the terms of the payment agreements you made when you established your accounts. Whether you choose to pay the total outstanding balance on your bills each month or just the minimum (a very bad habit to get into, as the interest they charge can be a disaster for you)  payment due, your payment must reach the financial institution or business before the cutoff time on the payment due date. If that time of the month is not convenient because it doesn't coincide with your paychecks, contact the creditor to see whether your billing cycle can be changed. Or adjust your budget.

Whether you're moving across town or down the street, make sure your creditors always have your most recent address so that you'll receive your billing statements promptly. This includes temporary address changes.

Differentiate between the necessities, such as, rent, food, utility & phone bills, auto loans, gas and insurance payments. Then figure in others such as clothing and entertainment. Subtract your expenses from your income, and you have your starting point. If the sum is below zero, it's time to reduce your expenses by cutting out any unnecessary spending on the second category.

If you are turned down for credit or find an error in your credit (which is free, from the three major reporting agencies) report, you are entitled to have it investigated by the credit bureau and corrected at no charge. However, if negative information on your credit file is accurate, then only time and responsible credit habits can help restore a bad credit history.

It's important that you understand that under the Equal Credit Opportunity Act, financial institutions must make credit equally available to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, or age, and without regard to whether all or part of the applicant's income derives from public assistance, or if the applicant has in good faith exercised any right under the Consumer Credit Protection Act.



Business Interruption Insurance
(Financial loss insurance) protects individuals and companies against various financial risks. For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover the failure of a creditor to pay money it owes to the insured. This type of insurance is frequently referred to as "business interruption insurance." Fidelity bonds and surety bonds are included in this category, although these products provide a benefit to a third party (the "obligee") in the event the insured party (usually referred to as the "obligor") fails to perform its obligations under a contract with the obligee.

Credit insurance repays some or all of a loan back when certain things happen to the borrower such as unemployment, disability, or death. Mortgage insurance (which see below) is a form of credit insurance, although the name credit insurance more often is used to refer to policies that cover other kinds of debt.

Liability insurance is a very broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of willful or intentional acts by the insured.

Mortgage Life Insurance refers to an insurance policy that guarantees repayment of a mortgage loan in the event of death or, possibly, disability of the mortgagor. Private Mortgage Insurance (PMI) refers to protection for the lender in the event of default, usually covering a portion of the amount borrowed. There are Government loan products that also include a Mortgage Insurance Premium (MIP), essentially the government equivalent of PMI.

Private Mortgage Insurance
(PMI) is default insurance on mortgage loans, provided by private insurance companies. PMI allows borrowers to obtain a mortgage without having to provide 20% down payment, by covering the lender for the added risk of a high loan-to-value (LTV) mortgage. The Homeowners Protection Act of 1998 requires PMI to be canceled when the amount owed reaches a certain level, particularly when the loan balance is 78 percent of the home's purchase price. Often, PMI can be cancelled earlier by submitting a new appraisal showing that the loan balance is less than 80% of the home's value due to appreciation (this generally requires two years of on-time payments first) Different terms: Mortgagee's Title Insurance is a policy that protects the lender from future claims to ownership of the mortgaged property. Generally required by the lender as a condition of making a mortgage. In the event of a successful ownership claim from someone other than the mortgagor, the insurance company compensates the lender for any consequent losses. Mortgagor's Title Insurance is a policy protecting the buyer/ owner of real property from successful claims of ownership interest to the property. The coverage usually is supplemental to a Mortgagee's Title Insurance policy, and the premium is customarily paid by the buyer.

Professional liability insurance, also called professional indemnity insurance, protects professional practitioners such as architects, lawyers, doctors, and accountants against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called malpractice insurance. Notaries public may take out errors and omissions insurance (E&O). Other potential E&O policyholders include, for example, real estate brokers, home inspectors, appraisers, and website developers.

Property insurance
provides protection against risks to property, such as fire, theft or weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance.

is the deliberate decision to pay for otherwise insurable losses out of one's own money. This can be done on a formal basis by establishing a separate fund into which funds are deposited on a periodic basis, or by simply forgoing the purchase of available insurance and paying out-of-pocket. Self-insurance is usually used to pay for high-frequency, low-severity losses. Such losses, if covered by conventional insurance, mean having to pay a premium that includes loadings for the company's general expenses, cost of putting the policy on the books, acquisition expenses, premium taxes, and contingencies. While this is true for all insurance, for small, frequent losses the transaction costs may exceed the benefit of volatility reduction that insurance otherwise affords.



Selecting the wrong type of life insurance can cause more damage to your financial plans than just about any other financial plan today. So, the first and most important decision you must make when buying life insurance is: term, permanent or a combination of both.

Term life policies offer death benefits only, so if you die your estate gets the whole pie. If you live past the length of the policy, you or your estate, get nothing back.

Permanent life policies offer death benefits and a "savings account" (also called "cash value") so that if you live, you get back at least some of, and often much more than, the amount you spent on your premium. You get this money back either by cashing in the policy or by borrowing against it.

As you do your insurance homework, you quickly find out that permanent life insurance premiums are more expensive than term premiums because some of the money is put into a savings program. The longer the policy has been in force, the higher the cash value, because more money has been paid in and the cash value has earned interest, dividends or both. You should always concerned with cash value. If you buy a policy today, your first annual premium is likely to be much higher for a permanent life policy than for term.

Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.

  • Issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.

However, the premiums for permanent life stay the same over the years, while the premiums for term life increase. That extra premium paid in the early years of the permanent policy gets invested and grows, minus the amount your agent takes as a sales commission. The gain is tax deferred if the policy is cashed in during your life. (If you die, the proceeds are normally tax-free to your beneficiary.)

Touted is the saying, "Buy term and invest the difference." The fact is, it depends on how long you keep your policy. If you keep the permanent life policy long enough, that's the best deal. But "long enough" varies, depending on your age, health, insurance company, the types of policies chosen, interest and dividend rates, and more. The reality is that there is not a simple answer, because life insurance is not a simple product. The key is how long you plan to keep the policy. If the answer is less than 10 years, term is clearly the solution.

If it is more than 20 years, permanent life is probably the way to go. Assuming that you keep the policy in force, as most people drop their policies within the first 10 years, but if you do your homework now, that shouldn't be the case for you. Make certain that your budget will be able to honor the commitment for the entire coverage period, you walk away and you are out everything you put in.

Once you figure out your needs, it's time to choose the type of policy that makes most sense for you.


Derivatives are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying on which a derivative is based can be a credit derivative based on loans, bonds or other forms of credit.

The main types of derivatives are forwards, futures, options, and swaps.

Derivatives can be used to mitigate the risk of economic loss arising from changes in the value of the underlying. This activity is known as hedging. Alternatively, derivatives can be used by investors to increase the profit arising if the value of the underlying moves in the direction they expect. This activity is known as speculation.

Because the value of a derivative is contingent on the value of the underlying, the notional value of derivatives is recorded off the balance sheet of an institution, although the market value of derivatives is recorded on the balance sheet

In finance a hedge is a position established in one market in an attempt to offset exposure to the price risk of an equal but opposite obligation or position in another market — usually, but not always, in the context of one's commercial activity. Hedging is a strategy designed to minimize exposure to such business risks as a sharp contraction in demand for one's inventory, while still allowing the business to profit from producing and maintaining that inventory.

Some form of risk taking is inherent to any business activity. Some risks are considered to be "natural" to specific businesses, such as the risk of oil prices increasing or decreasing is natural to oil drilling and refining firms. Other forms of risk are not wanted, but cannot be avoided without hedging. Someone who has a shop, for example, expects to face natural risks such as the risk of competition, of poor or unpopular products, and so on. The risk of the shopkeeper's inventory being destroyed by fire is unwanted, however, and can be hedged via a fire insurance contract. Not all hedges are financial instruments: a producer that exports to another country, for example, may hedge its currency risk when selling by linking its expenses to the desired currency.  Banks and other financial institutions use hedging to control their asset-liability mismatches, such as the maturity matches between long, fixed-rate loans and short-term (implicitly variable-rate) deposits.

A hedger (such as a manufacturing company) is thus distinguished from an arbitrageur or speculator.

(Such as a bank or brokerage firm) in derivative purchase behavior.

A derivative instrument (or simply derivative) is a financial instrument, which derives its value from the value of some other financial instrument or variable. For example, a stock option is a derivative because it derives its value from the value of a stock. An interest rate swap is a derivative because it derives its value from one or more interest rate indices. The value(s) from which a derivative derives its value is called its underlier(s).

By contrast, we might speak of primary instruments, although the term cash instruments is more common. A cash instrument is an instrument whose value is determined directly by markets. Stocks, commodities, currencies and bonds are all cash instruments. The distinction between cash and derivative instruments is not always precise, but it is a useful informal distinction.

Derivative instruments are categorized in various ways. One is the distinction between linear and non-linear derivatives. The former has payoff diagrams that are linear or almost linear. The latter has payoff diagrams that are highly non-linear. Such non-linearity is always due to the derivative either being an option or having an option embedded in its structure.

A somewhat arbitrary distinction is between vanilla and exotic derivatives. The former tends to be simple and more common; the latter more complicated and specialized. There is no definitive rule for distinguishing one from the other, so the distinction is mostly a matter of custom.


Homeowner Insurance:

Your house is your prized possession. In most cases your house is your largest asset. If someone asked you, "Do you have enough homeowner’s insurance?" ... would you know? What coverages should you have on your homeowner’s policy? Have you reviewed your policy lately? Various lines of insurance are available. The most appropriate insurance for you depends primarily on your type of dwelling.

Your insurance policy typically includes property insurance covering damage to the home and the owner's belongings, liability insurance covering certain legal claims against the owner, and even a small amount of health insurance for medical expenses of guests who are injured on the owner's property.

One thing to look at is whether the insurance company will offer "actual cash value" (ACV) or "replacement cost coverage" for your belongings. As the name implies, ACV coverage will pay only for what your property was worth at the time it was damaged or stolen. So, if you bought a television five years ago for $500, it would be worth significantly less today. While you'd still need to spend about $500 for a new TV, your insurance company will pay only for what the old one was worth, minus your deductible.

Replacement cost coverage, on the other hand, will pay what it actually costs to replace the items you lost, again minus the deductible.

In some regions, most insurers write Actual Cash Value (ACV) coverage. In others, they'll quote you replacement cost coverage by default. Replacement cost coverage will cost you more in premiums, but it will also pay out more if you ever need to file a claim.

Let your Insurance agent know about any particularly valuable (It is always beneficial to take pictures of your valuables, as well as that of the interior of your home, keeping them in a safe location) items you have. Jewelry, antiques, and electronics might be covered up to a certain amount. If you have some items that are unusually expensive, such as a diamond ring, you'll probably want to purchase a separate rider. If you don't talk to your agent about an expensive item when you buy the policy, you probably won't be able to recover the full loss.


1. Owning a Home – If you own a home, there are two policy forms that are available to you: homeowners and dwelling forms. The main difference between these two types of forms is that the homeowners form combines property coverage with liability coverage. Dwelling forms only cover property losses. Both types of policy forms have the various peril coverage available for both your dwelling and your contents.

2. Owning a Manufactured Home – There are policy forms specifically designed to cover property for manufactured homes. This type of policy covers both dwelling as well as contents.

3.  Owning a Home on a Farm – If your primary dwelling is on a farm or ranch, you may not qualify for standard homeowners’ insurance. A farm owners policy may be the most appropriate form to cover losses to your home as a result of tornadoes or hail. Additionally, a farm owners form provides coverage for both the personal and commercial exposure of farms, and contains both property and liability coverage.


Automobile Insurance:

The basic types of auto insurance coverages are:

1.Bodily injury liability covers other people's bodily injuries or death for which you are responsible. It also provides for a legal defense if another party in the accident files a lawsuit against you. Claims for bodily injury may be for such things as medical bills, loss of income or pain and suffering. In the event of a serious accident, you want enough insurance to cover a judgment against you in a lawsuit, without jeopardizing your personal assets. Bodily injury liability covers injury to people, not your vehicle. Therefore, it's a good idea (and usually a company requirement) to have the same level of coverage for all of your cars. Bodily Injury Liability does NOT cover you or other people on your policy. Coverage is limited to the terms and conditions contained in the policy. It is mandatory in most states

2. Property Damage liability covers you if your car damages someone else's property. Usually it is their car, but it could be a fence, a house or any other property damaged in an accident. It also provides you with legal defense if another party files a lawsuit against you. It is a good idea to purchase enough of this insurance to cover the amount of damage your car might do to another vehicle or object. Coverage is limited to the terms and conditions contained in the policy. If you select limits that are too low, you could be putting yourself at risk financially. Should either you or a driver covered by your policy cause a serious accident where damages exceed your limits, you will be held responsible for the amount above your limits. To make that payment, you could be forced to liquidate property, savings and other assets, or your future earnings could be attached. By purchasing liability limits to account for both your current assets and future net worth, you can help protect yourself against this risk.

3. Medical (medpm) payments to the policy owner and other passengers in the policy owner’s car. There may also be coverage if as a pedestrian a vehicle injures you. Does NOT matter who is at fault. Medical payments may also cover policyholders and their family members when they are injured while riding in someone else's car or when they are hit by a car while on foot or bicycling. Coverage is limited to the terms and conditions contained in the policy.

4. Uninsured and Underinsured motorist coverage, which protects you when the negligent driver has no insurance or insufficient insurance (in most states, this covers only bodily injury losses -- though some states also include property damage losses (In states where Uninsured Property Damage is not offered, companies usually just define UMBI as UM, without the added extension of BI because there is no other UM offered in that state.)

5. Physical Damage

   a. Collision, covers damage to your car when your car hits, or is hit by, another vehicle, or other object. Pays to fix your vehicle less the deductible you choose. To keep your premiums low, select as large a deductible as you feel comfortable paying out of pocket. For older cars, consider dropping this coverage, since coverage is normally limited to the cash value of your car. Coverage is limited to the terms and conditions contained in the policy. This is not required by a state, but if you have a loan or a lease then the lien holder will require it.

   b. Comprehensive, covers your vehicle, and sometimes other vehicles you may be driving for losses resulting from incidents other than collision. Comprehensive insurance covers damage to your car if it is stolen; or damaged by flood, fire, or animals. It pays to fix your vehicle less the deductible you choose. To keep your premiums low, select as high a deductible as you feel comfortable paying out of pocket. Coverage is limited to the terms and conditions contained in the policy. This is not required by a state, but if you have a loan or a lease then the lien holder will require it.


*Condominium or a **Renter

There are several types of residential insurance policies. The HO-4 policy is designed for renters, while the HO-6 policy is for condo owners. Both HO-4 and HO-6 cover losses to your personal property from 16 types of perils:

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Damage caused by aircraft
  • Damage caused by vehicles
  • Smoke
  • Vandalism or malicious mischief
  • Theft
  • Volcanic eruption
  • Falling objects
  • Weight of ice, snow, or sleet
  • Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance.
  • Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system.
  • Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance.
  • Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)

*Policies designed for condominium owners primarily cover contents. However, there is a small provision included to cover the portions of the dwelling that are your insurance responsibility as defined by the governing rules of the condominium. Generally, additional dwelling coverage may be purchased if the provision included in the package is not sufficient.

** Renting a Residence – If you are renting a residence, coverage for your contents is available through renter’s insurance



Brokerage firms generally are classified as full service, discount, or online organizations. Investors who do not have time to research investments on their own will likely rely on a full-service broker to help them construct an investment portfolio, manage their investments, or make recommendations regarding which investments to buy. Full-service brokers have access to a wide range of reports and analyses from the companys large staff of financial analysts. These analysts research companies and recommend investments to people with different financial needs. Persons who prefer to select their own investments generally use a discount or online broker and pay lower commission charges. Discount firms usually do not offer advice about specific securities. Online brokerage firms make their trades over the Internet in order to keep costs down and fees low. Discount brokerage firms usually have branch offices, while online firms do not. Most brokerage firms now have call centers staffed with both licensed sales agents and customer service representatives who take orders and answer questions at all hours of the day.

Brokerage firms also provide investment banking services; that is, they act as intermediaries between those companies or governments which would like to raise money and those with money or capital to invest. Investment banking usually involves the firm buying initial stock or bond offerings from private companies or from Federal, State, and local governments and, in turn, selling them to investors for a potential profit. This service can be risky, especially when it involves a new company selling stock to the public for the first time. Investment bankers must try to determine the value of the company on the basis of a number of factors, including projected growth and sales, and decide what price investors are willing to pay for the new stock. Investment bankers also advise businesses on merger and acquisition strategies and may arrange for the transfer of ownership.

Companies that specialize in providing investment advice, portfolio management, and trust, fiduciary, and custody activities also are included in this industry. These companies range from very large mutual fund management companies to self-employed personal financial advisors or financial planners. Also included are managers of pension funds, commodity pools, trust funds, and other investment accounts. Portfolio or asset management companies direct the investment decisions for investors who have chosen to pool their assets in order to have them professionally managed. Many brokerage firms also provide these services. Personal financial advisors can manage investments for individuals as well, but their main objective is to be able to provide advice on a wide range of financial matters.









