“The 10 Most Common Mistakes People Make With Their Money…” By: Alan Haft (Part Four)

common-money-mistakes Alan HaftPhil Wassermans partner, Alan Haft, reveals his fourth most common mistake people make with their money. Alan Haft has written many educational books and articles to help retirees navigate through the confusing world of retirement.

Mistake Four:  “Too Much Tax!”

“Have you ever had the paranormal experience of holding a mutual fund that went down in value, only to discover that you somehow wound up owing taxes on it? As strange as it sounds, it could happen. How and why it happens is beyond the scope of this preview, but the bottom line is sad but true — when investing in a managed mutual fund, you have virtually no control of the taxes you pay while holding the fund.

If someone is interested in reducing tax, one of the first things they should ask themselves is whether or not they are investing in managed mutual funds outside an IRA. Investing in managed funds outside an IRA could result in taxable consequences that are beyond your control. As a result, paying taxes each year on a fund only reduces your return and that’s certainly not an efficient way to invest.

How much tax does your fund cause? Your tax return should give you a good idea as to how much tax you’re paying on your funds. Another way of checking out the taxable consequences of holding a fund(s) is to investigate something called “turnover” and Morningstar.com is a good place to research this.

“Turnover” simply means “the amount of times a year the fund manager replaces the portfolio with a different set of stocks.” If the fund manager changes the portfolio once a year, that’s a 100% turnover. If the fund manager changes the portfolio two times a year, that’s a 200% turnover, if the manager changes
half the portfolio that’s a 50% turnover, etc., etc.. Each time the fund manager “turns over” a portfolio, that usually leads to one
thing: paying tax, and in some cases, too much tax.

Certainly, there are some funds out there that are more tax efficient than others, but as far as I’m concerned, the simplest way to reduce taxes on managed mutual funds is to invest in the indexes instead.

Remember: an index is a “passive” investment. There is no one trading stocks within the index and given there are typically few trades (if any) done within the index, there is often zero “turnover” that would cause taxable events from taking place. Investing in the indexes often puts you in control of when you pay the tax, not a fund manager out there making those decisions for you.”

By Alan Haft 

“The 10 Most Common Mistakes People Make With Their Money…” By: Alan Haft (Part Three)

common-money-mistakes Alan Haft

“The 10 Most Common Mistakes People Make with Their Money,” written by Phil Wasserman’s partner, Alan Haft. In this section we are going to show you the third mistake people make with their money.

 Mistake Number Three; “Using the Wrong Gas.”

Let’s go back to my very simplistic “diversified”
portfolio outlined in Mistake #2:
1. US Stocks: 20%,
2. International Stocks: 20%,
3. Technology: 20%,
4. Real Estate: 20%,
5. Flavors of the Day: 20%.
If the above portfolio met the investor’s requirements for diversification, the next logical step would be to select “something” to represent each sector within the portfolio. The “something” I’m referring to basically comes down to one of three possible choices:

1. Rocket fuel: Individual stocks,
2. Watered-down fuel: Managed Mutual Funds
3. Diesel Fuel: Stock indexes

By Alan Haft

“The 10 Most Common Mistakes People Make With Their Money…” By: Alan Haft (Part Two)

Phil Wasserman’s partner, Alan Haft announced “The 10 Most Common Mistakes People Make With Their Money.” We are going to reveal a brief preview of the second  mistake.

In its most simplistic form, “re-balancing” a portfolio simply means maintaining its original balance when the portfolio was first established.
Let’s take a closer look at what this really means…Failing to re-balance a diversified portfolio is like forgetting to cook that pizza mentioned in the last common mistake. Without this critical step, what would typically be my personal all-time favorite food could easily turn out to be the worst meal ever.

Here’s why:

Suppose we turn back the clock to the late ‘90s. For sheer simplicity, suppose I listened to prudent advice and diversified my investment portfolio into five sectors of the market, dividing my money up equally amongst them:

• US Stocks: 20%
• International Stocks: 20%
• Technology: 20%
• Real Estate: 20%
• Flavors of the Day: 20%

Given the gains and losses of various market sectors, suppose a year later the value of my diversified portfolio (in percentages) winds up looking like this:

• US Stocks (up in value): 30%
• International Stocks (down in value): 10%,
• Technology (surged in value): 40%,
• Real Estate (down in value): 5%,
• Flavors of the Day (down in value): 15%.

True, I may have been diversified but do I just end the process there? Not if I want to give myself the best possible chances for sustained and consistent investment success. If I just held my portfolio above without re-balancing it, as the market later went down, I would have very likely lost the gains I made within the US Stocks and Technology sectors.

“The 10 Most Common Mistakes People Make With Their Money…” By: Alan Haft (Part One)

common-money-mistakes Alan Haft


Phil Wasserman’s partner, Alan Haft announces “The 10 Most Common Mistakes People Make With Their Money.” We are going to reveal a brief preview of the first mistake.

Mistake Number one: Too Many Eggs in One Basket

When it comes to giving yourself the best possible chance for continued and sustained investment success, the timeless laws of diversification is an extremely efficient place to begin. Many people think their portfolios are diversified simply because they have a lot of investments. But that’s not always the case. As odd as it may sound, when it comes to your investments, think of a diversified investment portfolio as a Domino’s pizza. A properly diversified portfolio includes many slices divided up into neat little segments that shouldn’t overlap each other and whereby each slice represents a particular sector of the market such as:

o Domestic stocks
o Large Companies (“Large Caps”)
o Medium Sized Companies (“Mid Caps”)
o Small Sized Companies (“Small Caps”)
• International stocks
• Emerging Market stocks (India, China, Latin America, etc.)
• Bonds
• Commodities
• Real Estate
• Technology
• Natural Resources
• Health Care
• Cash
• Etc.