Bond Simplification & Wealth Building

Learn all about bonds and how you can possibly use them to build wealth more effectively…


Learn what is inside Wealth Building NOW

Read sample chapter in Wealth Building Now Book–20 minute read…


Caution:  30 minute read

In the United States you will often hear of corporate bonds and government bonds being touted by many, but exactly what are corporate and government bonds and how can you use them to build wealth?


In this discussion will focus on government and corporate bonds and discuss ways that you can possibly use them to build wealth more efficiently.


Municipal, Mortgage-backed, Agency and Corporate bonds will all be discussed to further enhance your understanding of the bond market.  You can also purchase bonds as part of a Mutual Fund, ETF, Target Date Fund, 401k’s, IRA’s or other retirement plans by utilizing brokers or doing the selections yourself on your brokerage account.


Treasuries (Bills. Bonds, Notes) and CDs (Certificates of Deposit) are often considered the safest of investments on the market because they are government backed, and they too will be covered in this discussion.


Other bond investments, like municipal or corporate bonds, have credit ratings from rating agencies like Moody’s Investors Services and Standard & Poor’s.  The higher the credit rating, the more likely an issuer is to make timely interest and principal payments.


Conversely, the lower the credit rating, the greater the risk that the issuer can’t make timely interest or principal payments.  Prices for bonds with longer maturities tend to be more sensitive to changes in interest rates compared to shorter-term bonds.  Be particularly cautious of junk bonds as they are riskier, and the inability of the issuer to make payments should be of higher concern to you.  On the flip side you can potentially receive higher returns, but with more risk.


Municipal, are bonds issued by states, cities, counties, and other local governments, as well as enterprises that serve a public purpose, such as universities, hospitals, and utilities.  Those who issue municipal bonds generally pay “interest income” that is “exempt” from federal and potentially state income taxes.


Corporate are bonds issued when companies issue corporate bonds to raise capital for activities such as expanding operations, purchasing new equipment, or building new facilities.  The issuing company is responsible for making interest payments and repaying the principal at maturity.


Mortgage-backed securities are created by pooling mortgages purchased from the original lenders.  As an investor you would receive monthly interest and principal payments from the underlying mortgages. These securities differ from traditional bonds in that there isn’t necessarily a predetermined amount that gets redeemed at a scheduled maturity date.


Agency bonds are issued by either a government-sponsored enterprise (GSE) or a government-owned corporation (GOC) and are debt obligations solely of the issuing agency (fannie-mae and freddie-mac come to mind as well as the Tennessee Valley Authority and the Hoover Dam).


There are generally two types of government bonds that you can buy directly at, and they are marketable and non-marketable.




Marketable bonds include TIPs, (Treasury Inflation Protected securities), Treasuries (Bills, Bonds, Notes), FRNs (Floating Rate Notes), and STRIPs (Separate Trading of Registered Interest and Principal securities).




Non-marketable bonds include series EE and series I-Bonds (series is based on issue date), and they can be purchased in electronic form on or purchased with your tax refund at set purchase amount intervals–you will receive a paper bond(s). will start by discussing bond basics and because marketable bonds cause more confusion for many and are generally a more complex transaction than purchasing non-marketable bonds, government marketable bonds will be discussed first among bonds, followed by corporate marketable bonds and then non-marketable bonds.


Bond Basics

When you buy a bond, you are a company’s (or government entity) lender and the bond is like an IOU-a promise to pay back the money you’ve loaned to the company or agency, with interest back to you.


The amount of income a bond pays is largely determined by the prevailing interest rate at the time of issuance and other factors specific to that bond.


In simplified form, face value multiplied by interest rate equals interest payment to you.


$1,000 * 5% = $50


You might receive 2 coupon payments a year for $50 each and get payment of face value in 5 or 10 years, depending on term of the bond.


Bonds are often used to generate income, protect earnings, diversify portfolios and a strong point for many with government bonds are that they are often backed by the full faith and credit of the U.S. government.


What determines a bond’s yield?

Two key factors that determine a bond’s yield are credit risk and the time to maturity.


Credit risk: A bond’s yield generally reflects the risk that the issuer will not make full and timely interest or principal payments.


Rating agencies provide opinions on this risk in the form of a credit rating.  Bonds with lower credit ratings generally pay higher yields because investors expect extra compensation for greater risk.


Maturity: Generally, the longer the maturity, the higher the yield.  Investors expect to earn more on long-term investments because their money is committed for a longer period of time, and they lack access to it.


Who Issues?

Bonds are issued by both public and private entities.


Many cities, states, the federal government, government agencies, and corporations issue bonds to raise capital for a variety of purposes, such as building roads, improving schools, opening new factories, and buying the latest technology—along with other stated purposes.


How Bond Yields Work?