There are two different types of brokers; traditional (also known as "full service") and discount. If you open decide to open an account with a traditional brokerage firm, you will work one-on-one with a personal stock broker. He or she will offer investment ideas, prepare reports about your portfolio, provide you with up to dates as to how well your investments are doing, and generally be available by phone or email to buy or sell stocks, bonds, mutual funds, or other investments for your account. Additionally, traditional brokers offer a variety of different research sources to their customers. In exchange for this one-on-one service and guidance, you will be charged a significantly higher commission, to many it is well worth the additional cost. These brokers are experienced and in-the-loop continuously.

Discount brokers, on the other hand, are geared toward the do-it-yourself investor. Generally, they will not offer investment advice. They will simply execute orders once you've decided to buy or sell an investment. Instead of working with the same stock broker, you will do most of your trading online, or if you decide to call in your order, with the first available broker. Recently, discount firms have been offering research that is on par with those offered at the traditional brokerage firms. In exchange for giving up personal contact with a regular broker, investors will be charged a significantly lower commission.



You Possibly Can Avoid Foreclosure and Keep Your Home

General information
Facing money problems
Steps to take when you can't pay your mortgage
Common questions to save your home
Common questions for servicemembers

Losing a home can be financially and personally devastating. Here's information to help you keep your home. Relief may be available.

  • People facing money problems:

    If you are facing unemployment or have money problems, you may be able to keep your home if you know the right steps to take. Read on for important information and links to local organizations that can help you get through difficult times without losing your home. Government organizations and the mortgage industry worked together to provide this information to help you keep your home.


  • Disaster area victims:

    If you live or work in an area declared a disaster by the President and the hurricane, tornado, flood, wildfire, or other natural or man-made event damaged your home or reduced your income, your lender will provide disaster relief:
    • For 90 days on an FHA-insured loan. Go to the Disaster Help from the button on the left of this page.


  • Military personnel and spouses:

    If you or your spouse are on active military duty, you may qualify for a reduction in your interest rate resulting in lower payments. Read how the Servicemembers Civil Relief Act of 2003 (formerly the Soldiers' and Sailors' Civil Relief Act of 1940) affects military homeowners.

Facing Money Problems:

Financial problems are most often associated with major life changes like:

  • Job loss
  • Cuts in work hours or overtime
  • Retirement
  • Illness, injury, or death of a family member
  • Divorce or separation

If your family is facing any of these issues and you can't pay your bills, look closely at what you owe and what you earn. Eliminate unnecessary spending and reach out for help if you still can't make ends meet. Taking action right away can help you protect your family from the loss of your home.

Steps to take when you can't pay your mortgage:

Contact your lender as soon as you have a problem
Talk to a housing counselor
Prioritize your debts
Explore loan workout solutions with your lender
If keeping your home is not an option
Beware of predatory lending schemes

1. Contact your lender as soon as you have a problem

Many people avoid calling lenders about money troubles because we:

    • Feel embarrassed discussing money problems with others
    • Believe that if lenders know we are in trouble, they will automatically rush to a collection agency or foreclosure (seize property for failure to pay a mortgage debt)

But lenders want to help borrowers keep their homes because:

    • Foreclosure is expensive for lenders, mortgage insurers and investors
    • HUD and private mortgage insurance companies and investors like Freddie Mac and Fannie Mae require lenders to work aggressively to help borrowers facing money problems

Lenders have workout options (choices) to help you and:

    • These options work best when your loan is only one or two payments behind
    • The farther behind you are on your payments, the fewer options are available

Don't assume that your problems will quickly correct themselves:

    • Don't lose valuable time being overly optimistic
    • Contact your mortgage lender to discuss your circumstances as soon as you realize that you're unable to make your payments
    • Look forward to your lender being willing to explore many possible solutions, without guaranteeing any one particular solution

Finding your lender

Check the following sources to contact your lender:

      • Your monthly mortgage billing statement
      • Your payment coupon book


Information to have ready when you call

To help you, lenders usually need:

      • Your loan account number
      • A brief explanation of your circumstances
      • Recent income documents:
        • Pay stubs
        • Benefit statements from Social Security, disability, unemployment, retirement, or public assistance
        • Tax returns or a year-to-date profit and loss statement, if self-employed
        • A list of household expenses

Expect to have more than one phone conversation with your lender. Typically, your lender will mail you a "loan workout" package. This package contains information, forms and instructions. If you want to be considered for assistance you must complete the forms fully and truthfully and return them to your lender quickly. Your lender will review the complete package before talking about a solution with you.

CALL YOUR LENDER TODAY! The sooner you call, the sooner help is available.

Don't ignore mail from your lender

If you don't get in touch with your lender, your lender will try to contact you by mail and phone soon after you stop making payments. It is very important that you respond to mail and phone calls offering help. If your lender doesn't hear from you, they will have to start legal action leading to foreclosure. This will greatly increase the cost to bring your loan current.

Information for families with FHA loans

The FHA provides many alternatives and ways for borrowers to get help. These may include mortgage modifications (changes), special forbearances (allowances), and other actions you can take to avoid foreclosure.

FHA works closely with customers who have FHA-insured loans. Do you feel your lender is not responding to your questions? Do you need help contacting your lender? The FHA is ready to help! Contact us at (800) CALL-FHA.

2. Talk to a housing counselor

If you don't feel comfortable talking with your lender, you should immediately contact a housing counseling agency and make an appointment with a counselor. Most FHA counselors are free or cost very little. A counselor can help you:

    • Review your financial situation, determine what options are available to you, and negotiate with your lender
    • Learn which of the various workout arrangements lenders consider makes the most sense for you and your family, based on your circumstances
    • Call the lender with you or on your behalf to discuss a workout plan
    • Protect you from future credit problems before you get too far behind on mortgage payments
    • Give you information on services and programs in your area that provide financial, legal, medical or other assistance

A good counselor will help you create a monthly budget plan to ensure you meet all your monthly expenses, including your mortgage payment. Your personal financial plan will clearly show how much money you have available to make the mortgage payment. This analysis will help you and your lender determine whether a reduced or delayed payment schedule could help you.

To find out more about HUD-approved housing counseling agencies and their services, please call toll free (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern Standard Time (6:00 a.m. to 2:00 p.m. Pacific Time). The same number can give you an automated referral to the three housing counseling agencies located closest to you.

Many of these local housing counseling agencies are connected with national and regional housing counseling intermediaries (mediators). The website for HUD-approved National and Regional Housing Counseling Intermediaries describes the full range of assistance offered and provides maps showing their member's locations.

3. Prioritize your debts (rank them by importance)

You will need a new, tightened budget if you lose a job. Prioritize your bills and pay those most necessary for your family: food, utilities and shelter.

Failing to pay any of your debts can seriously affect your credit rating, but if you stop making your mortgage payments you could lose your house. Try these suggestions to keep your home:

    • Whenever possible, use any income available after paying for food and utilities to pay your monthly mortgage payments.
    • If your employment income has stopped or been reduced, first consider getting rid of or cutting back on other expenses (such as dining out, entertainment, cable, or even telephone services).
    • If you still do not have enough income, consider cashing out other financial resources like stocks, savings accounts, or personal property that may have value like a boat or a second car.
    • Take any responsible action that will save cash.

Besides speaking with your lender, you may want to contact a nonprofit consumer credit counseling agency that specializes in helping restructure credit payments. Credit counselors can often reduce your monthly bills by negotiating lower payments or long-term payment plans with your creditors. Trustworthy credit counseling agencies provide their services free of charge or for a small monthly fee tied to a repayment plan. Beware of credit counseling agencies that offer counseling for a large upfront fee or donation.

When you call a credit counseling agency, they will ask you to provide current information about your income and expenses. Make sure you ask if the agency has a charge before you sign any documents!

Preserve your good credit

Do not underestimate (misjudge) how important it is to keep your good credit. Your future ability to purchase items, rent or buy a home, and do other things often requires a credit check. Consumer credit agencies and your lender can help you explore solutions to keep your credit rating from getting blemished.

Maintaining good credit is even important for job hunters. When you apply for a job, the employer probably will check your credit report to determine whether:

    • You have been sued
    • You have filed for bankruptcy
    • You have trouble paying your bills

4. Explore loan workout solutions with your lender

First and foremost, if you can keep your mortgage current, do so.
But if you find you are unable to make your mortgage payments, you might qualify for a loan workout option. Check with your lender to see which option may be available. Some options may not apply to your loan if it is not insured by FHA.

If your problem is temporary - call your lender to discuss these possibilities:

    • Reinstatement: Your lender is always willing to discuss accepting the total amount owed in a lump sum by a specific date. Forbearance may accompany this option.
    • Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time and then agree to another option to bring your loan current. A forbearance option is often combined with a reinstatement when you know you will have enough money to bring the account current at a specific time. The money might come from a hiring bonus, investment, insurance settlement, or tax refund.
    • Repayment plan: You may be able to get an agreement to resume making your regular monthly payments, plus a portion of the past due payments each month until you are caught up.

If it appears that your situation is long-term or will permanently affect your ability to bring your account current - call your lender to discuss options:

    • Mortgage modification: If you can make payments on your loan, but don't have enough money to bring your account current or you can't afford your current payment, your lender may be able to change the terms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways:
      • Adding the missed payments to the existing loan balance.
      • Changing the interest rate, including making an adjustable rate into a fixed rate.
      • Extending the number of years, you have to repay.
    • Partial Claim: If your mortgage is insured, your lender might help you get a one-time interest-free loan from your mortgage guarantor to bring your account current. You may be allowed to wait several years before repaying this loan. You qualify for an FHA partial claim if:
      • Your loan is between 4- and 12-months delinquent
      • You are able to begin making full mortgage payments again

When your lender files a partial claim, HUD will pay your lender the amount necessary to bring your mortgage current. You must sign a promissory note, and a lien will be placed on your property until the promissory note is paid in full.

The promissory note is interest-free and is due when you pay off the first mortgage or when you sell the property.

If keeping your home is not an option - call your lender to discuss these possibilities:

    • Sale: If you can no longer afford your home, your lender will usually give you a specific amount of time to find a purchaser and pay off the total amount owed. You will be expected to use the services of a real estate professional who can aggressively market the property.
    • Pre-foreclosure sale or short payoff: If you can't sell the property for the full amount of the loan, your lender may accept less than the amount owed. Financial help may also be available to pay other lien holders and/or help towards some moving costs. You may qualify if:
      • The loan is at least 2 months delinquent
      • You (or your real estate professional) can sell the house within 3 to 5 months
      • A new appraisal (obtained by your lender) shows that the value of your home meets HUD program guidelines
    • Assumption: A qualified buyer may be allowed to take over your mortgage, even if your original loan documents state that it is non-assumable.
    • Deed-in-lieu of foreclosure: As a last resort, you "give back" your property and the debt are forgiven. This will not save your house, but it is less damaging to your credit rating. This option might sound like the easiest way out, but it has limitations:
      • You usually have to try to sell the home for its fair market value for at least 90 days before the lender will consider this option
      • This option may not be available if you have other liens, such as other creditor judgments, second mortgages, and IRS or state tax liens

Resources for finding a real estate agent and selling your home

If you need to sell your home, you'll have to answer many questions. You'll need to find how much your house is actually worth, and you'll have to find a real estate agent you are comfortable with. The following resources may help:

National Association of Realtors

     National Association of Hispanic Real Estate Professionals

     The Home Store

If you have an FHA-insured loan and your lender is not responsive

1-800-CALL-FHA (225-5342)

Your lender has to follow FHA servicing guidelines and regulations for FHA-insured loans. If your lender is not cooperative, contact FHA's National Servicing Center at toll free (888) 297-8685 or via email HUD does not oversee VA or conventional loans. /

Beware of predatory lending schemes

Most mortgage lenders are trustworthy and provide a valuable service by allowing families to own a home without saving enough money to buy it outright. But dishonest or "predatory" lenders do exist and engage in lending practices that increase the chances that a borrower will lose a home to foreclosure. Beware especially of those who make high risk second mortgages. Other abusive practices include:

  • Making a mortgage loan to an individual who does not have the income to repay it
  • Charging excessive interest, points and fees
  • Repeatedly refinancing a loan without providing any real value to the borrower

Borrowers facing unemployment and/or foreclosure are often targets of predatory lenders because they are desperate to find any "solution".

Homeowners receive many refinances offers in the mail saying they are "pre-approved" for credit based on the equity in their homes. Borrowing against your house may seem attractive when you are struggling to pay your mortgage and other bills. But stop and think about this: if you can't make your current payments, increasing your debt will make it harder to keep your home, even if you get some temporary cash.

Beware of scams

  • Equity skimming: In this type of scam a "buyer" approaches you offering to repay the mortgage or sell the property if you sign over the deed and move out - usually leaving you with the debt and no house. Signing over your deed does not necessarily relieve you of the responsibility of paying the loan.
  • Phony counseling agencies: charging for counseling that is often free of charge. If you have any doubt about paying for such services, call a HUD-approved foreclosure housing counseling agency toll free at (800) 569-4287 or TDD (800) 877-8339 before you pay anyone or sign anything.
  • Do not sign anything you do not understand. It is your right and duty to ask questions
  • Information is your best defense against becoming a victim of predatory lending, especially for a desperate homeowner

Where to report suspected predatory lending

Homeowners can call toll free (800) 348-3931 to get information on what steps to take to file a complaint. Homeowners who call will also receive a booklet containing information found on the website.

For more information about predatory lending go to:

Common Questions

What happens when I miss my mortgage payments?
What should I do?
Who is my lender? How do I make contact?
I don't remember what type of mortgage I have.
Do I need to keep living in my house to qualify for assistance?
My employer has already announced layoffs
What are the key points to remember?
What precautions can I take?
Will I be responsible for any out-of-pocket expenses?

What happens when I miss my mortgage payments?

Foreclosure may occur. This means your lender can legally repossess (take over) your home. When this happens, you must move out of your house. If your property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment could be pursued, meaning you would not only lose your home, you also would owe HUD money.

Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. So you should avoid foreclosure if at all possible.

What should I do? Do not ignore letters from your lender. If you are having problems making your payments, call or write to your lender's loss mitigation department immediately. Explain your situation. Be prepared to provide financial information, such as you-r monthly income and expenses. Without this information, they may not be able to help.

  • Stay in your home for now. You may not qualify for assistance if you abandon your property.
  • Contact a HUD-approved foreclosure housing counseling agency. Call toll free 1-800-569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you. These agencies are valuable resources. They have information on services and programs offered by government agencies and private and community organizations that might be able to help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.

Who is my lender? How do I make contact?

Look at your monthly mortgage coupons or billing statements for the lender's name and contact information.

I don't remember what type of mortgage I have. How can I find this information?

Look on the original mortgage documents or call your mortgage lender.

Do I need to keep living in my house to qualify for assistance?

Usually yes, but call your lender to discuss your specific circumstances and get advice on options that may be available.

My employer has already announced layoffs in the coming month. What can I do now?

You have started learning about available options here. Now, figure out if a layoff will make it hard for your family to make your mortgage payments. If so, consider other resources you have to pay your mortgage. Review your spending habits and see where you can reduce spending. If you have a lot of other debt, consider contacting a nonprofit, consumer credit counseling agency. Take advantage of any help your employer offers. If you still believe you will have trouble making your mortgage payments, contact your lender right away.

What are the key points to remember?

  1. Don't lose your home and damage your credit history
  2. Call or write your mortgage lender immediately and be honest about your financial situation
  3. Stay in your home to make sure you qualify for assistance
  4. Arrange an appointment with a HUD-approved housing counselor to explore your options toll free at (800) 569-4287 or TDD (800) 877-8339
  5. Cooperate with the counselor or lender trying to help you
  6. Explore every alternative to keep your home
  7. Beware of scams
  8. Never sign anything you don't understand. And remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation
  9. Act now. Delaying can't help. If you do nothing, you will lose your home and your good credit rating!

What precautions can I take?

These precautions can help you avoid being "taken" by a scam artist:

  • Don't sign any papers you don't fully understand.
  • Make sure you get all "promises" in writing.
  • Beware of any sales contract that assumes the loan where you are not formally released from liability (responsibility) for your mortgage debt.
  • Check with a lawyer or your mortgage company before entering into any deal involving your home.

If you're selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You can contact your state's Attorney General, the State Real Estate Commission, or the local District Attorney's Consumer Fraud Unit for this type of information.

Will I be responsible for any out-of-pocket expenses if I am approved for a workout option?

You may have to pay expenses such as recording fees for a loan modification. Because every situation is different, contact your lender for more information. But, if a lender has no contact with you and has to start foreclosure, you may have to pay very high legal fees. To avoid this, call your lender as soon as you realize you might have trouble.

Servicemembers Civil Relief Act (SCRA) Common Questions

Who is eligible?
Am I entitled to debt payment relief?
Is the interest rate limitation automatic?
Am I eligible even if I can afford to pay my mortgage at a higher interest rate?
What if I can't afford to pay my mortgage even at the lower rate?
Am I protected against foreclosure?
What information do I need to provide to my lender?
Will my payments change later?
Will I need to pay back the interest rate "subsidy" at a later date?
How long does the benefit last? Does the period begin and end with my tour of duty?
How can I learn more about relief available to active duty military personnel?

