Archive for June, 2011

Economic Indicators & Your Investment

Many of you might have heard about reports like Customer Price Index, Unemployment claim report, Personal Income and Spending report which come out every month. These reports are called economic indicators, bringing lots of data to shedslight on conditions which has impact over current economic condition and financial market.  There are two types of this kind, leading indicators and trailing ones. Depending on type of indicator, it either gives assurance or prediction of the economic growth path.

Lately even an ordinary person is closely watching these reports to get idea on how we are doing as a country in different fronts, more importantly employment and customer sentiment towards the economy. Overall, we all waiting to hear some good news to flow in the markets both main street and wall street to pedal the country in the postive growth path.  It is crucial for investors to keep track of these reports to make investment moves accordingly by considering different data points to predict the direction of the market.

This month magazine from TRoweprice has a good article which showed how certain reports gives indication on condition that impacts stock and bond market.  Let me give some for example,

1. Employment Situation Summary – Published by Bureau of Labor Statistics which gives idea about the employment numbers around nation. Lower unemployment means higher stock prices and rising unemployment reduces market sentiment bringing stocks down. It’s other way around for bond as bond prices goes up on rising unemployment because lower interest rates by Fed to keep the economy going.

2. Consumer Price Index –  Bureau of Labor Stasticis measures the cost of basket of consumer goods and services. It gives indication about the economy whether it’s in the inflation or deflation trend depending on the price index. This can help the Fed to tailor the future moves to drive the economy and Investors to make decision on their future investments.

In general these economic indicators are just a snapshot and shouldn’t be used soley to make any decision to alter your financial goals or portfolio. It should be one of many criterias which helps to make decision on your asset allocation to your portfolio.

Wanna read the article in details, check it out and try to be financial saavy investor.

Fandango & LivingSocial offers another Good deal – Two Movie tickets for just $9

Just got to know about this deal from my favorite blogger and want to spread the happy word out to my readers as well.

Fandango in association with LivingSocial is offering 2 movie tickets for just $9 dollars(saving of atleast $10 and more depending on location) with some fine prints. You don’t have to signup for new account in if you have facebook account. is like Groupon offers daily deals on various things and you might want to check it out often for these type of deals and save money.

Important Fine prints are,

1. Not valid for 3D and IMAX movies.
2. Limited to tickets with maximum face value (including Fandango’s convenience fee of up to $2 per ticket) of $15
3. Both tickets must be purchased for the same movie and show time in a single transaction.
4. Promotional value of Promo Codes expire September 9, 2011.

Click here to take advantage of the offer and it is only for today.

Efficient Mutual Fund Investing by Avoiding Taxes

Mutual funds have been one of the safest avenues for many American to invest for the future whether its for retirement or kids education. Mutual fund companies have gained their reputation by showing good returns and solid growth. Many mutual fund companies have evolved strongly by good fund analysis with strong results and catering to various needs of the investor gaining investor sentiment from novice to veterans.

Many of us invest in mutual funds because it is bit safe and saves time as the fund managers are paid to do the job of portfolio analysis, effective investment by incorporating diversification and asset allocation strategies according to each fund’s goal. Another main reason, mutual funds are less expensive for amount of diversification and assets involved in the funds. If someone has to do the same kinda of diversification, it would cost more on transaction fees alone not to add other cost. So it is not prudent unless you have big asset to handle.

Above all, we look for good, solid return and performance. On the downside, we really don’t pay attention to the taxes on mutual fund earnings. We all know not all mutual funds are made equal but all them have the tax component associated with it. Taxes can be biggest drag on the funds performance. Every year many investors lose certain percentage points of fund returns because they don’t try to lower their taxes.

It is not a big science or need to learn lot of tax codes to implement it. Just by keeping certain aspects of tax saving concepts in mind and adapting them which will help you portfolio. Here is the list of 3 simple strategies/concepts you can follow while trying to invest in mutual funds.

1. Low Turnover Ratio – Check for a fund’s portfolio turnover ratio which is the percentage of its assets that were sold during the most recent quarter or year. If the fund has high turnover ration mean it is a more aggressive fund. For example, a turnover of 500% means a fund sold the equivalent of its entire portfolio of securities five times during the year. That raises a fund’s expenses, and the likelihood of capital gains taxes. It is a good idea to limit your tax consequences by avoiding funds that trade most of their holdings in a given year. That means being wary of turnover ratios above 50%.

2. After-tax Return – Like you calculate any material cost after taxes, calculate fund tax return after taxes. So look beyond a mutual fund’s pretax return is wise thing to do. After tax returns will give the right picture of profit margin after all the tax deductions. The tax-adjusted return accounts for capital gains, dividends and interest.

3. Capital Gain – If you are worried about big tax bill, it is good idea to analyze a funds possible capital gain exposure before you buy it. Possible exposure tallies capital gains that haven’t been distributed to shareholders and divides that number by total net assets.

If you don’t want to go through the head-ache of analysing every funds, you have option to go with tax-efficient funds or ETF’s.

Tax Efficient funds, also called as Tax Advantage  funds, are structured and operated on reducing the tax liability faced by its shareholders. It uses variety of techniques to keep the taxes low by purchasing tax-free (or low taxed) investments such as municipal bonds, Low turnover ratio, Offsetting gains by selling other stocks at a loss and Investing in lower-dividend-paying stocks to minimize passthrough dividends.

In conclusion, mutual fund investment can really reap better rewards if you give little bit of attention every year and plan accordingly by lowering taxes.

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