The yield you’re quoted when you buy a bond is often different from the interest it pays.


I’m sure you want to know why that is the case!


Because in addition to the annual interest rate, the bond’s return reflects any difference between its purchase price and its face value—the amount you’re expected to receive when the bond matures.


If you buy the bond at a price higher than the face value (at a premium), you’ll receive less than you paid when the bond matures.  Let’s say face value is $1,000 and you pay $1,100, when the bond matures you will only get $1,000.


If you buy the bond at a price lower than the face value (at a discount), you’ll receive more than you paid when the bond matures.  Let’s say face value is $1,000 and you pay $900, when the bond matures you will get $1,000.


If you sell the bond before it matures, you get its current price, which may be higher or lower than the amount you originally paid and you are in essence forfeiting your future coupon (interest) payments.


Frequently Asked Questions about Bonds…


TIPS (Treasury Inflation-Protected Securities) Basics

  • Treasury Inflation-Protected Securities (TIPS) are a type of Treasury bond that is indexed to an inflationary gauge to protect investors from a decline in the purchasing power of their money.


  • TIPs with a fixed principal can be stripped (more on stripping later in this discussion).


  • TIPS are issued with maturities of five, 10, and 30 years and are considered a low-risk investment because the U.S. government backs them.


  • Auctions are held several times a year.


  • TIPs pay interest every six months based on a fixed rate determined at the bond’s auction.


  • The principal value of TIPS rises as inflation rises.


  • The principal amount is protected since investors will never receive less than the originally invested principal.


  • The principal value of TIPS rises as inflation rises, while the interest payment varies with the adjusted principal value of the bond.


  • TIPS can be purchased directly from the government through the TreasuryDirect system, in $100 increments with a minimum investment of $100.


  • Some investors prefer to get TIPS through a TIPS mutual fund or exchange-traded fund (ETF).    However, purchasing TIPS directly allows investors to avoid the management fees associated with mutual funds.


Suppose you as a bond investor owns $1,000 in TIPS at the end of the year, with a coupon rate of 2%.  If there is no inflation as measured by the CPI, then you will receive $20 in coupon payments for that year.  If inflation rises by 4%, however, then the $1,000 principal will be adjusted upward by 4% to $1,040.  The coupon rate will remain the same at 2%, but it will be multiplied by the adjusted principal amount of $1,040 to arrive at an interest payment of $10.40 for the year.


Conversely, if inflation were negative—known as deflation—with prices falling 5%, then the principal would be adjusted downward to $950.  The resulting interest payment to you would be $9.50 over the year.   However, at maturity, you would receive no less than the principal amount invested of $1,000 or an adjusted higher principal, if applicable.  Learn more about TIPs by visiting “Treasury Inflation Protected Securities (TIPS),” at



You can buy most at auction or in the open market.  If bought at auction you can re-invest your earnings automatically.  If you have an investment account with a brokerage, many brokerages allow you to purchase treasuries on their platform and re-invest as well.

Check current interest rates…


Treasuries (Bills, Bonds, Notes)

NOTE: Treasuries have a competitive and non-competitive bidding process, and you want to be aware of that proactively, as opposed to after the fact.


Treasury Bill Basics

Note about Cash Management Bills: Cash Management Bills (CMBs) are also available at various times and for variable terms.  Cash Management Bills are only available through a bank, broker, or dealer and cannot be purchased at

Treasury issues short-term cash management bills periodically to manage short-term financing needs.


*Bills are issued in electronic form only for periods of 4, 8,13, 17, 26 and 52 weeks.

  • Interest is “fixed rate” and is set at auction.


  • Interest is the difference between what you paid and the face value you get


  • when bill matures interest is paid


  • minimum purchase is $100 and sold in increments of $100


  • Taxes at federal level are due on interest earned yearly (no state or local taxes)


  • Not eligible for STRIPs


Treasury Bond Basics

*Issued in electronic form only.

  • Term is either 20 or 30 years.


  • Bonds pay a fixed rate of interest every six months until they mature and that rate is determined at auction.


  • You can hold a bond until it matures or sell it before it matures.


  • Interest rate is never lower than .125%.


  • Minimum purchase is $100 and interest is paid every 6 months until maturity.


  • Sold at auction several times a year.


  • Taxes at federal level are due on interest earned annually (no state or local taxes).


  • Are eligible for STRIPs.


NOTE: Treasury Bonds are not the same as U.S. Savings Bonds

EE Bonds, I Bonds, and HH Bonds are U.S. savings bonds and are “non-marketable,” meaning they can’t be sold in the secondary market, see U.S. Savings Bonds.


Treasury Note Basics

*Issued in electronic form only

*Term is of 2, 3, 5, 7, or 10 years.

*Notes pay a fixed rate of interest every six months until they mature.  The rate is fixed at auction.