Reservists, guardsmen and other military personnel can find answers to questions about mortgage payment relief and protection from foreclosure provided by the Service members Civil Relief Act of 2003 (formerly The Soldiers' and Sailors' Civil Relief Act of 1940).

Who is eligible?

The Act applies to active duty military personnel who had a mortgage obligation before enlistment or before being ordered to active duty. This includes:

  • Members of the Army, Navy, Marine Corps, Air Force, Coast Guard
  • Commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration engaged in active service
  • Reservists ordered to report for military service
  • People ordered to report for induction (training) under the Military Selective Service Act
  • Guardsmen called to active service for more than 30 consecutive days.

In limited situations, dependents of servicemembers are also entitled to protections.

Am I entitled to debt payment relief?

The Act limits interest that may be charged on mortgages taken out by a servicemember (including debts incurred jointly with a spouse) before he or she entered into active military service. At your request, lenders must reduce the interest rate to no more than 6% per year during the period of active military service and recalculate your payments to reflect the lower rate. This provision applies to both conventional and government-insured mortgages.

Is the interest rate limitation automatic?

No. To ask for this temporary interest rate reduction, you must submit a written request to your mortgage lender and include a copy of your military orders. The request may be submitted as soon as the orders are issued, but no later than 180 days after the date of your release from active duty military service.

Am I eligible even if I can afford to pay my mortgage at a higher interest rate?

If a mortgage lender believes that military service has not affected your ability to repay your mortgage, they have the right to ask a court to grant relief from the interest rate reduction. This is does not happen very often.

What if I can't afford to pay my mortgage even at the lower rate?

Your mortgage lender may let you stop paying the principal amount due on your loan during active duty service. Lenders are not required to do this but they generally try to work with servicemembers to keep them in their homes. You will still owe this amount, but will not have to repay it until after you complete active duty service.

Most lenders also have other programs to assist borrowers who can't make their mortgage payments. If you or your spouse finds yourself in this position at any time before or after active duty service, contact your lender immediately and ask about loss mitigation options. If you have an FHA-insured loan and are having difficulty making mortgage payments, you may also be eligible for special forbearance and other loss mitigation options.

Am I protected against foreclosure?

Mortgage lenders may not foreclose while you are on active duty or within 90 days after military service without court approval., A lender would be required to show in court that your ability to repay the debt was not affected by your military service.

What information do I need to provide to my lender?

When you or your representative contacts your mortgage lender, you should provide the following information:

  • Notice that you have been called to active duty
  • A copy of the orders from the military notifying you of your activation
  • Your FHA case number
  • Evidence that the debt precedes your activation date

HUD has reminded FHA lenders of their obligation to follow the SCRA. When notified that a borrower is on active military duty, an FHA lender must inform the borrower or representative of the adjusted payment amount due, provide adjusted coupons or billings, and ensure adjusted payments are not considered insufficient payments.

Will my payments change later? Will I need to pay back the interest rate "subsidy" at a later date?

The change in interest rate is not a subsidy. Interest in excess of 6% per year that would otherwise have been charged is forgiven. However, the reduction in the interest rate and monthly payment amount only applies during the period of active duty. Once the period of active military service ends, the interest rate will revert back to the original interest rate, and payments will be recalculated accordingly.

How long does the benefit last? Does the period begin and end with my tour of duty?

Interest rate reductions are only for the period of active military service. Other benefits, such as postponement (delaying) of monthly principal payments on the loan and restrictions on foreclosure, may begin immediately upon assignment to active military service and end on the third month following the term of active duty assignment.

How can I learn more about relief available to active duty military personnel?

Servicemembers who have questions about the SCRA or the protections they may be entitled to, can contact their unit judge advocate or installation legal assistance officer. Dependents of servicemembers can also contact or visit local military legal assistance offices where they live. A military legal assistance office locator for each branch of the armed forces is available at



The fasted growing crime in the US and it is not even done in the presence of the victim. Most often the crime is performed on-line, by mail, on the telephone, or on a fax-based transactions,  This crime is known as non-self-revealing.

Did you know?

t the minimum, Identity theft victims spend about 40 hours resolving the theft.

ost identity thefts involve the thief acquiring a credit card

-Only 15% of victims find out about the theft through proactive action taken by a business

-Emotionally, this has about the same impact as that of a violent crime


  • Stealing mail or bills disposed in the rubbish (dumpster/garbage, trash cans, realize that your personal information is no longer personal, if deposited in the trash outside for pickup).
  • Victims carelessly throwing away old equipment, without proper sanitizing (hard drives, etc.).
  • Stealing your credit card information, front and back, while you are making an in-store purchase.
  • Inside infiltration of data bases of that store vast amounts of personal information.
  • Eavesdropping (via Wi-Fi) on public transactions to obtain personal data. This can be done from the parking lot of many major stores.
  • Stealing by hacking personal information in databases
  • Impersonating a charity organization.
  • False advertising, where the victim is seeking some type of bogus job, and having to provide private information.
  • Browsing online for personal details that have been posted by users, this is so easy, and victims providing the information, so naive.

TransUnion, Equifax, Experian are the major credit reporting agencies in the US.

Protecting yourself from identity theft takes action on you. Do not think for a minute, that it cannot happen you, for it can happen to anyone. While you can't totally protect yourself from thieves, you can at least attempt to make yourself less vulnerable as a victim by doing what you can, to make it more difficult for thieves to access your personal information.

The financial world classifies ID theft as:

-Identity Cloning: (assuming someone else's identity in daily life)
-Financial Identity Theft: (using anther's name and other identifying information to obtain goods and services)
-Criminal Identity Theft: (posing as some else, when arrested "or detained" for a crime)
-Business/Commercial Identity Theft (using another's business name to obtain credit)

A few suggestions to avoid being a victim.:

1.  Do not sign the back of your credit cards. Instead, put 'PHOTO ID REQUIRED.' 

2.   When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the 'For' line. Instead, just put the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won't have access to it.

3.   Put your work phone # on your checks instead of your home phone. If you have a PO Box use that instead of your home address. If you do not have a PO Box, use your work address. 
Never have your SS# printed on your checks. (DUH!) You can add it if it is necessary.  But if you have it printed; anyone can get it.

4.   Place the
contents of y our wallet on a photocopy machine.  Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place.
I also carry a photocopy of my passport when I travel either here or abroad. We've all heard horror stories about fraud that's committed on us in stealing a Name, address, Social Security number, credit cards.

5.   We have been told we should
cancel our credit cards immediately.  But the key is having the toll-free numbers and your card numbers handy so you know whom to call.  Keep those where you can find them.

File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation (if there ever is one).

7.   Call the
3 national credit reporting organizations immediately to place a fraud alert on your name and also call the Social Security fraud line number.  I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over the internet in my name.
The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.

 -You should Optout. All you have to do is to write to the three major credit bureaus (calling (888) 5OPTOUT (567-8688). They will remove your name, for two years, from mailing and telemarketing lists

-Do yourself and buy a small shredder. Newer models not only provide for shredding paperwork, but also that of credit cards. If you don't want to purchase one, at least cut up the documents and credit card cross cut style.

-Annually review your credit report. Every time you apply for a loan, the visit by the credit inquirer is noted on your credit report, even though you did not go through with it. If you did not initiate it, contact the reporting credit agency and let them know.

-Do not carry your Social Security card with you. Memorize the number and put away in a secure location. How many credit cards do you carry with you? do you really need all of them? Carry only your Driver’s license and as few credit cards, as necessary.

-Do photocopy all of your credit card(s), your driver’s license, just-in-case you lose your purse or wallet. It makes it a whole lot simpler if you have all of the information available.

-Do not ever provide personal information on the phone to someone you do not know. Quite often, the scam artists call unsuspecting victims pretending to be their financial services company and request information to be provided over the phone (a very easy way to circumvent this potential scam is to get their name, phone number and address, and then call them back at the number you have on file or that is printed on the statements you receive).

-Do you look over your monthly credit card statement each month to make sure there aren't any charges showing up that are not yours? If there are charges not initiated by you, immediately contact that company.

-Fortunately, credit card companies are getting on the ball. If your card company contacts you about questionable (Last week, while you were in Paris, did you buy a piece of jewelry for 5,000.00 dollars?) charges and you did not, beware, this is notice that someone has stolen your identity.

-If at all necessary, do not place out-going mail in your mail box. Take it to the Post Office or a Post Office neighborhood collection box. Many thief's take documents that contain personal information for your personal mail box. Did you know that thieves have the chemical ability to remove ink and then rewrite your checks?

-Unfortunately, should a thief get their hands on your driver’s license, they can change it to their own picture, thus providing proof that they are the person, named. At this rate, it will not be long before they simply print a counterfeit driver license with your information on them, with their picture.


Annual Percentage Rate (APR): The cost of credit or a loan expressed as a simple annual percentage. The Federal Truth In Lending Act requires all consumer credit agreements and loans to disclose the APR in large, bold type. On a mortgage, the APR is usually higher than the stated interest rate, since it includes points and other charges.



When someone is viewing your home, first impressions are critical. You want your potential buyer to walk away with a good impression. There are several easy, quick and low-cost things you can do to increase your chances of getting your asking price and selling quickly. When people make a investment such as a house, they can be picky, and seek perfection. You can beat them to the punch, by being ready for them.

A well-manicured lawn, neatly trimmed shrubs and a clutter-free porch welcomes prospects. So does a freshly painted - or at least freshly scrubbed - front door. If it's autumn, rake the leaves. If it's winter, shovel the walkways. If it's spring and summer, mow the lawns and present your house with colorful flowers around the entry. The fewer obstacles between prospects and the true appeal of your home, the better. It is imperative that the house look as clean as possible. The bathroom is another area where people seem to make judgments, so make sure your bathrooms are spotless! Dripping water rattles the nerves, discolors sinks and suggests faulty or worn-out plumbing. Burned-out bulbs or faulty wiring leave prospects in the dark. Don't let those problems detract from the good qualities in your home.

Having a few family pictures on the walls is certainly acceptable, but if your house walls are overwhelming with family pictures, it takes away from the potential buyer’s ability to envision themselves in the house. Also, the less that is on the walls, effectively makes the rooms appear larger, do avoid having too much furniture in the rooms, it is a turn off. You want your home to be clean and smell fresh, not stale. Make sure that the windows are clean, the furniture is dusted, the floors sweep and the carpet vacuumed.  Pull back your curtains and drapes, so that the potential buyer can see how bright, inviting and cheerful your home is. Turn on lamps to add even more light. If you are showing your home in the evening, your exterior lighting will add color and warmth, making your buyers feel welcome.

Depending on the time of the year, you want your yard to be neat. If it is spring or summer, make sure that your lawn is mowed and you have colorful flowers around your entry. If it is winter, shovel the walk, and if it's autumn, rake the leaves. If the yard looks bad, it is a big turnoff. Also, when you are showing your home, place your pets outside, or at the least, out from underfoot.

If your house was built before 1978, there is a new federal law that requires the seller to complete a lead base paint disclosure statement, you want to know this in advance. So, have it checked out.

Do you know how much your house is actually worth? The most common mistake made by first time home sellers is setting their asking price too high. Get a reasonably good estimate of the worth of your house from a home appraisal online service.

Your Listing Agent:

Your goal should be to have your property seen by as many home buyers as possible. One of the best ways to increase the visibility of your property that you're trying to sell is to get it listed with a real estate property listing service.

In case you have never sold a house before, you may not be aware of all the associated costs. You'll need to know about these costs in order to help you adjust the asking price on your house, as well as to help you estimate the profit that you'll realize on the house. If you're counting on the sale of your house to finance the purchase of another, this is especially important. These out-of-pocket costs may include:

·         Realtor commissions - typically 5-7% (7% is actually very high) of the selling price. (It is a good idea to shop around at several different real estate agencies to determine which one offers the greatest value for the money).

·         Closing costs, including attorney, and other professional fees. (Next to the commission on the sale of the home, closing costs are often the biggest expense of selling a home. One of the costliest parts of closing costs is often title insurance. In most cases title insurance ranges between $800 and $1,800, and varies according to region, and rise with the cost of the home.

·         Excise taxes on the sale. (Some states are authorized to levy a real estate excise tax on all sales of real estate, measured by the full selling price, including the amount of any liens, mortgages and other debts given to secure the purchase.

·         Property taxes and any homeowner association fees. (These are always pro-rated, split by the buyer and seller, the amount set by the due dates on them).

  • Other incurred cost: Some of the most commonly seen buyer negotiated fees include a home warranty paid for by the seller, the cost of repairs needed to make the sale, and the cost for a thorough home inspection. It is important for both the seller and the buyer to remember that virtually any part of the real estate contract is negotiable.

Capital gain tax on home sale:

  • Did you purchase your home or acquire it by gift or inheritance?
  • Did you use your home partly for business or rental?
  • Costs associated with selling your home.
  • Home improvements or additions, which may help to offset capital gains.
  • Gain from the sale of a prior home on which tax was postponed prior to the enactment of the federal Taxpayer Relief Act of 1997.

The federal Taxpayer Relief Act of 1997 says when you sell your home you can keep, tax free, capital gains of up to $500,000 if you are married filing jointly or $250,000 for single taxpayers, or married taxpayers who file separately. To qualify for the exclusion, you must have used the home as your principle residence for at least two of the prior five years. It is not a onetime tax exclusion. You can use the exclusion as often as you meet the qualifications.

The federal Internal Revenue Service Restructuring and Reform Act of 1998 further clarified the law and says you can prorate the $500,000/$250,000 exclusion (not your specific gain) if unforeseen events, such as a job change, illness, or some other hardship forced you to sell before you meet the two-year residency requirement.


The common denominator of those who have achieved financial success

"Extreme Integrity"


401 (K)

The 401(k) is one of the most popular retirement plans around.

If your employer offers a 401(k) plan, it makes a lot of sense to participate in it as soon as possible. If you start early you can very likely have a million or more dollars in your account by the time you retire.

The primary advantages to a 401(k) are that the money is contributed before it is taxed and your employer may be matching your contribution with company money.

There is a small downside to the employer contribution, this being a "vesting schedule". Vesting means that there is usually a tiered schedule for when money the employer contributes to your account is actually yours. For example, your employer may have a three-year vesting schedule that increases your ownership of the money by one-third each year. After three years, the money is all yours and all future contributions are 100-percent yours.

Congress declared in 1978 that Americans needed a bit of encouragement to save more money for retirement, and not entirely depending on Social Security. They thought that if they gave people a way to save for retirement while at the same time lowering their state and federal taxes, they might just take advantage of it. The Tax Reform Act was passed. Part of it authorized the creation of a tax-deferred savings plan for employees. The plan got its name from its section number and paragraph in the Internal Revenue Code -- section 401, paragraph (k).

401(k) plans are part of a family of retirement plans known as "defined contribution" plans. Other defined contribution plans include profit sharing plans, IRAs and Simple IRAs, SEPs, and money purchase plans. They are called "defined contribution plans" because the amount that is contributed is defined either by you the employee or the employer.

In a nut shell:

-When you participate in a 401(k) plan, you tell your employer how much money you want to go into the account. You can usually put up to 15 percent of your salary into the account each month, but the employer has the right to limit that amount. It might be worth your while to rally for a higher limit if it isn't as high as you would like it to be. The IRS limits your total annual contribution.

-The money you contribute comes out of your check "before taxes are calculated", and more importantly, before you have the opportunity to spend it. That makes the 401(k) one of the most effective ways to save for your retirement.

-Usually, by not always, your employer will match a portion of your contribution.

-The money is given to a third party administrator who invests it in mutual funds, bonds, money market accounts, etc.

-If you change jobs, you have a few options available to you.

1.Keep your money in your former employer's plan

2. Roll the money over into a new 401(k) plan or IRA You do have the option of "cashing out", but unless you are 59.5 you will have to pay the tax "and" a Ten (10) percent penalty to the IRS
If you do decide to roll it over into another 401(K) or IRA, do be sure that you don't have the check written to you,. The check must be written directly to the new account. There is no grace period for placing the money into the new account. If it does come to you rather that the new account, you will be charged the tax and the Ten (10) Percent fine.

If you opt to keep your money in your former employer's plan, then there are also a few requirements.

1. You have to have a fully vested total of at least $5,000 in your account.
2. You must be under the plan's normal retirement age.


Debt-to-Equity Ratio: is used for measuring solvency and researching the Capital Structure of a company.
The ratio of total debt to total shareholder equity indicates the level of capability for repayment of outstanding creditors. In addition, long-term debt as a function of shareholder equity indicates the degree of leveraged money to improve shareholder rates of return.

The Debt to Equity Ratio is watched closely by investors and creditors, as it reveals the extent the company
management is will to fund its operations with debt, rather than equity. Lenders are very sensitive about this ratio, as a excessively high ratio of debt to equity will put their loans at risk of being repaid. Banks often use the restrictive contracts that force excess cash flow into debt repayment, restrictions on alternative use of cash, and a requirement for investors themselves to insert more equity into the company.



A mutual (Legally known as an "open-end company) fund is a company that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, other securities or assets, or some combination of these investments. The combined holdings the mutual fund owns are known as its portfolio. Each share represents an investor's proportionate ownership of the fund's holdings and the income those holdings generate.

Mutual funds can invest in many different kinds of securities. The most common are cash, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for instance, can invest primarily in the shares of a particular industry, such as technology or utilities. These are known as sector funds. Bond funds can vary according to risk (high-yield junk bonds or investment-grade corporate bonds), type of issuers are government agencies, corporations, or municipalities, or maturity of the bonds (short- or long-term). Both stock and bond funds can invest in primarily U.S. securities (domestic funds), both U.S. and foreign securities (global funds), or primarily foreign securities (international funds).

Most mutual funds' investment portfolios are continually adjusted under the supervision of a professional manager, who forecasts the future performance of investments appropriate for the fund and chooses those which he or she believes will most closely match the fund's stated investment objective. A mutual fund is administered through a parent management company, which may hire or fire fund managers.

Mutual funds are liable to a special set of regulatory, accounting, and tax rules. Unlike most other types of business entities, they are not taxed on their income as long as they distribute substantially all of it to their shareholders. Also, the type of income they earn is often unchanged as it passes through to the shareholders. Mutual fund distributions of tax-free municipal bond income are also tax-free to the shareholder. Taxable distributions can be either ordinary income or capital gains, depending on how the fund earned those distributions.

Mutual funds offer several advantages over investing in individual stocks. For example, the transaction costs are divided among all the mutual fund shareholders, who also benefit by having a third party (professional fund managers) apply their expertise, dedicate their time to manage and research investment options. However, despite the professional management, mutual funds are not immune to risks. They share the same risks associated with the investments made. If the fund invests primarily in stocks, it is usually subject to the same ups and downs and risks as the stock market.

If you were to begin buying various stocks, bonds, it could possibly take you weeks, but by purchasing just a few mutual funds you could be done in half a day. The caviat of Mutual funds is that they automatically diversify in a pre-determined category of investment, and ideally you want to have diversification iin your portfolio, that is to say, spreading out your money across many different types of investments. When one investment is down another might be up. Diversifying your investment holdings reduces your risk.


P/E Ratio is the price-to-earnings ratio is the dollars that you pay for each one-dollar of earnings. Its calculated by dividing the price per share, by the past 12 months earnings per share. You will get the same answer by dividing the market cap by the company's total earnings for the past four quarters.

Some say that the PE is a much better comparison of the value of a stock than the price, others would disagree. There are other considerations. Many people would reasonably argue that the P/E isn't even all that valuable, since a company, via accounting tricks -- legal and otherwise -- can manipulate earnings to some degree. If you find a company with a low P/E, try to determine why it's low. See whether the company has encountered any problems recently, and determine whether those problems will likely be temporary or permanent. Many lenders, for example, are being pressured by issues surrounding subprime lending these days.

The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings.

The P/E ratio provides the investor with an idea of what the market is willing to pay for the company's earnings. The higher the P/E the more the market is willing to pay for the company's earnings. Some investors read a high P/E as an overpriced stock and that may be the case, however it can also indicate the market has high hopes for this stocks future and has bid up the price.

Conversely, a low P/E may indicate a “vote of no confidence” by the market or it could mean this is a sleeper that the market has overlooked. Known as value stocks, this is what the very clever and informed investor is looking for, these are where fortunes are made by "some". Being able to spot a growth stock prior to the rest of the market discovers it true worth.

The average P/E ratio in the market has been around 15-25. This fluctuates significantly depending on economic conditions. The P/E can also vary widely between different companies and industries.


Blue Chip Stock: The common stock of a company with a reputation for quality products, services, and management, and a long history of earnings growth and dividend payments. Some examples of blue chip companies include Apple, General Electric, Exxon/Mobil, IBM, Berkshire-Hathaway, Microsoft, Coca-Cola, Gillett, and DuPont.



Casualty Loss: As defined by the IRS, the loss is sudden and unexpected losses due to flood, fire, tornado, earth quake, or hurricane and if you're not compensated by insurance, you are eligible for a tax deduction. The focus is that they are usually reimbursed either in full or in part by insurance contracts. Amounts of compensation are listed for losses are not usually tax-deductible if full restitution is made by the insurance carrier. However, claims denied or not covered are potentially tax-deductible. Casualty losses are a red flag for an IRS audit and nd you will need to produce documents supporting the values, basis, and depreciation. If your records meet all the general rules and exceptions, you may have a deductible loss on your federal income tax return.

The general rule for year deductible, is that the loss is a deduction in the year of the casualty, however, there is an exception for a casualty loss suffered in an area determine by the United States President to warrant assistance by the federal government under the Disaster Relief and Emergency Assistance Act. Instead of claiming the loss in the casualty year, the loss may be claimed in the year immediately preceding the year in which the casualty occurred. The benefit to you is that you receive any accompanying tax refunds a year earlier which will provide you additional funds to re-build after the casualty.

The amount of the deductible casualty loss depends upon whether you suffered a total or partial loss.

Total loss of business property. If your business property is completely destroyed (becomes totally worthless), your deductible loss is the adjusted basis of the property, minus any salvage value and any insurance or other reimbursement you receive or expect.

Partial loss of business property. In a partial destruction, the deductible loss is the decrease in fair market value of the property or the adjusted basis of the property, whichever is less. Reduce this amount by any insurance or other reimbursement you receive or expect.

A casualty loss is not deductible if the damages or destruction is caused by: a) Accidentally breaking articles such as glass or china under normal conditions; b) A family pet; c) A fire you willfully set or paid someone to set; d) A car accident, if caused by your negligence. Loss of property due to progressive deterioration is not deductible as a casualty loss, because damage results from a normal process, such as rot or erosion, rather than from a sudden event, such as a storm.

If you recover property after you've taken a theft-loss deduction, you must recalculate your loss. If the new figure is less than you deducted, you generally have to report the difference as income in the recovery year.

But report the difference only up to the amount of loss that reduced your tax.



Your potential angel investor(s) is usually a high net-worth individual who invest in entrepreneurial companies, usually at an early stage. Like institutional venture capital firms, many angel investors provide cash to young companies and take equity in return. On average, angel investors typically invest smaller amounts of money in individual companies than venture capitalists do, making them a possible resource for companies that have exhausted their pool of family and friends, but not in a position to  approach the venture capital firms for working and expansion capital.

Some angel investors work in groups, this grouping, allowing them to increase their access to investment opportunities and giving them the possibility of investing jointly with other angels to hedge their risk. They usually make investment decisions based on membership votes, so it's important to have an ally on the inside to represent you. Tapping into these networks is one way to start looking for investors. Sophisticated angel investors have knowledge and expertise in your industry--they will have “been there and done that.” You need their expertise. Should you need to raise venture capital in later rounds, it's going to be much harder if you show up with a long list of unsophisticated investors, usually, but not always..

Of Note: Consider that Apple computer (Steve Jobs and Steve Wosniak) started out with one (1) angel (A.C. "Mike" Markkula) investor, who just happened to have tremendous marketing experience and a degree in engineering, now that was a dream angel! After the initial startup of Apple, and with thousands of orders from their "first" marketing show at the West coast Computer faire, they went for 1st round Venture Capital money. The rest is history.

In you quest for angels, "remember that choosing your angel investor is a also a great opportunity to gain an advisor".


Buy-Sell Agreement: provides for the purchase of all outstanding shares of an owner who wishes to sell, terminate involvement, is permanently disabled, or dies. Such an agreement allows for different future ownership structure. The agreement is usually funded with life and disability insurance, and contains specific purchase arrangements. buy-sell agreement may be thought of as a sort of "premarital agreement" between business partners/shareholders. It is sometimes called a 'business will'. An insured buy-sell agreement (agreement funded with life insurance on the participating owner's lives) is often recommended by business succession specialists and financial planners to ensure the buy-sell arrangement is well-funded and also to guarantee there will be money when the buy-sell event is triggered.

In the sale of a business, a buy-sell clause in a shareholder agreement preserves continuity of ownership in the business and ensures that everyone is fairly treated, the buyer as well as the seller. It is a binding contract between business partners about the future ownership of the business. A buy-sell agreement is made up of several legally binding clauses in a business partnership or operating agreement (or it can be a separate agreement that stands on its own) that can control the following business decisions:

  • Who can buy a departing partner's or shareholder's share of the business (this may include outsiders or be limited to other partners/shareholders);
  • What events will trigger a buyout, and;

(the most comment events that trigger a buyout are: death, disability, retirement, or an owner leaving the company)

  • What price will be paid for a partner's or shareholder's interest in the partnership and so on.

Buy-sell agreement can be in the form of a cross-purchase plan or a repurchase (entity or stock-redemption) plan. For greater neutrality and effectiveness of the buy-sell arrangement, the service of a corporate trustee is recommended.



This is when investor purchases a house at a considerable discount from market (estate, foreclosure) value. The price may also be due to the condition of the property, such as the need for major renovations and/or repairs needed or the owner(s) needing to sell a house quickly, for whatever reason.

The investor will then perform necessary renovations and repairs, and attempt to make a profit by selling the house quickly at a price nearer to full market value, hence, "Flip".

Many investors do this on full-time basis, and some do very well. They have done their homework and understand the various hurdles they will encounter.

Unfortunately, there is an adverse financial aspect to those who participate in "flipping", when interest rates go up, the cause and effect resulting in lack of sales, and major price depreciations (often far below) their previous increases, results in a excessive properties on the market at one time, obviously not selling due to lack of buyers, due to the increase in interest they would have to pay, consequently causing a serious downturn in local market and potentially the economy as a whole causing a domino effect. Here the investor is really in trouble, since they are paying the mortgage, putting time and money in the property, as well as taxes and insurance, having to ride it out, until the real estate market returns, which on occasion can be a few years. The method of escape from the property is precisely why you see so many TV commercials attesting to those "flippers" telling you how many LLC or Corporations they own, as that is some badge of success, well it is not. All this does is to provide them the opportunity to walk away from the property, giving it back to the lender. Their liability being the actual dollars they have invested.

Flipping trends have historically ended in disaster


Education IRA: A This is a savings plan that allows parents to receive tax-free savings on money earmarked for a child’s college education. There are limits on income eligibility and on how much may be set aside per year in an education IRA. There is also a provision in federal tax law makes it possible for parents to use tax-favored savings accounts to pay their children's tuition for private elementary and high schools--or even to pay for tutoring.

At the center of the provision are individual retirement accounts known as education IRAs, tax-favored savings accounts created in 1997 to help parents save for college costs. Contributions to education IRAs, which are limited to $500 annually for each beneficiary, are not tax deductible. However, money grows in the account on a tax-deferred basis. As long as the money is used for qualified education expenses, all the investment gains can be withdrawn tax-free.

However, when Congress passed tax cut legislation this year, education IRAs were changed in two significant ways. Individuals will be able to contribute as much as $2,000 per beneficiary each year. (In this case, the beneficiary is the child for whom the account is opened. A person with five children could contribute $10,000 to education IRAs annually--$2,000 for each child's account.)

In addition to paying college costs, money in these accounts can be used to pay qualified elementary and secondary education expenses without being subject to federal income tax. Allowable expenses include tuition, fees, academic tutoring and specialized services for a special-needs child, as well as books, supplies and school uniforms. If the money is used for anything but qualified education expenses, withdrawals will be subject to both income taxes and penalties. And because there's no up-front tax deduction, there's no benefit to putting money into an education IRA and quickly pulling it out.

Anyone can contribute to the education IRA account--parents, grandparents, aunts and uncles--as long as the total contributions do not exceed $2,000 per year for each child and the person contributing earns no more than $95,000 if single or $190,000 if married. The accounts can be a cost-effective way to finance expensive private high schools




Day traders quickly buy and sell stocks (sometimes only seconds to minutes) continuously in hopes that their stocks will continue climbing or falling in value for the very short period, they own the stock, allowing them to quickly lock in quick profits. Day traders usually buy on borrowed money, hoping that they will reap higher profits through leverage, but also running the risk of higher losses.

Day trading is highly risky and it is not illegal. Most individual investors do not have the temperament to be a day trader, as well as be able to sustain the devastating losses that day trading can bring. But if you are successful, the gains are sometimes substantial.

A few pointers about day trading:

-Day traders live their life in front of their computer screen, looking for a stock that is either moving up or down in value. They want to ride the momentum of the stock and get out of the stock before it changes direction. They do not know for certain how the stock will move, they are hoping that it will move in one direction, either up or down in value. True day traders do not own any stocks overnight, because of the extreme risk that prices will change radically from one day to the next, leading to some very big losses.

-They typically suffer severe financial losses in their first months of trading, and many never graduate to profit making. Given these outcomes, it's clear, these traders should only risk money they can afford to lose. They should never use money they will need for daily living expenses, their secure savings, never re-finance your first or take out a second mortgage, for day trading. Day traders watch the market continuously during the day glued to their computer terminals. It's extremely difficult and demands great concentration to watch dozens of ticker quotes and price moves for them to spot market trends

-Don't believe snake oil claims that promise sure profits from day trading. Before you start trading with a firm, find out about them. Do some research, find out the percentage of their clients that are actually making money and how many are not. If the firm does not know, or will not tell you, think twice about the risks you take in the face of ignorance.

Borrowed money to trade in stocks is very risky business. Day trading strategies demand using the leverage of borrowed money to make profits. This is why many day traders lose all their money and may end up in debt as well. Day traders should understand how margin works, how much time they'll have to meet a margin call, and the potential for getting in over their heads and broke.

For the casual or want-a-be day trader, watch out for the "hot Tips", those you are inundated with in your email box daily, you are destined to lose. You might as well simply go out and buy a lottery (simply go outside and wait for the lightning strike, this of which you have a better chance of succeeding, than winning a lottery) ticket


Family Limited Partnership (FLP): A partnership of family members to arrange for generational transfers, maintain control in the general partners, and reduce potential liability to the transferor and transferee. Family limited partnerships utilize the benefits in wealth preservation, taxation, credit protection, and estate planning.


Limited Liability Company (LLC): In contrast to the unlimited liability inherent in proprietorships as a form of business ownership, a limited liability company provides limited liability to each shareholder "to the extent of invested capital".

LLCs are organized with a document called the "articles of organization", or "the rules of organization" specified publicly by the state; additionally, it is common to have an "operating agreement" privately specified by the members. The operating agreement is a contract among the members of an LLC governing the membership, management, operation and distribution of income of the company.

Managing members are the individuals who are responsible for the maintenance, administration and management of the affairs of an LLC. In most states, the managers serve a particular term and report to and serve at the discretion of the members. Specific duties of the managers may be detailed in the articles of organization or the operating agreement of the LLC. In some states, the members of an LLC may also serve as the managers.

Members are the owner(s) of an LLC. Unless the articles of organization or operating agreement provide otherwise, management of an LLC is vested in the members in proportion to their ownership interest in the company.

Operating as an LLC form of partnership does not mean that appropriate US federal partnership tax forms are not necessary, or not complex. As a partnership, the entity's income and deductions attributed to each member are reported on that owner's tax return.

LLCs can lose their tax advantage without the partnership structure. The possible label "disregarded entity" for income tax purposes singles out the one-member owner of an LLC as actually earning income and deductions directly. It is the owner, then, who reports as a business proprietor, rather than as an LLC operating an active trade or business. An LLC passively investing in real estate and owned by a single member would have its income and deductions reported directly on the owner's individual tax return on a Schedule E tax form. And an LLC owned by a corporation--in other words, an LLC with a single corporate member--would be treated as an incorporated branch and have its income and deductions reported on the corporate tax return, creating double taxation.

  • No requirement of an annual general meeting for shareholders.
  • No loss of power to a board of directors.
  • Much less administrative paperwork and recordkeeping than a corporation.
  • Pass-through taxation (i.e., no double taxation), unless the LLC elects to be taxed as a corporation.
  • Limited liability, meaning that the owners of the LLC, called "members," are protected from some liability for acts and debts of the LLC, but are still responsible for any debts beyond the fiscal capacity of the entity.
  • Using default tax classification, profits are taxed personally at the member level, not at the LLC level.
  • Check-the-box taxation. An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation, providing much flexibility.
  • LLCs in some states can be set up with just one natural person involved.
  • Membership interests of LLCs can be assigned, and the economic benefits of those interests can be separated and assigned, providing the assignee with the economic benefits of distributions of profits/losses (like a partnership), without transferring the title to the membership interest (i.e., see Virginia and Delaware LLC Acts).
  • LLCs in most states are treated as entities separate from their members, whereas in other jurisdictions case law has developed deciding LLCs are not considered to have separate juridical standing from their members (See recent D.C. decisions).
  • Unless the LLC has chosen to be taxed as a corporation, income of the LLC generally retains its character, for instance as capital gains or as foreign sourced income, in the hands of the members.



Consider that by using the equity in your home, you may qualify for a sizable amount of credit, available for use when and how you please, at an interest rate that is relatively low. Furthermore, under the tax law--depending on your specific situation--you may be allowed to deduct the interest because the debt is secured by your home.