*You can hold a note until it matures or sell it before it matures.

  • Interest rate is never lower than .125%


  • Minimum purchase $100 and interest is paid every 6 months until maturity


  • Sold at auction several times a year


  • Taxes at federal level are due on interest earned each year (no state or local taxes)


  • Are eligible for STRIPs


  • Whether you purchase at auction or on the secondary market the bonds can be readily bought and sold.


FRNs (Floating Rate Notes)

*are relatively short-term investments that are issued in electronic form only.

  • Mature in two years.


  • Pay interest four times each year.


  • have an interest rate that may change or “float” over time.


  • You can hold a FRN until it matures or sell it before it matures.


  • Minimum purchase $100, sold in increments and Interest paid every 3 months.


  • Sold at auction.


  • Federal tax due each year on interest earned. No state or local taxes


  • Are not eligible for STRIPs.



You can buy, hold, sell, and redeem STRIPS only through a financial institution, a broker, or dealer who handles government securities.


Treasury securities with a fixed-principal, such as notes, bonds, and TIPS are eligible and may be stripped!


Treasury Bills and FRNs can’t be stripped!


The idea behind STRIPS is that the principal and each interest payment become “separate securities” that are treated individually.


Each separated piece is a zero-coupon security that matures separately and, has only one payment.


You can learn more about stripping by going to!


Corporate Bonds

Corporate bonds are often used by investors in their portfolio to help reduce the risk of returns from other investments.  Many investors use a laddered approach (purchase bonds or bond funds of varying maturities to reduce risk) and many laddered corporate bonds pay 5% or better if properly structured.


Investors usually select Junk or High Yield Corporate bonds so that they can obtain a higher rate of return and possibly an increase in the bond price down the road.


The segment that is considered high-yield would be rated B to BB+ by S & P or B to Ba1 by Moody’s.


They can be a good choice during economic expansion and quite risky during an economic decline.


High-yield bonds are also less sensitive to interest rate movement than the other categories mentioned in this discussion.  You can buy junk-bonds through a broker or invest through a fund.


Investment grade bonds are purchased by many mutual fund companies and more conservative investors as they are not as risky as junk bonds but provide a stable return in many instances.


Although many domestic bond funds invest a small percentage in markets overseas you may be able to diversify your fixed income investments and receive a more attractive yield (bond yields and inflation on international bonds tend to have a low correlation to the U. S.  Bond Market).


Some corporate bonds pay interest monthly, but quarterly or semi-annually are more common!


Be sure you are properly positioned to invest as there will be more risk.  In addition to interest rate risk which is always a constant when investing in bonds—you will also have currency risk.


Depending on your “life stage” you could use international bonds to increase your nest egg–or utilize them during retirement if you are properly “positioned” to do so!


To help reduce currency risk, some International Bond Funds enter into “currency forward contracts” that lock in an exchange rate to buy or sell a currency on a future date and locks in the foreign currency fluctuations versus the United States Dollar.   In addition, other methods are used to reduce currency risk depending on the company that you choose.  As with any fund it is important that you are aware of the expense ratio—and particularly with International Bond Funds as there are usually other fees added that you won’t see on the expense ratio but will be charged to your account nevertheless.


Even though you can get hefty returns during good times, market risk can be substantial when bond funds in international markets plummet during volatile times, therefore it can never be stressed enough that you must be in the “right financial position” and at the “right stage in your life” to utilize International Bonds & Bond Funds in your portfolio for maximum results.


Non-marketable Bonds 


Series EE and Series I Bonds

These are also government issued bonds that are sold at a “discount of face value” and mature over 20 to 30 years.


Series I bonds are also adjusted for inflation twice a year!


Non-marketable bonds include series EE and series I-Bonds (series is based on issue date), and they can be purchased in electronic form on or purchased with your tax refund at set dollar amounts with your tax refund–you will receive a paper bond(s).


The interest would accumulate in your account and once you cashed in you would receive the interest and principal.  If you cash in early there could be a penalty!  In order to get the full face value on the bond, you would have to keep the bond for the full term.  You could also be taxed on the interest unless an exception such as proceeds were used for educational purposes–were to apply.


CD’s (Certificate of Deposit) & Money Market Accounts

A CD with a fixed term and guaranteed rate can be a good place for money you plan to spend down the line, such as a wedding, or the purchase of a house or boat.  Due to early withdrawal penalties, however, the money is not as easily accessible as funds in a savings account.  This makes a liquid savings account a better option for money you may need for emergencies.


You want to ensure that you properly establish an emergency funds at the earliest time possible to help with unplanned events that will occur in the short and long-term.  A CD could work for you as part of your emergency fund if you found low penalty CD’s that otherwise met your goals and you used a laddered approach in establishing the fund.


Unlike bonds, a CD’s fixed term is guaranteed to pay a specific yield on a set date in the future!  If you like the safety of bonds and CDs, you may want to set up a bond or CD ladder so that you can have better access to your funds, particularly if you will be using part or all for your emergency fund utilization!


You can use a CD calculator to determine exactly how much interest the CD that you are considering can earn when the CD matures so you will know your “numbers” in advance.  And you can go to to learn more about CDs and how the one you are considering ranks as far as safety and penalties are concerned.


Since CDs usually pay fixed yields, a CD may be a smart option in a falling interest rate environment.  When rates are decreasing, you may be able to lock in a higher yield than what will be offered in coming months or years.


Although they are not in the bond family, CD’s and money market accounts are worth considering depending on your goals as there are a large number of consumers who possess these accounts and like their safety ($250,000  protection through FDIC).


With interest rates fluctuations Certificates of Deposits and Money Market Accounts will vary on what they pay in returns, and returns that you expect may depend on FED policy of keeping short term rates close to zero or utilizing FED policy to raise interest rates!



You can use bonds to fund your IRA if you have a brokerage account.  You can possibly save on management fees by purchasing Treasury bonds directly at


Bonds can play an important role as you approach retirement and even during your retirement years.  Used as part of an overall or comprehensive wealth building approach they can play a role in helping you live out your retirement years with dignity.  If you are uncomfortable selecting bonds you can use bond mutual funds or let mutual fund managers select bonds that are part of the mutual fund that they manage.  Target Date and Educational accounts may automatically include bonds in your account if you are currently using that type of financial product.


All bond types have their pros and cons so you may want to do additional research or consult with your financial advisor if you are still uncomfortable with bonds.


Bonds can also be used to fund your, your children’s, or grandchildren’s education, and the interest earned could be tax free if you meet the educational guidelines outline in the IRS tax code.


Treasury marketable securities are sold through auctions.  In 2023, Treasury Direct held 428 public auctions and issued about $22 trillion in Treasury marketable securities–no small change!


Treasury marketable securities include Bills, Bonds, Notes, Treasury Inflation-Protected Securities (TIPS), and Floating Rate Notes (FRNs).  What makes them “marketable” is that you can sell or transfer them before they mature and there are always ready buyers.  Agency, mortgage-backed, municipal and other bonds are available at the federal, state and local level and are offered by various entities.


You can strip some marketable bonds and basically break them down into individual payments!


Corporate bonds include investment grade, junk, international, bond funds and other classifications and they can be found in abundance in the financial markets.  You can set up an account with all bond types in 15 minutes or so at many brokerages as the process is fairly straightforward.


Many mutual funds that you may already have, or are considering, may already have a percentage invested in bonds that you may not be aware of.  If you have a target date fund or a 529 savings plan a portion of your investment is more than likely already invested in the bond market.


Non-Marketable bonds include series EE and I bonds and they can be purchased by you, but can’t be sold in the financial markets.


Bonds can be an important part of your wealth building future if you utilize them in the appropriate manner and you have addressed your finances in a comprehensive manner as a major part of your approach to your future, whether it be for retirement or any other purpose.


All the best to your bond management success…


Set up a non-competitive bidding account at…


Treasury Auction Dates…



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Investment Simplification & Wealth Building

Learn if you at this time have the right investment vehicle(s) to effectively reach your investment goals…


Caution:  35-minute read, however it is “well worth your time” in The Wealth’s opinion


It is important that you start your long-term investing at the earliest time possible and there are investment vehicles that you can utilize to get you where you need to be more efficiently.


In this discussion The Wealth Increaser will hone in on some of the most useful and time-tested investment vehicles that you can use to build wealth and reach goals that you desire at the various stages of your life.


Your path to investment success does not have to be a difficult one if you start early, invest consistently and you know your “target number” that you need to reach to fulfill your various goals.


Your home purchase, college funding, traveling around the world, reaching your retirement number or reaching the number that you need to reach for any other purpose is attainable if you are at this time willing to make a serious effort toward achieving what you desire.


Mutual Funds (MFs) Investment Calculator

A Mutual fund is an investment program funded by shareholders that trades in diversified holdings and is professionally managed.  It normally includes a “bundle of stocks” and investment products and frees you from the hassle of selecting individual stocks or other investments yourself.


A MF is a portfolio of stocks, bonds and other securities and creates a diversified investment portfolio that generally reduces your risk factor.  It is key that you understand that mutual funds are “bought and sold” at the “end of” the trading day!


  • Mutual funds are sold based on dollars, so “you can specify any dollar amount” that you’d like to invest.


  • Mutual funds are divided into several kinds of categories, representing the kinds of securities they invest in, their investment objectives, and the type of returns they seek.  Although there are others, most mutual funds fall into categories which include stock funds, money market funds, bond funds, and target-date funds.