If you are in the market for credit, a home equity plan may be right for you. Or perhaps another form of credit would be better. Before making a decision, you should weigh carefully the costs of a home equity line against the benefits. Shop for the credit terms that best meet your borrowing needs without posing undue financial risk. And remember, failure to repay the amounts you've borrowed, plus interest, could mean the loss of your home.

A home equity line of credit is a form of revolving credit in which your home serves as collateral. Because the home is likely to be a consumer's largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills and not for day-to-day expenses.

With a home equity line, you will be approved for a specific amount of credit--your credit limit, the maximum amount you may borrow at any one time under the plan. Many lenders set the credit limit on a home equity line by taking a percentage (say, 75 percent) of the home's appraised value and subtracting from that the balance owed on the existing mortgage.
In determining your actual credit limit, the lender will also consider your ability to repay, by looking at your income, debts, and other financial obligations as well as your credit history.

Many home equity plans set a fixed period during which you can borrow money, such as 10 years. At the end of this "draw period," you may be allowed to renew the credit line. If your plan does not allow renewals, you will not be able to borrow additional money once the period has ended. Some plans may call for payment in full of any outstanding balance at the end of the period. Others may allow repayment over a fixed period (the "repayment period"), for example, 10 years.

Once approved for a home equity line of credit, you will most likely be able to borrow up to your credit limit whenever you want. Typically, you will use special checks to draw on your line. Under some plans, borrowers can use a credit card or other means to draw on the line.

There may be limitations on how you use the line. Some plans may require you to borrow a minimum amount each time you draw on the line (for example, $300) and to keep a minimum amount outstanding. Some plans may also require that you take an initial advance when the line is set up.

What should you look for when shopping for a plan?

If you decide to apply for a home equity line of credit, look for the plan that best meets your particular needs. Read the credit agreement carefully, and examine the terms and conditions of various plans, including the annual percentage rate (APR) and the costs of establishing the plan. The APR for a home equity line is based on the interest rate alone and will not reflect the closing costs and other fees and charges, so you'll need to compare these costs, as well as the APRs, among lenders.

Interest rate charges and related plan features

Home equity lines of credit typically involve variable rather than fixed interest rates. The variable rate must be based on a publicly available index (such as the prime rate published in some major daily newspapers or a U.S. Treasury bill rate); the interest rate for borrowing under the home equity line changes, mirroring fluctuations in the value of the index. Most lenders cite the interest rate you will pay as the value of the index at a particular time plus a "margin," such as 2 percentage points. Because the cost of borrowing is tied directly to the value of the index, it is important to find out which index is used, how often the value of the index changes, and how high it has risen in the past as well as the amount of the margin.

Lenders sometimes offer a temporarily discounted interest rate for home equity lines--a rate that is unusually low and may last for only an introductory period, such as 6 months.

Variable-rate plans secured by a dwelling must, by law, have a ceiling (or cap) on how much your interest rate may increase over the life of the plan. Some variable-rate plans limit how much your payment may increase and how low your interest rate may fall if interest rates drop.

Some lenders allow you to convert from a variable interest rate to a fixed rate during the life of the plan, or to convert all or a portion of your line to a fixed-term installment loan.

Plans generally permit the lender to freeze or reduce your credit line under certain circumstances. For example, some variable-rate plans may not allow you to draw additional funds during a period in which the interest rate reaches the cap.

Costs of establishing and maintaining a home equity line

Many of the costs of setting up a home equity line of credit are similar to those you pay when you buy a home. For example,

A fee for a property appraisal to estimate the value of your home

An application fee, which may not be refunded if you are turned down for credit

Up-front charges, such as one or more points (one-point equals 1 percent of the credit limit)

Closing costs, including fees for attorneys, title search, and mortgage preparation and filing; property and title insurance; and taxes.

In addition, you may be subject to certain fees during the plan period, such as annual membership or maintenance fees and a transaction fee every time you draw on the credit line.

You could find yourself paying hundreds of dollars to establish the plan. If you were to draw only a small amount against your credit line, those initial charges would substantially increase the cost of the funds borrowed. On the other hand, because the lender's risk is lower than for other forms of credit, as your home serves as collateral, annual percentage rates for home equity lines are generally lower than rates for other types of credit. The interest you save could offset the costs of establishing and maintaining the line. Moreover, some lenders waive some or all of the closing costs.

How will you repay your home equity plan?

Before entering into a plan, consider how you will pay back the money you borrow. Some plans set minimum payments that cover a portion of the principal (the amount you borrow) plus accrued interest. But (unlike with the typical installment loan) the portion that goes toward principal may not be enough to repay the principal by the end of the term. Other plans may allow payment of interest alone during the life of the plan, which means that you pay nothing toward the principal. If you borrow $10,000, you will owe that amount when the plan ends.

Regardless of the minimum required payment, you may choose to pay more, and many lenders offer a choice of payment options. Many consumers choose to pay down the principal regularly as they do with other loans. For example, if you use your line to buy a boat, you may want to pay it off as you would a typical boat loan.

Whatever your payment arrangements during the life of the plan--whether you pay some, a little, or none of the principal amount of the loan--when the plan ends you may have to pay the entire balance owed, all at once. You must be prepared to make this "balloon payment" by refinancing it with the lender, by obtaining a loan from another lender, or by some other means. If you are unable to make the balloon payment, you could lose your home.

If your plan has a variable interest rate, your monthly payments may change. Assume, for example, that you borrow $10,000 under a plan that calls for interest-only payments. At a 10 percent interest rate, your monthly payments would be $83. If the rate rises over time to 15 percent, your monthly payments will increase to $125. Similarly, if you are making payments that cover interest plus some portion of the principal, your monthly payments may increase, unless your agreement calls for keeping payments the same throughout the plan period.

If you sell your home, you will probably be required to pay off your home equity line in full immediately. If you are likely to sell your home in the near future, consider whether it makes sense to pay the up-front costs of setting up a line of credit. Also keep in mind that renting your home may be prohibited under the terms of your agreement.

Lines of credit vs. traditional second mortgage loans

If you are thinking about a home equity line of credit, you might also want to consider a traditional second mortgage loan. A second mortgage provides you with a fixed amount of money repayable over a fixed period. In most cases the payment schedule calls for equal payments that will pay off the entire loan within the loan period. You might consider a second mortgage instead of a home equity line if, for example, you need a set amount for a specific purpose, such as an addition to your home.

In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at both the APR and other charges. Do not, however, simply compare the APRs, because the APRs on the two types of loans are figured differently:





Disclosures from lenders

The federal Truth in Lending Act requires lenders to disclose the important terms and costs of their home equity plans, including the APR, miscellaneous charges, the payment terms, and information about any variable-rate feature. And in general, neither the lender nor anyone else may charge a fee until after you have received this information. You usually get these disclosures when you receive an application form, and you will get additional disclosures before the plan is opened. If any term (other than a variable-rate feature) changes before the plan is opened, the lender must return all fees if you decide not to enter into the plan because of the change.

When you open a home equity line, the transaction puts your home at risk. If the home involved is your principal dwelling, the Truth in Lending Act gives you 3 days from the day the account was opened to cancel the credit line. This right allows you to change your mind for any reason. You simply inform the lender in writing within the 3-day period. The lender must then cancel its security interest in your home and return all fees--including any application and appraisal fees--paid to open the account.



Quick Tip: There's no such as thing as "Get rich quick." That which can be achieved in one day, could be gone the next!


Hedge Funds

Hedge funds are pooled investments, primarily in publicly traded securities. But they're generally more aggressive, employing risky strategies, such as trading options and selling short., use arbitrage, buy and sell undervalued securities, trade options or bonds, and invest in almost any opportunity in any market where it foresees impressive gains at reduced risk. Hedge fund strategies vary widely-- many hedge against downturns in the markets -- especially important today with volatility and anticipation of corrections in overheated stock markets. The primary aim of most hedge funds is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions.

Investment strategies vary by hedge funds, each offering different degrees of risk and return. A macro hedge fund, for example, invests in stock and bond markets and other investment opportunities, such as currencies, in hopes of profiting on significant shifts in such things as global interest rates and countries’ economic policies. A macro hedge fund is more volatile but potentially faster growing than a distressed-securities hedge fund that buys the equity or debt of companies about to enter or exit financial distress. An equity hedge fund may be global or country specific, hedging against downturns in equity markets by shorting overvalued stocks or stock indexes. A relative value hedge fund takes advantage of price or spread inefficiencies. Knowing and understanding the characteristics of the many different hedge fund strategies is essential to capitalizing on their variety of investment opportunities.

A wide range of hedging strategies are available to hedge funds. For example:

--Selling short - selling shares without owning them, hoping to buy them back at a future date at a lower price in the expectation that their price will drop.

-Using arbitrage - seeking to exploit pricing inefficiencies between related securities - for example, can be long convertible bonds and short the underlying issuers equity.

-Trading options or contracts who values are based on the performance of any underlying financial asset, index or other investment

-Investing in anticipation of a specific event - merger transaction, hostile takeover, spin-off, exiting of bankruptcy proceedings, etc.

-Investing in deeply discounted securities - of companies about to enter or exit financial distress or bankruptcy, often below liquidation value.

-Many of the strategies used by hedge funds benefit from being non-correlated to the direction of equity markets

An investor must understand the differences between the various hedge fund strategies because all hedge funds are not the same -- investment returns, volatility, and risk vary enormously among the different hedge fund strategies. Some strategies which are not correlated to equity markets are able to deliver consistent returns with extremely low risk of loss, while others may be as or more volatile than mutual funds. A successful fund of funds recognizes these differences and blends various strategies and asset classes together to create more stable long-term investment returns than any of the individual funds.

In a nut shell:

  • Most hedge funds are highly specialized, relying on the specific expertise of the manager or management team.
  • Performance of many hedge fund strategies, particularly relative value strategies, is not dependent on the direction of the bond or equity markets -- unlike conventional equity or mutual funds (unit trusts), which are generally 100% exposed to market risk.
  • Many hedge fund strategies, particularly arbitrage strategies, are limited as to how much capital they can successfully employ before returns diminish. As a result, many successful hedge fund managers limit the amount of capital they will accept.
  • Hedge fund managers are generally highly professional, disciplined and diligent.
  • Their returns over a sustained period of time have outperformed standard equity and bond indexes with less volatility and less risk of loss than equities.
  • Beyond the averages, there are some truly outstanding performers.
  • Investing in hedge funds tends to be favored by more sophisticated investors, including many Swiss and other private banks, that have lived through, and understand the consequences of, major stock market corrections.
  • An increasing number of endowments and pension funds allocate assets to hedge funds.

Less than 5% of hedge funds are global macro funds. Most hedge funds use derivatives only for hedging or don't use derivatives at all, and many use no leverage.

  • Many hedge fund strategies have the ability to generate positive returns in both rising and falling equity and bond markets.
  • Inclusion of hedge funds in a balanced portfolio reduces overall portfolio risk and volatility and increases returns.
  • Huge variety of hedge fund investment styles – many uncorrelated with each other – provides investors with a wide choice of hedge fund strategies to meet their investment objectives.
  • Academic research proves hedge funds have higher returns and lower overall risk than traditional investment funds.
  • Hedge funds provide an ideal long-term investment solution, eliminating the need to correctly time entry and exit from markets.
  • Adding hedge funds to an investment portfolio provides diversification not otherwise available in traditional investing.


Limited Partnership: An organization managed by a general partner and financially backed by limited partners, offering limited liability to the extent of the amount invested by each individual limited partner. A limited partner does not supervise the daily operations or directly manage the partnership.




Treasury bills, or T-bills, are issued at a discount from their face value

You can "bid" for a bill in two ways:

  • With a noncompetitive bid, you agree to accept the discount rate determined at auction. With this bid, you are guaranteed to receive the bill you want, and in the full amount you want.
  • With a competitive bid, you specify the discount rate you are willing to accept

Your Bid may be:

-Accepted in the full amount you want if the rate you specify is less than the discount rate set by the auction,

-Accepted in less than the full amount you want if your bid is equal to the high discount rate.

-Rejected if the rate you specify is higher than the discount rate set at the auction.

To place a noncompetitive bid, you may use TreasuryDirect, Legacy Treasury Direct, or a bank, broker, or dealer.

To place a competitive bid, you must use a bank, broker, or dealer.

In a nut shell: Treasury Bills are,

  • Bills are sold at a discount. The discount rate is determined at auction.
  • Treasury bills are issued for terms of 4, 13, and 26 weeks. Another type of Treasury bill, the cash management bill, is issued in variable terms, usually of only a matter of days.
  • 4-week, 13-week, and 26-week bills are auctioned on a regular schedule.
  • Bills pay interest only at maturity. The interest is equal to the face value minus the purchase price.
  • Bills are sold in increments of $1,000. The minimum purchase is $1,000.
  • All bills except cash management bills are auctioned every week. Cash management bills aren't auctioned on a regular schedule.
  • Cash management bills are issued in variable terms, usually only a matter of days.
  • Bills are issued in electronic form.
  • You can hold a bill until it matures or sell it before it matures.
  • In a single auction, an investor can buy up to $5 million in bills by non-competitive bidding or up to 35% of the initial offering amount by competitive bidding
  • Interest income is exempt from state- and local income taxes.
  • Interest income is subject to federal income tax.


Closing Costs: Also called settlement costs. The expenses involved in transferring real estate from a seller to a buyer. Typically includes fees or charges for loan origination, discount points, appraisal, property survey, title search, title insurance, deed filing, credit reports, taxes, and legal services. Does not include points and the cost of private mortgage insurance (PMI).


( Real Estate Investment Trusts)

Congress created REITs (pools of real estate that are sold as a public security) in 1960 to make investments in large-scale, income producing real estate accessible to smaller investors. This was a vehicle for average investors to invest in large scale commercial properties the same way they invest in other industries, through the purchase of equity. In the same way as shareholders benefit by owning stocks of other corporations, the stockholders of a REIT earn a pro-rata share of the economic benefits that are derived from the production of income through commercial real estate ownership. REITs offer distinct advantages for investors: greater diversification through investing in a portfolio of properties rather than a single building and management by experienced real estate professionals.

Both foreign and domestic sources provide investment in the REIT market. REITs are owned by thousands of individuals, as well as large institutional investors including pension funds, endowment funds, insurance companies, bank trust departments and mutual funds. Investment goals for REIT share ownership are much the same as investment in other stocks current income distributions and long-term appreciation potential.

The majority of REIT shares can be purchased on the major stock exchanges, and orders can be placed through stockbrokers. Financial planners and investment advisors can help to match an investor's objectives with individual REIT investment.

Because REITs are, by definition, obligated to distribute 90% of their taxable income to investors, they must rely upon external funding as their key source of capital. Investors must consider a REITs potential for future success, assessing whether individual REITs have the access to debt or equity capital sufficient to fund their future growth plans. REITs that have the ability to properly leverage themselves usually will deliver superior returns.

The most common and widely purchased are shares of equity REITs, which invest in commercially managed property that produce income. This is generally the type of REIT that is referred to when discussing them as an investment tool. Typically, the trust invest in and actively manages large commercial real estate projects. These ranging from apartments to shopping centers to office complexes, as well as many other large-scale projects, although most of the do trust specialize in a certain type of investment. 

- REITs trade like stocks, you can get into and out of them with ease, unlike limited real estate partnerships or other forms of real estate ownership.

-As the real estate appreciates in value, the REIT becomes more valuable and its share price "may" increase.

-Net Income from rents is passed through to shareholders.

- REITs also provide an annual report, prospectus and other financial information directly to an investor. Recently, mutual funds have emerged specializing in REIT investment and diversification.

-REITs typically can offer predictable income streams because of long-term lease agreements with tenants.


REITs must meet specific criteria as established by the act:


  • Be an entity that is taxable as a corporation
  • Be managed by a board of directors or trustees
  • Have shares that are fully transferable
  • Have a minimum of 100 shareholders
  • Have no more than 50 percent of its shares held by five or fewer individuals during the last half of the taxable year
  • Invest at least 75 percent of its total assets in real estate assets
  • Derive at least 75 percent of its gross income from rents from real estate property or interest on mortgages on real property
  • Have no more than 20 percent of its assets consisted of stocks in taxable REIT subsidiaries
  • Pay annually at least 90 percent of its taxable income in the form of shareholder dividends

REITs have outperformed common stocks with less risk.  On average, annual returns have exceed 13% per year. Just like other stocks, strong earnings growth moves REIT share prices higher. But earnings growth is even more significant for REITs. Because REITs must pay out 90% of their net income to shareholders, earnings growth also fuels dividend increases. So, you'll usually get the best overall returns with REITs producing above-average earnings growth.

Another of the primary incentives for REIT investment is the low correlation of its value to that of other financial assets. Because of this, REITs possess low relative historical volatility and provide some degree of inflation protection. In addition to the advantages of an investment which avoids double taxation and requires no minimum investment, REITs offer investors current income that is usually stable and often provides an attractive return. Another factor attractive to the investor is that a REIT's performance is monitored on a regular basis, by independent directors of the REIT, analysts, auditors, and the business and financial media.