  • Employer-sponsored retirement plans commonly invest in mutual funds and if your employer offers them–especially with an employee match, you want to put yourself in position to contribute as best you can, based on your financial ability to do so.


Index Funds (IFs) Investment Calculator

Technically a Mutual Fund, Index funds invest in stocks that correspond with a major market index such as the S&P 500, Nasdaq or the Dow Jones Industrial Average (DJIA).  It could be one focused on a sector, such as healthcare, durable goods or technology.  This investment strategy requires less research from analysts and advisors, so your expenses as a shareholder would be lower, and these funds are often designed with cost-sensitive investors in mind.

  • The positives of index funds are that they require little financial knowledge, are low cost, and are convenient to invest in.  On the negative side, you could end up stuck with poorly performing assets and the potential for returns to be less than those of successful managers of actively managed funds.


  • The goal of index fund managers are to mirror the performance of a particular index – and not try to outperform it, which is the goal of managers of active funds.


  • Although many think that index funds are relatively new, the first publicly available index fund was launched back in the mid-1970s.


  • Index funds often perform better than actively managed funds over longer investment time frames.  Even so, there are still risks involved with this style of investing.  If the tracked index falls, then your investment’s value will follow and if it is at the time of your retirement or planned withdrawal, you will suffer financially, and your living conditions could be affected.


  • You can reduce risk by diversifying your portfolio by holding several different index funds covering a variety of stock markets or sectors.


  • Index funds can provide a very straightforward, cost-effective, and diversified way for you to steadily increase your wealth over time.  Fund managers do not decide which individual investments they should buy or sell, which is what happens in active mutual funds.


  • Investors in these products expect their chosen index to rise over the long term, even if it encounters some turbulence along the way!  The performance of the FTSE All-World Index, which has delivered an average annual return of 9.3% since 1993, according to Vanguard, provides a real world blueprint (30 plus years of results) of what index funds can achieve IF utilized appropriately.


  • So, should you as a novice investor choose an active mutual fund(s) or index fund(s)?  You can spread your risk by investing a portion in each at the level that you are comfortable with.  Again, index funds replicate the performance of an index, whereas the managers of mutual funds will pick and choose securities they believe will help them outperform that index.  If an active manager makes the right calls, then they can substantially outperform their benchmark index and deliver handsome returns to investors–normally with more risk.


Popular index funds that you may want to consider include the following:


*Fidelity 500 Index Fund (FXAIX)

*Schwab S & P 500 Index Fund (SWPPX)

*T. Rowe Price Equity Index 500 Fund (PREIX)

*Vanguard 500 Index Fund Investor Shares (VFINX)

* Schwab 1000 Index Fund

*Many others


Be sure to do your own independent research, confirm that fees are low, and you can do so by going directly to the sites by “typing in the ticker symbol” using your favorite search engine!


Target Date Funds (TDFs) Investment Calculator

Although technically a mutual fund, target date funds are separated out in this discussion in order to give you more clarity on how you can use them to build wealth.


Target-date funds are a “set it and forget it” or “invest it and rest” retirement savings option that removes two headaches for you as an investor:


1) deciding on a mix of assets which saves you time and


2) re-balancing your investments for you over time which saves you time


Target-date funds, also known as life-cycle funds or target-retirement funds—aim to continually strike the right balance between the risk necessary to build wealth and safer options to protect a growing nest egg.


The fund automatically re-balances your portfolio with the right mix of stocks, bonds and money market accounts as you age and is a great hands off way for you to build wealth if that fits your personality and risk profile!


Target Date Funds are “mutual funds” that purchase from other mutual funds (known in the “investment world” as a “fund of funds”) and they are designed to build a diverse portfolio.  While you set and forget or invest and rest so to speak, the fund updates your asset allocation over the years for you.


Early in your working life, a target-date fund generally is set for growth by having a much larger slice of your portfolio in stocks rather than fixed-income investments like bonds, which are safer but provide smaller returns (the approach is similar to that of a 529 education savings plan).  As your retirement year approaches, the fund gradually shifts toward more bonds, money market accounts and other lower-risk investments.


Your retirement year is the “target date” of most of these funds–unless you choose a target date for other purposes, and the funds are conveniently named to correspond with your planned retirement year.  Say you are 35 years old and plan to work until you are 65, a Target Date 2055 would possibly be of appeal to you.  Most target-date funds are named in five-year increments with some at 10-year increments, so you would choose the provider with a fund named with the year nearest your planned retirement date or other target date based on your goals.