Due to a REIT’s diversification it may provide some protection from the ups and downs of individual properties such as occupancy rates, defaults on rents, and downturns in industry sectors or local markets.

REITs do carry the risk of loss of investment. Because they can be a complicated investment product, so think long and hard, before investing in REITs, as you would with any investment.


An "Asset" is Property with a cash value, such as real estate, equipment, savings, and investments.




Investors searching for relatively low-risk investments that can easily be converted into cash often turn to certificates of deposit (CDs). A CD is a special type of deposit account with a bank or thrift institution that typically offers a higher rate of interest than a regular savings account. Unlike other investments, CDs feature federal deposit insurance up to $100,000.

When you purchase a CD, you invest a fixed sum of money for fixed period of time – six months, one year, five years, or more – and, in exchange, the issuing bank pays you interest, typically at regular intervals. When you cash in or redeem your CD, you receive the money you originally invested plus any accrued interest. But if you redeem your CD before it matures, you may have to pay an "early withdrawal" penalty or forfeit a portion of the interest you earned.

Although most investors have traditionally purchased CDs through local banks, many brokerage firms and independent salespeople now offer CDs. These individuals and entities – known as "deposit brokers" – can sometimes negotiate a higher rate of interest for a CD by promising to bring a certain amount of deposits to the institution. The deposit broker can then offer these "brokered CDs" to their customers.

At one time, most CDs paid a fixed interest rate until they reached maturity. But, like many other products in today’s markets, CDs have become more complicated. Investors may now choose among variable rate CDs, long-term CDs, and CDs with other special features.

Some long-term, high-yield CDs have "call" features, meaning that the issuing bank may choose to terminate – or call – the CD after only one year or some other fixed period of time. Only the issuing bank may call a CD, not the investor. For example, a bank might decide to call its high-yield CDs if interest rates fall. But if you’ve invested in a long-term CD and interest rates subsequently rise, you’ll be locked in at the lower rate.

Before you consider purchasing a CD from your bank or brokerage firm, make sure you fully understand all of its terms. Carefully read the disclosure statements, including any fine print.

-Many investors fail to confirm the maturity dates for their CDs and are later shocked to learn that they’ve tied up their money for five, ten, or even twenty years. Before you purchase a CD, ask to see the maturity date in writing.

-Carelfully consider "Callable CDs, the issuing bank the right to terminate-or "call"-the CD after a set period of time. But they do not give you that same right. If interest rates fall, the issuing bank might call the CD. In that case, you should receive the full amount of your original deposit plus any unpaid accrued interest. But you'll have to shop for a new one with a lower rate of return. Unlike the bank, you can never "call" the CD and get your principal back. So if interest rates rise, you'll be stuck in a long-term CD paying below-market rates. In that case, if you want to cash out, you will lose some of your principal. That's because your broker will have to sell your CD at a discount to attract a buyer. Few buyers would be willing to pay full price for a CD with a below-market interest rate.

-Do not assume that a "federally insured one-year non-callable" CD matures in one year. It doesn't. These words mean the bank cannot redeem the CD during the first year, but they have nothing to do with the CD's maturity date. A "one-year non-callable" CD may still have a maturity date 15 or 20 years in the future. If you have any doubt, ask the sales representative at your bank or brokerage firm to explain the CD’s call features and to confirm when it matures.

-When purchasing a brokered CD, make sure of the issuer, federal deposit insurance is limited to a total aggregate amount of $100,000 for each depositor in each bank or thrift institution, it is very important that you know which bank or thrift issued your CD. Your broker may plan to put your money in a bank or thrift where you already have other CDs or deposits. You risk not being fully insured if the brokered CD would push your total deposits at the institution over the $100,000 insurance limit. (If you think that might happen, contact the institution to explore potential options for remaining fully insured)

-Find out how the CD is held, unlike traditional bank CDs, brokered CDs are sometimes held by a group of unrelated investors. Instead of owning the entire CD, each investor owns a piece. Confirm with your broker how your CD is held, and be sure to ask for a copy of the exact title of the CD. If several investors own the CD, the deposit broker will probably not list each person's name in the title. But you should make sure that the account records reflect that the broker is merely acting as an agent for you and the other owners. This will ensure that your portion of the CD qualifies for up to $100,000 of FDIC coverage.

-Withdrawl penalties: Some deposit brokers tell investors that their CDs have no penalty for early withdrawal. While technically true, these claims can be misleading. Be sure to find out how much you'll have to pay if you cash in your CD before maturity and whether you risk losing any portion of your principal. If you are the sole owner of a brokered CD, you may be able to pay an early withdrawal penalty to the bank that issued the CD to get your money back. But if you share the CD with other customers, your broker will have to find a buyer for your portion. If interest rates have fallen since you purchased your CD and the bank hasn't called it, your broker may be able to sell your portion for a profit. But if interest rates have risen, there may be less demand for your lower-yielding CD. That means you would have to sell the CD at a discount and lose some of your original deposit –despite no "penalty" for early withdrawal.

-Verify the interest rate and in which manner you will be paid. You should receive a disclosure document that tells you the interest rate on your CD and whether the rate is fixed or variable. Be sure to ask how often the bank pays interest – for example, monthly or semi-annually. And confirm how you’ll be paid – for example, by check or by an electronic transfer of funds.

-If you are considering investing in a variable-rate CD, make sure you understand when and how the rate can change. Some variable-rate CDs feature a "multi-step" or "bonus rate" structure in which interest rates increase or decrease over time according to a pre-set schedule. Other variable-rate CDs pay interest rates that track the performance of a specified market index

Lastly, deposit brokers do not have to go through any licensing or certification procedures, and no state or federal agency licenses, examines, or approves them. Since anyone can claim to be a deposit broker, you should always check whether your broker or the company he or she works for has a history of complaints or fraud. You can do this by calling your state securities regulator or by checking with the National Association of Securities Dealers' "Central Registration Depository" at 1-800-289-9999.


1/4 of 1 percent of Americans are worth 10 Million dollars and make $750,000 or more per year.


Quick Tip: Make sure your new insurance policy is in effect before dropping your old one, or you could be very sorry.



Quick Tip: Be cautious in taking out Home Equity Loans. These loans reduce the equity that you have built up in your home. If you are unable to make payments, "you could lose your home".



According to the EPA's Energy Star Program, Home electronics accounts for in excess of 15 prcent of all residential electric




Annual Fee

The annual cost of membership to a particular credit card account. Most banks now have products without annual fees.

Annual Percentage Rate (APR)
This shows how much credit will cost you on a yearly basis.

ATM Card
A card used in an automated teller machine (ATM) to access a credit or a debit account to complete banking inquiries and fund transfers between accounts.

Balance Computation Methods
Credit card issuers assess finance charges by applying the APR to a balance. There are several methods for determining your balance. Descriptions of two of the most frequently used follow:

Average Daily Balance Method - This balance is figured by taking the outstanding balance and deducting payments and adding credits for each day in the billing cycle, and then dividing that amount by the number of days in the billing cycle. Some credit card issuers include new transactions in this calculation, while others exclude new transactions.

Two-Cycle (or Double-Cycle) Average Daily Balance Method
This balance is calculated by taking the sum of the average daily balances for two billing cycles. The first balance is for the current billing cycle and the second balance is for the previous billing cycle.

The status of being legally declared unable to pay your debts as they become due. Federal bankruptcy laws have been enacted that allow a person or organization to liquidate their assets to pay a reduced amount to their creditors or that allow the rehabilitation of the debtor by requiring creditors to accept reduced payments from future earnings of the debtor. A declaration of bankruptcy will remain on a person's credit report from 7 to 10 years and, in some cases, indefinitely. Declaring bankruptcy is generally considered a last resort.

Billing Cycle

The length of time between billing statements.

Business Card (Business Credit Card)
A bookkeeping and tax preparation tool for many businesses, these credit cards are generally issued to corporate executives or business owners. They make it easy to keep business expenses separate from personal charges.

Charge Card
Unlike revolving credit card accounts, which allow you to carry balances from month to month, charge card accounts must be paid in full every month.

Chip Card
There are various types of Chip Cards, sometimes called Smart Cards. Electronic chips allow these cards to function in different ways: as credit cards, debit cards, frequent buyer or rewards program cards, ID cards, or any combination. Many college ID cards are chip cards. These may or may not be credit cards.

Co-Branded Card
A credit card sponsored by both the issuing bank and a retail organization, such as a department store or an airline. Cardholders may benefit through account enhancements that provide such benefits as discounts or free merchandise from the sponsoring merchant based on account usage.

Consumer Credit Counseling Service (CCCS)
This is a nonprofit organization that has helped thousands of people get out of debt. CCCS counselors can advise you on how to develop a budget you can live with and can be invaluable in helping you negotiate repayment plans with your creditors. This service is confidential. To reach the CCCS, call 1-800-388-2227.

Credit Reporting Agencies
Credit reporting agencies collect and report vital facts about your financial habits, for instance, whether or not you pay your bills on time. These facts are then compiled into a "credit report," which can be accessed by potential creditors, employers, and the like. The three major credit reporting agencies are Equifax, Experian and TransUnion. You can contact them at the addresses below.

Credit Card
Unlike charge cards, these cards allow you to "revolve" your charges, that is, carry over portions of your balance from month to month. However, if you do not pay your balance in full, you are assessed finance charges. To protect your credit rating, be sure to pay at least the minimum amount due by the payment due date.

Credit Card Insurance
Protects you if you are unable to pay your credit card bills because of illness, unemployment, or other severe conditions. Under these circumstances, the insurance provider will pay your minimum payments.

Credit Line
The most you can charge on your credit card account. When you receive a new credit card, you're usually issued a set credit line. Under some circumstances, your card issuer may increase or decrease it.

Credit Report
The record of your credit history. It shows whether you pay your bills on time, how much debt you have, and the like. Your report is compiled by credit reporting agencies and released to lenders and others.

Debit Card
A convenient way to "pay as you go," this enhanced ATM card subtracts money from your deposit account when you use it to make a purchase or get cash.

Endorsed Card
A credit card endorsed by groups, such as colleges, sports teams, professional organizations, or special interest groups, and offered to their alumni, fans, or members. Typically, use of the credit card gives financial benefit to the endorsing organization.

Equal Credit Opportunity Act (Implemented by Federal Reserve Regulation B)
This federal law protects your rights against being denied credit because of sex, race, color, age, national origin, or religion. It also guarantees your right to have credit in your given name or your married name, the right to know why your credit application is rejected, and the right to have someone other than your husband or wife co-sign for you.

Fair Credit Billing Act
This federal act protects many important credit rights including your rights to dispute billing errors, unauthorized use of your account, and charges for unsatisfactory goods and services.

Finance Charge
The total cost of credit including service fees, late fees, and transaction fees.

Fixed APR
Unlike a "variable APR," this type of APR does not automatically fluctuate based on changes in an index such as Prime Rate or LIBOR. A "fixed APR" does not mean that the rate is guaranteed not to change, though. Refer to your account terms for information on your issuer's ability to change the APR on your account.

Grace Period
If you have a credit card, the period of time the issuer doesn't charge interest on purchases. Be sure to read the fine print; Some credit card issuers give a grace period only if the account is paid up and doesn't have a balance carried over from the previous month.

Interest Rate
Credit is not free! When you use money provided by a bank or financial institution, the interest rate reflects the amount the organization charges for that service.

Introductory APR
A temporary, usually low, interest rate (expressed as an annual percentage rate) offered by providers to "introduce" you to their services. It will usually expire after a certain amount of time and may often be terminated based on your behavior, such as if you make a late payment or exceed your credit limit. Be sure to check the details of the offer for any limitations on an introductory APR. .

LIBOR (London interbank offered rates)
Five major London banks determine these fixed rates daily for specific maturities. What does this mean to you? LIBOR may be used by some banks instead of the Prime Rate to set APRs.

Minimum Payment
Shown on your credit card statement, the lowest amount you can pay every month, based on that month's balance at the time of billing.

Previous Balance
How much you owed your card issuer at the end of your last billing period.

Prime Rate
Prime means "best," and this rate is what banks charge their best commercial customers for loans. The prime changes often, is reported daily in The Wall Street Journal, and is used as a reference point for many businesses. For instance, the prime rate is used by some financial institutions to set the APR for credit cards.

Unlike interest or fees, the principal reflects the actual dollar amount of the purchases you made or the balance that remains on your loan or credit card account.

Purchasing Card
A real convenience for businesses, this card eliminates the need for time-consuming purchase orders. A company simply places orders directly with suppliers and charges them to the card, usually for purchases of $5,000 or less.

Secured Card
A great "first credit card" or way to reestablish your credit rating, this kind of card is "secured" by money you deposit in a designated savings account. For instance, if you deposit $500, your credit card limit generally will be for that amount. If for some reason you cannot pay your credit card bills, your credit card issuer will be paid from the savings account.

Transaction Fees
Fees charged when you make certain types of transactions. Transaction fees are typically assessed on balance transfers, cash advances and cash-like transactions, such as money orders, wire transfers, and casino gaming chips.

Truth in Lending Act (Implemented by Federal Reserve Regulation Z)
This federal law protects you by making sure lenders tell you about the costs, terms, and conditions at the time they offer you a loan or credit card.

Variable APR
Tied to certain index (such as the prime rate, T-Bills, LIBOR, etc.), and, as the name implies, varies depending on what direction the index goes. Are interest rates on their way down? Then a card with a variable interest rate usually makes the most sense. Some issuers offer a "variable rate for life" or "prime-for-life" card, which means that the rate will never go above the prime rate.

If you are trying to pay off a balance, most likely you are looking for a card that offers a teaser rate (or "special" rate, "promotional" rate, "limited-time-only" rate). It is simply the Very Special Interest Rate the lender is offering at that time. As with most teasers, there are time limits attached. Teaser and introductory rates are usually offered for both fixed rate and variable rate cards. In all promotional materials for cards carrying a teaser rate, you'll see reference to an "ongoing APR," as well. That is the interest rate you will be charged on balances once the introductory "teaser rate" period has ended.


Fight identity theft by monitoring and reviewing your credit report. You may request your free credit report online

You have the right to ask that nationwide consumer credit reporting companies place "fraud alerts" in your file to let potential creditors and others know that you may be a victim of identity theft

·  Equifax: 1-877-576-5734;      

·  Experian: 1-888-397-3742;      

·  TransUnion: 1-800-680-7289;

Contact  any one of the three consumer reporting companies listed above to place a fraud alert on your credit report. You only need to contact one of the three companies to place an alert. The company you call is required to contact the other two, which will place an alert on their versions of your report

LifeLock = Helps protect your personal information.


Quick Tip: Seniors control 79% of America's Financial Assets. Seniors also spend $14 Billion Annually on gifts just for their grandchildren. On average Seniors have over 26% more disposable income than other consumers.



There are two types of options: "Calls and Puts":

In general, options are written on blocks of 100s of shares

When you buy a call option, you have the right but not the obligation to purchase a stock at the strike price any time before the option expires. When you buy a put option, you have the right but not the obligation to sell a stock at the strike price any time before the expiration date.

One important difference between stocks and options is that stocks give you a small piece of ownership in the company you are investing in, while options are just contracts that give you the right to buy or sell the stock at a specific price by a specific date. It is important to remember that there are always two sides for every option transaction: a buyer and a seller. So, for every call or put option purchased, there is always someone else selling it.

When individuals sell options, they effectively create a security that didn't exist before. This is known as writing an option and explains one of the main sources of options, since neither the associated company nor the options exchange issues options. When you write a call, you may be obligated to sell shares at the strike price any time before the expiration date. When you write a put, you may be obligated to buy shares at the strike price any time before expiration. 
The price of an option is called its premium. The buyer of an option cannot lose more than the initial premium paid for the contract, no matter what happens to the underlying security. So, the risk to the buyer is never more than the amount paid for the option. The profit potential, on the other hand, is theoretically unlimited.

In return for the premium received from the buyer, the seller of an option assumes the risk of having to deliver (if a call option) or taking delivery (if a put option) of the shares of the stock. Unless that option is covered by another option or a position in the underlying stock, the seller's loss can be open-ended, meaning the seller can lose much more than the original premium received.

There are two basic styles of options: American and European. The American option can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style and all stock options are American style. A European option can only be exercised on the expiration date. Many index options are European style.

When the strike price of a call option is above the current price of the stock, the call is out of the money and when the strike price is below the stock price it is "in the money". Put options are the exact opposite, being "out of the money" when the strike price is below the stock price, and in the money when the strike price is above the stock price.

Options officially expire on the Saturday immediately following the third Friday of the expiration month, that means the option expires the third Friday. The broker-broker settlements are done effective Saturday. Another way to look at the one-day difference is this: unlike shares of stock which have a 3-day settlement interval, options settle the next day. In order to settle on the expiration date (Saturday), you have to exercise or trade the option by Friday. While most trades consider only weekdays as business days, the Saturday following the third Friday is a business day for expiring options.

The expiration of options contributes to the once-per-quarter "triple-witching day," the day on which three derivative instruments all expire on the same day. Stock index futures, stock index options and options on individual stocks all expire on this day, and because of this, trading volume is usually especially high on the stock exchanges that day. In 1987, the expiration of key index contracts was changed from the close of trading on that day to the open of trading on that day, which helped reduce the volatility of the markets somewhat by giving specialists more time to match orders.