Below you will find some of the more popular target date funds that you may want to consider:




Expense Ratio

Vanguard Target Retirement 2045 Fund Investor Shares



Fidelity Freedom Index 2045 Fund Investor Class



Lifecycle Index 2045 Fund Premier Class



American Funds 2045 Target Date Retirement Fund Class R-5



T. Rowe Price Retirement 2045 Fund



There are many other target date funds, and the current data is current as of market close on February 1, 2024.   Be sure to do your own independent research as the accuracy of the data cannot be guaranteed.


Always realize that the main appeal of target-date funds for most is their simplicity.   And just as an index fund operates with simplicity, so too does a target date fund!


The funds go from a “high ratio” of riskier equity funds to safer investments like bonds, and money market accounts as it gets closer to the “target date”, freezing your asset allocation in order to protect your nest egg.


An important question to ask yourself or your advisor when choosing among target-date funds is whether the account will freeze the year you plan to retire, or whether a “through” fund that continues the glide path for 5, 10, 15, or 20 years past retirement before freezing your asset allocation will be in effect.  You want to plan your approach appropriately and select the fund that’s right for your retirement or other goals.


How to purchase:


*through your retirement plan

*directly from fund

*open brokerage account ($500 to $3,000 to open)


Exchange Traded Funds (ETFs) Investment Calculator

They are similar to Mutual Funds as just a few key differences set them apart.  The biggest similarity between ETFs (Exchange-Traded Funds) and mutual funds are that they both represent professionally managed collections (or “baskets”) of individual stocks, bonds or other investments.


However, investment minimums are normally lower with an ETF!  You can purchase an ETF share of Vanguard FTSE Emerging Markets for under $100.  Many more ETF shares start at $500 or more and you can learn more about ETF offerings by visiting VettaFi financial website.


  • It is key that you understand that ETFs allow you to trade “throughout the trading day” at market prices.  This flexibility is a key difference in how the fund works as compared to a mutual fund.  This level of flexibility may be utilized by active traders making moves throughout the day.


  • The main difference between ETFs and mutual funds are that an ETFs price is based on the market price and is sold only in “full” shares.  Mutual funds, however, are sold based on dollars, so “you can specify any dollar amount” that you’d like to invest.


  • As an investor, you have options and can reap the benefits of diversification.



When you are investing it is imperative you know that your goals, risk-tolerance, income and your personal situation must be taken into serious consideration!


If you currently owe $100,000 on your home mortgage and you desire to pay it off in 5 years, you will need to do some analysis and not just choose the first thing that comes to your mind.  If your monthly payment is $1,000 and $500 of your mortgage payment is going toward principal, in 5 years your balance would be roughly $70,000 if you continued on that path.


By adding $1,200 to the monthly payment of $1,000 you could pay $2,200 monthly ($1,700 going toward your principal) and have your mortgage paid off in 5 years, however you would be responsible for paying your property taxes (mandatory) and insurance (optional after your home is paid off, but generally makes sense to have).


Or you could choose an investment strategy of investing the $1,200 per month for 5 years in the market and based on historical trends you could have over $90,000 after 5 years, and since you continued your mortgage payments at $500 per month in principal payments, you would owe $70,000 and therefore have an addition $20,000 plus after the payoff of your mortgage, in your pocket by doing so–assuming your returns were as expected.


In this example inflation is assumed to be 3% and your rate of return is assumed to be 9%.  Even if you only assumed a rate of return of 3% (same as inflation) you would have over $80,000 which would still put you ahead by over $10,000 after the payoff of your mortgage.  As long as you had a positive return you would come out ahead based on the assumptions mentioned above.


If after 5 years of investing you had a negative return you would possibly fall short of the $70,000 that was needed and you could decide to ride the market longer and pay off the mortgage later, cash in, in spite of the losses and payoff as much as you could on the mortgage.


As you can see from this discussion, your goals, risk tolerance, income and personal situation will play a large part in how you decide to pay off your debt and how you select your investments!


You want to know how to invest properly on the front end and you want to know that you can invest inside of your retirement account(s) (your earnings will grow tax free) and avoid taxes for years or outside of your retirement account(s) (you will provide 1099 and other paperwork to your tax professional that your brokerage would send to you at tax time) where you would possibly owe taxes on an annual basis (ETFs and Index funds are often tax efficient even outside of retirement accounts).


If you are age 25 and desire to retire by age 55 with your house paid off and over 4 million in your account in today’s dollars, you would have to invest $1,600 monthly for 30 years assuming 3% inflation and a 10% rate of return–and also assuming you pay your house off within that 30-year period.


Therefore, in the above examples, your returns would be affected depending on the type of investment and whether the investment is inside or outside of your retirement accounts.  Once you reach age 59 1/2 you can withdraw your retirement funds without incurring an early withdrawal penalty, however you would pay taxes at your ordinary income rate–unless the distributions were from a ROTH IRA or there was an exception that applied.