You will frequently hear about both volume and open interest in reference to options (really any derivative contract). Volume is quite simply the number of contracts traded on a given day. The open interest is slightly more complicated. The open interest figure for a given option is the number of contracts outstanding at a given time. The open interest increases (you might say that an open interest is created) when trader A opens a new position by buying an option from trader B who did not previously hold a position in that option (B wrote the option, or in the lingo, was "short" the option). When trader A closes out the position by selling the option, the open interest either remain the same or go down. If A sells to someone who did not have a position before, or was already long, the open interest does not change. If A sells to someone who had a short position, the open interest decreases by one.


Private Equity Funds

What are private equity funds?

When you invest in a private equity fund, you are investing in a fund managed by a private equity firm—the adviser.  Similar to a mutual fund or hedge fund, a private equity fund is a pooled investment vehicle where the adviser pools together the money invested in the fund by all the investors and uses that money to make investments on behalf of the fund.  Unlike mutual funds or hedge funds, however, private equity firms often focus on long-term investment opportunities in assets that take time to sell with an investment time horizon typically of 10 or more years. 

A typical investment strategy undertaken by private equity funds is to take a controlling interest in an operating company or business—the portfolio company—and engage actively in the management and direction of the company or business in order to increase its value.  Other private equity funds may specialize in making minority investments in fast-growing companies or startups.   

Although a private equity fund may be advised by an adviser that is registered with the SEC, private equity funds themselves are not registered with the SEC.  As a result, private equity funds are not subject to regular public disclosure requirements.  Information about a private equity fund’s adviser that is registered with the SEC.

Who can invest?

A private equity fund is typically open only to accredited investors and qualified clients.  Accredited investors and qualified clients include institutional investors, such as insurance companies, university endowments and pension funds, and high income and net worth individuals.  The initial investment amount for a private equity investment is often very high. 

Even if you are not invested in private equity funds directly, you may be indirectly invested in a private equity fund if you participate in a pension plan or own an insurance policy, for example.  Pension plans and insurance companies may invest some portion of their large portfolios in private equity funds.

What should I know?


Because of their long-term investment horizon, an investment in a private equity fund is often illiquid and it may be necessary to hold an investment in a private equity fund for several years before any return is realized.  Private equity funds typically impose limitations on investors’ ability to withdraw their investment.  Investors in private equity funds should be able to wait the requisite time period before realizing their return.  For an institutional investor, a private equity investment may represent only a small portion of its diversified investment portfolio. 

Fees and expenses

When investing in a private equity fund, an investor usually receives offering documents detailing material information about the investment and enters into various agreements as a limited partner of the fund.  These offering documents and agreements should disclose and govern the terms of the investor’s investment throughout the fund’s life, including the fees and expenses to be incurred by funds and their investors.  The SEC has brought enforcement actions, for example here, involving fees and expenses that were incurred by funds and their investors without being adequately consented to or disclosed.  Investors should be vigilant about the fees and expenses incurred in connection with their investment. 

In addition, advisers may be managing multiple funds that are jointly invested in multiple portfolio companies.  The adviser has a legal obligation to act in the best interests of each of the funds it manages and must allocate expenses among itself, its funds and the funds’ portfolio companies in accordance with this fiduciary duty.  The SEC has brought several enforcement actions, for example here, related to shifting and allocation of expenses.

Conflicts of interest

Private equity firms often have interests that are in conflict with the funds they manage and, by extension, the limited partners invested in the funds.  Private equity firms may be managing multiple private equity funds as well as a number of portfolio companies.  The funds typically pay the private equity firm for advisory services.  In addition, the portfolio companies may also pay the private equity firm for services such as managing and monitoring the portfolio company.  Affiliates of the private equity firm may also play a role as service providers to the funds or the portfolio companies.  As fiduciaries, advisers must make full disclosure of all conflicts of interest between themselves and the funds they manage in order to get informed consent. 

The SEC has brought several enforcement actions, for example here, related to an adviser’s alleged failure to disclose certain conflicts of interest to the funds it manages.  Through its various relationships, including with affiliates and portfolio companies, there exists opportunity for advisers to benefit themselves at the expense of the funds they manage and their investors.  It is important for an investor to be aware and alert about the conflicts that exist, or that may arise, in the course of an investment in a private equity fund.


Reverse Mortgage


Reverse Mortgages: Get the Facts Before Cashing in on Your Home's Equity

Whether seeking money to finance a home improvement, pay off a current mortgage, supplement their retirement income, or pay for healthcare expenses, many older Americans are turning to “reverse” mortgages. They allow older homeowners to convert part of the equity in their homes into cash without having to sell their homes or take on additional monthly bills.

In a “regular” mortgage, you make monthly payments to the lender. But in a “reverse” mortgage, you receive money from the lender and generally don’t have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. Reverse mortgages can help homeowners who are house-rich but cash-poor stay in their homes and still meet their financial obligations.

To qualify for most reverse mortgages, you must be at least 62 and live in your home. The proceeds of a reverse mortgage (without other features, like an annuity) are generally tax-free, and many reverse mortgages have no income restrictions.

Loan Features:

Reverse mortgage loan advances are not taxable, and generally do not affect Social Security or Medicare benefits. You retain the title to your home and do not have to make monthly repayments. The loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence. In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.
As you consider a reverse mortgage, be aware that:

  • Lenders generally charge origination fees and other closing costs for a reverse mortgage. Lenders also may charge servicing fees during the term of the mortgage. The lender generally sets these fees and costs.
  • The amount you owe on a reverse mortgage generally grows over time. Interest is charged on the outstanding balance and added to the amount you owe each month. That means your total debt increases over time as loan funds are advanced to you and interest accrues on the loan.
  • Reverse mortgages may have fixed or variable rates. Most have variable rates that are tied to a financial index and will likely change according to market conditions.
  • Reverse mortgages can use up all or some of the equity in your home, leaving fewer assets for you and your heirs. A “nonrecourse” clause, found in most reverse mortgages, prevents either you or your estate from owing more than the value of your home when the loan is repaid.
  • Because you retain title to your home, you remain responsible for property taxes, insurance, utilities, fuel, maintenance, and other expenses. So, for example, if you don’t pay property taxes or maintain homeowner’s insurance, you risk the loan becoming due and payable.
  • Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole.



Buying on margin means that you are buying your stocks with borrowed money.

If you are buying stocks in cash, you pay $10,000 for 100 shares of a stock that costs $100 a share. consequently, they are free and clear.

But when you buy on margin, you are borrowing the money to purchase the stock. For example, you don't have $10,000 for those 100 shares. A brokerage firm could lend you up to 50% of that in order to purchase the stock. All you need is $5,000 to buy the 100 shares of stock.

Most brokerage firms set a minimum amount of equity at $2,000. In other words, you you have to put in at least $2,000 for the purchase of stocks.

In return for the loan, you pay interest, either upfront, or against your stock. The brokerage is making money on your loan. They will also hold your stock as collateral against the loan. If you default, they will take the stock. They are exposed to little risk in the deal.

The price of your stock could always go down. By law, the brokerage will not be allowed to let the value of the collateral (the price of your stock) go down below a certain percentage of the loan value. If the stock drops below that set amount, the brokerage will issue a margin call, which means that you will have to pay the brokerage the amount of money necessary to bring the brokerage firms risk down to the allowed level. If you don't have the money, your stock will be sold to pay off the loan. In most cases, there is little of your original investment remaining after the stock is sold, or if may have fallen so far, you have to make up the difference.

Buying on margin could mean a huge return. But there is the risk that you could lose your original investment. As with any stock purchase there are risks, but when you are using borrowed money, the risk is increased.

Buying on margin is usually not a good idea for the beginner or normal, everyday investor. It is something that sophisticated investors even have issues with. The risk can be high. Make sure that you understand all of the possible scenarios that could happen, good and bad.

Suggestions from the professionals:

  • Never use margin unless you follow the market and your investments on a daily basis, and you consider yourself well-informed about the factors that could influence your asset value.
  • Do not use margin debt as a long-term investment strategy.
  • Plan ahead, having a clear idea of how long you plan to maintain the margin debt.
  • Always have cash set aside from your brokerage account that exceed your margin debt, so that you could pay off the debt at any time.
  • If you maintain the debt for more that a few weeks, contribute cash to your account on a monthly basis, so that you are paying down the debt, as you would a credit card.
  • Start with a small amount of debt relative to your account (5 - 10%), and use this as a benchmark for future actions.
  • Have a stop-loss limit and a target sell price for all of the investments in your leveraged account. Stick with your targets!
  • Do not let the chance of a margin call exceed 5%. The assessment of this probability should be made and adjusted regularly.
  • Study the techniques that hedge fund managers use in maintaining leveraged investments. 

If executed correctly, margin strategy can provide for huge profits. The flip side, you can lose your entire investment and any other assets you have. Do Not venture into this aspect without understanding what you're doing.


Quick Tip: Read the Fine Print!  and "Beware" of Subprime or Alt-A loans. They are somewhat riskier in nature than A credit, prime, or traditional loans. If you can't afford to buy it, DON'T.



Prepare for stress!
If you can't afford it, don't buy it!

The steps to take:

If you are considering purchasing a home, figuring out how much you can afford, your monthly mortgage payment should not exceed approximately 28%-30% of your gross monthly income. Your total debt payments (car payments, credit card payments, etc. plus the monthly mortgage amount) should not exceed approximately 35%-40% of your gross monthly income. These ratios will depend on the type of mortgage for which you are applying. You perform these steps before you ever begin looking.

Before you even begin your search, it is important that you realistically narrow your choices of properties. House hunting can be a time-consuming process, especially if you have not determined in advance specifically what you want. Many home buyers make the mistake of misinterpreting a want as a need. Many home buyers often dismiss homes that actually meet their needs in search for one that has their wants. You must be able to differentiate between what you really need and what you would like to have.

It is prudent at this stage to seek a lender's pre-approval loan, this represents a limited-time commitment to fund your mortgage loan. A pre-approval may include an interest rate lock. To obtain a pre-approval, a lender evaluates your credit history, and calculates your housing and debt ratios. You should expect to verify your income, length of employment and source of down payment. A pre-approval legitimizes you as a serious buyer. It also gives you additional negotiating leverage to negotiate a sale price, especially if the seller cannot find other pre-approved buyers.

If you go for a FIXED rate mortgage, you will have the same payment for the entire term of the loan. An adjustable rate mortgage (ARM) has a rate that can change, causing your monthly payment to increase or decrease. If you are only planning on living in your new home just a few years, then a AMR, will likely work for you, keep in mind that if you have a low interest loan, you are not gaining any equity, on the other hand, if you plan on long term, you want the fixed.


When seeking a pre-approval, it's important not to misrepresent the facts on your application. If a lender learns later that you've misrepresented or omitted information on your application, your pre-approval may be rescinded.

As part of the pre-approval process, a lender obtains your credit report. You should be familiar with the contents of your credit reports from all three major credit bureaus, as well as the mortgage lender will require the last 3 years Income Tax returns, current copies of pay stubs, records of any past derogatory credit history that has since been paid off, and records of any supplemental income you may have. Possible to do so without adversely affecting your down-payment situation, pay off minor debts. The less debt you have the easier he loan process will be. If you are self-employed, you will need all business records and tax returns for the last 3 years. Having these items close at hand will save a lot of time when the mortgage company ask for them. Do not incur any new debt, if at all possible before you go mortgage shopping, mortgages are based on debt to income ratios (the amount you pay out monthly versus the amount you bring in).

Once you have selected your mortgage lender, and have been pre-qualified on a loan amount, this is the time to look for your real estate (buyers) agent. It is not mandatory, but your using an agent can be useful, considering that you the buyer do not pay a commission, so the services of an Agent working for you are paid for by the seller. Without your using an Agent, you may be missing valuable representation of your interests.  Once you and an agent have met, and you have discussed what you are looking for and what you can afford to pay, the agent will have a better idea as to your needs and will then begin looking for your new home. 

When you find your new home, do ask if there are covenants that pertain to the development. Often, they can be very restrictive. If you have an RV or Boat, you most likely will have to be able to park them in your garage, or make arrangements for offsite storage. Consider that this, is yet another monthly cost you must consider into your budget.

It would be in your best interest to seek professional home inspection, the costs could be the best money you ever spend on your house. Not only does the home inspection seek out any defects (and gives you some peace of mind), the home inspector will often give you tips on maintaining and repairing your house, or at the least put you in contact those who do the work.

Once you find the home you want to buy, the next step is to write an offer – which is not as easy as it sounds. Your offer is the first step toward negotiating a sales contract with the seller. Since this is just the beginning of negotiations, you should put yourself in the seller’s shoes and imagine his or her reaction to everything you include. Your goal is to get what you want, and imagining the seller’s reactions will help you attain that goal.

The offer is much more complicated than simply coming up with a price and saying, "This is what I will pay." Because of the huge dollar amounts involved, especially in today's litigious society, both you and the seller want to build in protections and contingencies to protect your investment and limit your risk.

In an offer to purchase real estate, you include not only the price you are willing to pay, but other details of the purchase as well. This includes how you intend to finance the home, your down payment, who pays what closing costs, what inspections are performed, timetables, whether personal property is included in the purchase, terms of cancellation, any repairs you want performed, which professional services will be used, when you get physical possession of the property, and how to settle disputes should they occur.

In most purchase transactions there usually some dips in the road, but they usually smooth out. There is one issue that you want to deal with, your anticipating potential problems so that if something does go wrong, you can cancel the contract without penalty. These are called "contingencies" and you must be sure to include them when you offer to buy a home.

For example, some "move-up" buyers often agree to purchase a home before selling their previous home. Even if the home is already sold, it is probably a "pending sale" and has not closed. Therefore, you should make closing your own sale a condition of your offer. If you do not include this as a contingency, you may find yourself making two mortgage payments instead of one.

There are other common contingencies you should include in your offer. Since you probably need a mortgage to buy the home, a condition of your offer should be that you successfully obtain suitable financing. Another condition should be that the property appraises for at least what you agreed to pay for it. During the escrow period you are likely to require certain inspections, and another contingency should be that it pass those inspections.

Basically, contingencies protect you in case you cannot perform or choose not to perform on a promise to buy a home. If you cancel a contract without having built-in conditions and contingencies, you could find yourself forfeiting your earnest money deposit.

Now that you and the seller have agreed on the price and the length of time (Escrow Period, which can run from a few weeks to six months) before you move-in, you begin Escrow, which defined,  is a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a particular condition or event.


Whether you are the buyer, seller, lender or borrower, you want the assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed. The escrow holder has the obligation to safeguard the funds and/or documents while they are in the possession of the escrow holder, and to disburse funds and/or convey title only when all provisions of the escrow have been complied with.

The principals to the escrow: buyer, seller, lender, borrower: cause escrow instructions, most usually in writing, to be created, signed and delivered to the escrow officer. If a broker is involved, he will normally provide the escrow officer with the information necessary for the preparation of your escrow instructions and documents.

The escrow officer will process the escrow, in accordance with the escrow instructions, and when all conditions required in the escrow can be met or achieved, the escrow will be "closed." Each escrow, although following a similar pattern, will be different in some respects, as it deals with your property and the transaction at hand.

The duties of an escrow holder include; following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with the instruction; paying all bills as authorized; responding to authorized requests from the principals; closing the escrow only when all terms funds in accordance with instructions and provide an accounting for same : the Closing or Settlement Statement.

The selection of the escrow holder is normally done by agreement between the principals. If a real estate broker is involved in the transaction, the broker may recommend an escrow holder. However, it is the right of the principals to use an escrow holder who is competent and who is experienced in handling the type of escrow at hand. There are laws that prohibit the payment of referral fees; this affords the consumer the best possible escrow services without any compromise caused by a person receiving a referral fee.

If you are obtaining a loan, your escrow officer will be in touch with the lender who will need copies of the escrow instructions, the preliminary title report and any other documents escrow could supply. In the processing and the closing of the escrow, the escrow holder is obligated to comply with the lender's instructions. During the escrow process, your escrow officer, upon request, can provide you with an estimate of the escrow fees and costs as well as fees charged by others, provided such information is available.

It has become a practice of some lenders to forward their loan documents to escrow for signing. You should be aware that these papers are lender's documents and cannot be explained or interpreted by the escrow (they are not lawyers, nor can they provide you with legal advice. If you require legal answers, you should first consult with a lawyer) officer. You have the option of requesting a representative from the lender's office to be present for explanation, or arrange to meet with your lender to sign the documents in their office.

At the end of the Escrow period, the amount of closing costs will depend on what items are customary for buyers and sellers to pay for in your area. Traditions vary greatly from one area of the country to another. The escrow holder has no control over the costs of other services that are obtained, such as the title insurance policy, the lender's charges, insurance, *property taxes, recording charges, etc.. In some areas, for example, the buyer pays for title insurance. In other areas, it is the responsibility of the seller. In still other areas, the cost is split between buyer and seller. Your Agent can give you specific information on the items that are customarily paid for by buyers in your area. In addition, the amount of closing costs will depend on the amount of points you will be paying with your mortgage loan, since these are generally paid for up-front. (A point is 1% of your mortgage loan amount).