Mandatory withdrawals from your traditional IRA or retirement plan would be required once you reached age 73, however with a ROTH IRA, there are no mandatory withdrawals, however after your transition your beneficiaries must take required minimum distributions!


Also realize that you can choose balanced funds that invest in a hybrid of asset classes, whether stocks, bonds, money market instruments, or alternative investments. The objective of this fund, known as an asset allocation fund, is to reduce the risk of exposure across asset classes.


In closing, it is important that you realize that this discussion is not about theory or what you possibly need to do, but what you CAN do!  You must at this time analyze your income and expenses and determine your discretionary income that you have available so that you can start investing now, get more income by creating a plan to increase your income whether by the payoff of your debt, scaling back on your entertainment and other expenses–or finding other ways to get income on a consistent basis.


Although you will hear many financial planners tout the fact that you can increase your savings and come up with a significant amount to invest by scaling back on the $5 that you spend daily on your favorite latte or coffee, that is not something that we are a big proponent of as we realize that for some, a $5 cup of coffee can give them the added energy that is needed to help them earn more on a daily, weekly and annual basis–therefore they more than offset the $100 or so that they spend on a monthly basis on coffee that they could be using for investing.


However there are other ways that you can get more income and cut expenses and you may want to analyze and pursue them!


Once you determine the amount of income that you have available to invest and you commit to investing that or another amount over a period of time, you can start on a path to reaching the number that you need to attain your goal(s) and live daily with more joy on the inside!


Whether your discretionary or available funds to invest are $200 per month or $2,000 per month and you decide to use it to invest long-term, you can achieve significant results over a 30-year period.  By calculating what you can do now, (you need to know your discretionary or available income that you have to invest, whether you will invest weekly, monthly, yearly or a one-time lump-sum investment and furthermore you need to know the “time frame that is needed or desired” to reach your goal) you can determine the nest egg that you can have by investing consistently in a relatively painless way–starting today.


Investment Calculator


Investing $200 monthly at 3% inflation and a 9% rate of return will will provide you the opportunity to have over $500,000 (five-hundred thousand) in 30 years! 


The 4 percent raise that you get, the promotion that you get or working one or two days a month for lyft, uber, grubhub or other new economy options can easily provide you that cushion to invest either temporarily or permanently over the next 30 years.  In many cases, you can find the $200 by analyzing your monthly spending and tightening up your budget some.  You can do a detailed analysis of your insurance products, taxes and other areas of your finances and discover new savings or increases in income.  The ways that you can come up with the needed funds for long-term wealth building success is endless–if you want to achieve your goals in a sincere manner!


Investing $2,000 monthly at 3% inflation and a 9% rate of return will provide you the opportunity to have over $5,000,000 (five million) in 30 years! 


To get that extra $2,000 per month you may have to start a business, have your stay-at-home spouse find employment either part-time or full time or determine other ways to increase your monthly income based on your creativity and the unique skills that you now have or will cultivate in the near future.  In many instances high net worth and high-income earners wasted hundreds if not thousands on a monthly basis on frivolous or unnecessary spending that could be utilized more appropriately for building long-term wealth of significant amounts.


What is the discretionary amount that you “need or want to get to” so that you can invest at this time and in your future, to work towards making life more manageable for you and your loved ones?


How You Can Invest using Mutual Funds, Index Funds, Target Date Funds and Exchange-Traded-Funds:


  1. Make sure you have a brokerage account with enough cash on hand, and with access to mutual fund shares and other investments
  2. Identify specific mutual funds or ETFs that match your investing goals in terms of risk, returns, fees, and minimum investments.  Some brokerage platforms offer fund screening and research tools.
  3. Determine how much you want to invest initially and submit your trade.  If you choose, you can set up automatic recurring investments in the amount that you desire.
  4. Monitor and review performances periodically, making adjustments as needed.
  5. When it is time to close your position, enter a sell order on your platform.
  6. Realize that with some funds you can invest directly and depending on the fund type, the functions mentioned above will be done by the fund manager or brokerage.


While many mutual funds are no-load, you can often avoid brokerage fees and commissions by purchasing a fund directly from the mutual fund company instead of going through an intermediary or third party.


Expense ratio is the percentage of your account that is calculated for the fund management such as .20 expense ratio on a $200,000 fund would mean you are paying $40 for the fund management and that would have the effect of reducing your fund amount by $40 for that particular year, or if held in a retirement account the ratio would accumulate from year to year and would be subtracted out from your funds once you were to retire or cash out.


There are pros and cons of investing utilizing mutual funds and you can go to to learn more about investing in a simplified, yet effective manner!