(The terms of your transaction and the resultant escrow instructions determine how the property taxes will be handled. If there is no mention of the proration of taxes, your escrow officer will not deal with any credits or charges for prorated taxes. However, if your escrow calls for a proration of taxes, there will be an item in your closing statement that will reflect either a credit or charge to your account. If the taxes are not paid (even though there has been a credit or charge against your account), the buyer is obligated to obtain a tax bill and pay the taxes. If the buyer does not have a tax bill with which to pay the taxes, you can request a bill from the Tax Collector; send a photocopy of the deed.

Supplemental Property Taxes is another concern of the buyer. Upon transfer of real property, a supplemental tax bill is generated. This is accomplished in cooperation with the County Assessor and the County Tax Collector.

Shortly after the close of an escrow involving the conveyance of real property, the County Assessor will request information about the property from the buyer. This information assists the Assessor in determining the value of the property for taxation purposes. The escrow holder may have previously supplied some of the information at the time of the closing of the escrow, via Preliminary Change of Ownership form that should accompany each deed when it is recorded).

Sign on the dotted lines (lots and lots), wait the legal waiting period in your state (usually 24 hours), congratulations, pick up the keys, the home is yours.

It's move-in time.



A Bear maket is brought on by a period of negative returns in the broader market to the magnitude of between 15-20% or more. During this type of market, most stocks see their share prices fall, often substantially. There are several strategies that are used when investors believe that this market is about to occur or is happening, these factors depend on an the investor's willingness for risk, investment duration and objectives.

A safe harbor strategy, albeit the most extreme, is to sell all of your investments and either hold cash or invest the proceeds into much more stable financial instruments, such as short-term government bonds. By doing this, an investor can reduce their exposure to the stock market and minimize the effects of a bear market.

For investors looking to maintain positions in the stock market, a defensive strategy is usually taken. This type of strategy involves investing in larger companies with strong balance sheets and a long operational history, which are considered to be defensive stocks. The reason for this is that these larger more stable companies tend to be less affected by an overall downturn in the economy or stock market, making their share prices less susceptible to a larger fall. With strong financial positions, including a large cash position to meet ongoing operational expenses, these companies are more likely to survive downturns. These also include necessity companies that service the needs of businesses and consumers, i.e., food businesses, energy and base suppliers.  On the other hand, investing in small growth companies is typically avoided because they are less likely to have the financial security that is required to survive downturns. But, many have survived those bad times and succeeded and grown, beyond anyone's bearish expectations.

The only time a bear market is bad for you is when you need your money immediately. For those who are investing with a time frame of ten or more years, declining prices represent only one thing: the opportunity to buy more of their favorite company at a discount price
. Also, a wish move is for you is to look for companies and funds that are going to be fine ten or twenty years down the road. Stock market trading history has shown time after time, that prices will eventually return to more reasonable levels.

No matter how often you we are told the virtues of the buy-and-hold method, the true test of courage comes when we watch our holdings lose fifteen to twenty percent in one single afternoon, of course, one does not lose, until one sells, usually.


Large Cap stocks are companies with extremely large market capitalization, or "market cap", which is the product of the number of shares outstanding and the price of the stock.



In a Bull market, the savvy and confident investor takes advantage of rising prices by buying early in the trend and selling their shares when they have reached their peak.  Because on the whole, investors have a tendency to believe that the market will rise, investors are more likely to make profits in a bull market. As prices are on the rise, any losses should be minor and temporary. This is brought about a strong demand and weak supply for securities, while few are willing to sell. As a result, share prices rise as investors compete to obtain available equite. Subsequently, during the bull market, an investor can actively and confidently invest in more equity with a more likely chance of making a return.

In a bull market, the ideal thing for an investor to do is take advantage of rising prices by buying early in the trend and selling his or her shares when they have reached their peak. (Of course, determining exactly when the bottom and the peak will occur is impossible.) Because on the whole, investors have a tendency to believe that the market will rise (thus being bullish), investors are more likely to make profits in a bull market. As prices are on the rise, any losses should be minor and temporary. During the bull market, an investor can actively and confidently invest in more equity with a higher probability of making a return.

There is no sure way to predict market trends, so investors should invest their money based on the quality of the investments. At the same time, however, you should have an understanding of long-term market trends from a historical perspective. Because both bear and bull markets will have a large influence over your investments, do take the time to determine what the market is doing when you are making an investment decision. Remember though, in the long term, the market has posted a positive return.

The longest and most famous bull market was in the 1990s when the U.S. and many other global financial markets grew at their fastest pace ever.

Always do your research. The more you know, the better chance you have at prospering. This requires constant learning, and paying attention to situations that could effect you. Make sure you understand the various tax consequences, as well as those that might be in the process of becoming law. Understand how each of your investments work with the rest of your investment portfolio and with your overall end strategy.
Do understand the risk associated with each investment. Be objective and get advice from those who have experience. It is not wise to seek advice from those who have a vested interest in the stock you are looking at,
their point of view is usually biased

Quick Tip: 
Stocks and Bonds
Your porfolio may be down for the time being, but remember! You have not lost anything until you have sold it. Be some times, it is time to simply take your loses and get out.

Be Patient & Prudent & seek wisdom


the Dow Jones Industrial Average (DJIA) and other averages like S&P 500 or Russel 2000 are "market averages" designed to tell you how companies traded on the stock market are doing in general.

The Dow Jones Industrial Average is simply the average value of 30 large, industrial stocks. Big companies like General Motors, Goodyear, IBM and Exxon are the kinds of companies that make up this index. The Dow Jones Industrial Average has simply chosen 30 companies and averaged their values together by following a specific formula. Nothing more, nothing less.

There are all many others out there with, the largest being the Dow and the S&P 500, which is the average value of 500 different large companies. If you follow the Russel 2000, you find that it tracks the averages of 2,000 smaller companies. 

The averages tell you is the general health of stock prices as a whole. If the economy is "doing well," then the prices of stocks as a group tend to rise. If it is "doing poorly," prices as a group tend to fall. The averages show you the direction in the market as a whole. If a specific stock is going down while the market as a whole is going up, that tells you something. Or if a stock is rising, but is rising faster or slower than the market as a whole, that tells you something as well.



All state, county and local governments must raise money to provide benefits and services through taxation. One type of taxation, is a tax on "real property." To obtain this tax, the owner of a parcel of real property is assessed on the value of their real property. The county needs the cash immediately to fulfill it obligations, not in the future, It needs that money in order to fulfill its obligations. By state statute, each county is authorized to collect the taxes due that remain unpaid by selling at public auction, a Tax Lien Certificate.

When a homeowner owes outstanding property taxes on his or her property, the city or county will impose a tax lien, or judgment, against the house. Some states allow for a tax lien to be placed in first position on the house and then issue tax lien certificates investment documents which are transferable to third parties. The tax lien certificates are then sold at auction.

A lien against the property, however, does not help the county and local governments pay for the services and benefits they must provide for their citizens. Very few of them even know that this form of investment exists. Few investors actually know of this type of investment, as banks and brokerage houses have no incentive to tell you about it; and those who do participate consider you the competition.

In short, this investment involves the counties
selling of "tax lien certificates" sometimes referred to as TLC's., which become a first lien on the property. These certificates can yield very high rates of return on your investment when the property is redeemed. In many cases these yields can be 20% per annum or even more. In the event the delinquent property owner does not redeem within the time provided for redemption, the holder of the tax lien can obtain title to the property.

If an investor purchases a tax lien certificate through a successful bid, they are  buying the rights to that particular tax related debt, as well as any interest that has been attached to the lien. (Tax lien certificates are assigned a fixed rate interest rate by the city or county.) Investors then hold the rights to these tax lien certificate sand collect on interest until the debt is paid in full.

Sometimes the investment can become much more lucrative. If the homeowner doesn't pay the tax lien certificate (after a specific mandated time), the investor is entitled to receive the title to the property. Receiving the title to a real estate property at a substantial discount makes for a potentially high-profit investment opportunity.

The benefits of tax lien certificates are potentially rewarding in a way that is rarely seen in real estate: fixed interest rate returns and a potential chance to purchase property at a fraction of the normal cost.

The Downside in purchasing tax lien certificates is to later discover the property they thought they had purchased at a value was really worth nothing. For one, if a homeowner declares bankruptcy while the tax lien is outstanding, the bankruptcy court could outweigh the rights of investors, leaving the tax lien certificate worthless in the wake of the IRS. Other problems could include a property that has significant damage, making the structure uninhabitable or the property so damaged (slide, flood, earthquake, etc.) thereby making the sale worthless. Prior to ever proceeding with the investment, the investor should perform physical inspections and surveys on property before making a decision. the loss to your investment portfolio could be much more significant than any potential gain.

Due diligence would be to confirm that the property has no other liens against the title, as well as tell you whether or not the person whose name is on the lien actually has legal rights to the property. When you do purchase TLC's, keep in mind that you must make payment within 48 hours and in cash.



Did you ever notice those senior's enjoying their Golden years? That is because they lived within their means and not on a mass of burdening credit. Can you imagine jointly making 100K or more each year and being broke? a huge portion of America is doing just that. Today's modern family financial woes are because of many living a life of must have it right now, forgetting the pending disaster of debt.  BIG MISTAKE.



Easy Credit is a path to bad credit and misery, and the house of cards is most likely going to fall on you.



The net asset value, or (NAV), is the current market value of a fund's holdings, less the fund's liabilities, usually expressed as a per-share amount. For most funds, the NAV is determined daily, after the close of trading on some specified financial exchange, but some funds update their NAV multiple times during the trading day. The public offering price, or POP, is the NAV plus a sales charge. Open-end funds sell shares at the POP and redeem shares at the NAV, and so process orders only after the NAV is determined. Closed-end funds (the shares of which are traded by investors) may trade at a higher or lower price than their NAV; this is known as a premium or discount, respectively. If a fund is divided into multiple classes of shares, each class will typically have its own NAV, reflecting differences in fees and expenses paid by the different classes.

Should you notice that your fund's price, or NAV, has fallen and has the letter "z", "x" or "e" next to it. It doesn't mean your fund lost money for you. It simply means the fund made a distribution. Most equity funds pay out distributions in December.



It is exactly the opposite of buying a stock.

Shorting is the opportunity to make money when a stock’s price falls in value. In the example of a “long” investment, one must buy the stock first and sell second. However, it is also possible to sell a stock first, and buy it back later. This type of stock market transaction is known as “shorting” a stock or establishing a “short” position.

If an investor/speculator thinks the price of a stock will go down, they essentially believe the current price of the stock is a good price at which to sell. They would ask to borrow a certain number of shares from a bank to sell immediately. Once the stock is sold, the borrower still has the obligation to return the shares to the bank. That means the borrower will have to eventually buy the stock back on the stock market at a later date – also known as “buying to cover” or “covering a short position”. However, in order to make a profit, the borrower wants to buy the stock at a lower price than the price at which they originally sold the stock. The concept of shorting stock remains to buy low and sell high, however, shorting a stock requires you to perform these two steps in reverse order than when making “long” investments.

The obvious incentive for a bank is to charge an interest fee on the value of the sale proceeds generated on the stock they lend. Plus, they know that they'll get the stock back in the future, a fact which limits their own portfolio risk: Banks know that they will be better off lending than not, because regardless of the direction of the stock’s price movement, they will have the same amount of stock, but will also have the added interest income associated with lending the stock.

Though shorting is often used to mitigate risk associated with investing in the stock market, it is important to realize the concept of “unlimited losses” that are associated with short investments. When the investor makes a long investment, the most they can lose is the total value of that investment (the amount they paid for the stock) in total. In the case of shorting, if the stock goes up instead of down, they face the possibility of having to make up the loss. As an example, let’s assume that shares in LCI are currently sell for $10 per share. A short seller would borrow 100 shares of LCI, and then immediately sell those shares for a total of $1000. If the price of LCI shares later falls to $8 per share, the short seller would then buy 100 shares back for $800, return the shares to their original owner, and make a $200 profit. This practice has the potential for an unlimited loss. For example, if the shares of LCI that one borrowed and sold in fact went up to $25, the short seller would have to buy back all the shares at $2500, losing $1500. It’s this potential risk of unlimited losses that requires an investor to be very savvy (thorough knowledge of the proposed shorted stock) when shorting in the stock market.

Over the long-term, the stock market enjoys a average gain of about 12% per year. This does make shorting appear to be a poor direction to be going, as it seems as though the general market is bound to move higher, or against the wishes of a short-seller. However, in the short-term, the market does fall in value (sometimes simply adjusting from un-ups), and on an individual basis there will always be stocks that perform poorly. It is when observing these select opportunities where short-selling can make sense as an investment strategy.

Shorting can be used as an effective portfolio hedge, helping to eliminate some risk associated with long term investments in the market. But due to the possibility for unlimited losses, it should be thoroughly investigated, as it has the potential of financial ruin for the investor.

In a nut Shell:

One sells securities anticipating the opportunity to re-buy them at a future date, and at a lower price due to management’s assessment of the overvaluation of the security, or the market, or dire earnings, often due to accounting irregularities, competition or change of management. It is often used as a hedge to offset long-only portfolios and by investors who believe the market is approaching a "bearish period. The expected volatility is very high.




A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD's reverse mortgage provides these benefits, and it is federally-insured as well.

To be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.

Yes. It doesn't matter if you didn't buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.

Your home must be a single-family dwelling or a two-to-four-unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for individual condominiums units to qualify under the Spot Loan program.

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment."

No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home's value.

When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD's reverse mortgage loan. This debt will never be passed along to the estate or heirs.

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

There are five different way to receive your payments:

  • Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
  • Term - equal monthly payments for a fixed period of months selected.
  • Line of Credit - unscheduled payments or in installments, at times and in amounts of borrower's choosing until the line of credit is exhausted.
  • Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.
  • Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.


                       THE DILIGENT PROSPER



Annuities only make sense for a minor group of investors. Mutual funds are acceptable for the rest of investors. The reason they are so much heralded, is that the commissions are 5% or more, that is why the sale of variable annuities have gone through the roof since 2000. Should you wish to participate in Annuities, it is wise to select one with low costs and good investment options, from mutual fund companies.

A variable annuity is basically a tax deferred investment vehicle that comes with an insurance contract, usually designed to protect you from a loss in capital. Thanks to the insurance wrapper, earnings inside the annuity grow tax deferred, and the account isn't subject to annual contribution limits like those on other tax favored vehicles like IRAs and 401(k)s. Typically you can choose from a host of mutual funds, which in the variable annuity world are known as "sub accounts." Withdrawals made after age 59 1/2 are taxed as income. Earlier withdrawals are subject to tax and a 10% penalty.

Variable annuities can be immediate or deferred. With a deferred annuity the account grows until you decide it's time to make withdrawals. And when that time comes (which should be after age 59 1/2, or you owe an early withdrawal penalty) you can either annuitize your payments (which will provide regular payments over a set amount of time) or you can withdraw money as you see fit.
ariable annuities are notorious for the fees they charge. On average, the annual expense on variable annuity sub accounts currently stands at 2.37% of assets, this amount includes fund expenses plus insurance expenses.  The average open-ended mutual fund (excluding municipals), on the other hand, charges just 1.33%. Unfortunately, variable annuity fees don't stop there. Many variable annuities also have loads on their subaccounts, surrender charges for selling within, say, seven years and an annual contract charge.

The death benefit basically guarantees that your account will hold a certain value should you die before the annuity payments begin. With basic accounts, this typically means that your beneficiary will at least receive the total amount invested — even if the account has lost money. For an added fee, this figure can be periodically "stepped-up" or earn a small amount of interest.

Another problem with most variable annuities is that your money is often locked up for several years — typically five. Trying to withdraw funds during this time will result in huge fines. These fees typically decrease as the years tick by. For example, you might be charged a 7% surrender fee for a withdrawal during your first year of ownership. After seven years, however, that could be just 1%. The average fee is a steep 7.2%. As with majority of retirement accounts, should you withdraw funds before reaching 59 1/2,  you will have to pay a 10% withdrawal tax penalty.

Gains in variable annuities are taxed at ordinary income tax rates, which go as high as 35%. For most investors, that's a whole lot higher than the maximum 15% rate they now pay on their long-term mutual fund gains and dividend income. And that tax difference can easily eat up the advantage of an annuity's tax-free compounding.

Residents of some states may pay even more taxes on non-qualified variable annuity accounts. (That is, accounts that are not purchased within an IRS approved retirement plan like a 401(k), 403(b) or IRA.) Some states also add a tax for variable annuities purchased within a qualified account.

Having to face the issue of income tax due on annuities, there is no way of avoiding the fact that, if you die with money remaining in your annuity, your beneficiary will inherit all the taxes that you have deferred. Compare this to a mutual fund, whose basis is stepped-up at death. In that case, your beneficiary would owe no taxes on the gains.

Should you wish to participate in Annuities, it is wise to select one with low costs and good investment options. These are available from mutual fund companies. 


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