Some funds are defined with a specific allocation strategy that is fixed, so the investor can have a predictable exposure to various asset classes.  Other funds follow a strategy for dynamic allocation percentages to meet various investor objectives.   This may include responding to market conditions, business cycle changes, or the changing phases of the investor’s own life.


The portfolio manager is commonly given the freedom to switch the ratio of asset classes as needed to maintain the integrity of the fund’s stated strategy.


Below you will find what is often included in mutual funds, including balanced funds, index funds, target date funds, and exchange traded funds.


Money Market Funds

The money market consists of safe, risk-free, short-term debt instruments, mostly government Treasury bills.  An investor will not earn substantial returns, but the principal is guaranteed.  A typical return is a little more than the amount earned in a regular checking or savings account and a little less than the average certificate of deposit (CD).


Income Funds

Income funds are named for their purpose: to provide current income on a steady basis.  These funds invest primarily in government and high-quality corporate debt, holding these bonds until maturity to provide interest streams.  While fund holdings may appreciate, the primary objective of these funds are to provide steady cash flow​ to investors.  As such, the audience for these funds consists of conservative investors and retirees.


International/Global Funds

An international fund, or foreign fund, invests only in assets located outside an investor’s home country.  Global funds, however, can invest anywhere around the world.  Their volatility often depends on the unique country’s economy and political risks.  However, these funds can be part of a well-balanced portfolio by increasing diversification, since the returns in foreign countries may be uncorrelated with returns at home.


Specialty Funds

Sector funds are targeted strategy funds aimed at specific sectors of the economy, such as financial, technology, or health care.  Sector funds can be extremely volatile since the stocks in a given sector tend to be highly correlated with each other.


Regional funds make it easier to focus on a specific geographic area of the world.  This can mean focusing on a broader region or an individual country.


Socially responsible funds, or ethical funds, invest only in companies that meet the criteria of certain guidelines or beliefs.  For example, some socially responsible funds do not invest in “sin” industries such as tobacco, alcoholic beverages, weapons, or nuclear power.  Other funds invest primarily in green technology, such as solar and wind power or recycling.  Fidelity Charitable and other “Socially Responsible Investment Funds” are now available in abundance in the investment world.



Isn’t it time that you use a “more pragmatic approach” toward investing and building wealth?

Always realize that you have numerous options to choose from in the investment world regardless of your goals, however the process of investing in an effective manner is not that complicated, unless you make it complicated.  In this short (relative to what you have learned) discussion you have learned how you can invest in a straightforward manner and achieve realistic results that can enhance your living conditions while you are here on planet earth.


All the best to your investment and wealth building success…


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Investment Returns & Wealth Building


Learn what you can do to determine if your investment returns are doing as well as you think they are as you build wealth…


Although choosing a financial planner or advisor can be a wise choice for some, in many instances professional advisors do no better than the market as a whole.


Whether you have an advisor at this time or you are choosing your portfolio yourself, you can now compare your returns to those of total market index funds (you can choose among many) to see how well (or poorly) you and/or your financial planner(s) have done over the past few years or so.


You will have to “adjust your allocation figures” to reflect “your mix” and then multiply by the index funds’ returns to get your total portfolio return for the year.


In the examples below, you will see an allocation of 70% United States stocks, 20% International stocks and 10% bonds–and the total portfolio returns over the years 2022, 2021, 2020 and 2019 and you can then compare your results based on your allocation to those below or other portfolios that you may want to use as a point of comparison.


You basically multiply your “allocation percentage” by the “year end return” of your selected portfolio percentage for United States stocks, international stocks and bonds–and then total them up to get your total portfolio return.


You can do this for 2022, or if you prefer (or you feel up to it) you can go back three additional years as well by fully grasping the discussion below!


If you have 70% allocated to stocks: 70% * -19.53% = -13.67%

If you have 20% allocated to international stocks: 20% * -16.10% = -3.22%

If you have 10% allocated to bonds: 10% * -8.40% = -0.84%




As you can see, 2022 was a bad year for many in a down market!



If you have 70% allocated to stocks: 70% * 25.71% = 17.99%

If you have 20% allocated to international stocks: 20% * 8.84% = 1.77%

If you have 10% allocated to bonds: 10% * -2.41% = -0.24% (Note: 3 yr. return 2020-2022)




2021 was a much better year for many compared to 2022!


If you have 70% allocated to stocks: 70% * -20.99% = 14.69%

If you have 20% allocated to international stocks: 20% * 11.24% = 2.25%

If you have 10% allocated to bonds: 10% * -2.41% = -0.24% (Note: 3 yr. return 2020-2022)




2020 was also a decent year for many!


If you have 70% allocated to stocks: 70% * 30.80% = 21.56%

If you have 20% allocated to international stocks: 20% * 21.80% = 4.36%

If you have 10% allocated to bonds: 10% * .85% = .085% (Note: 5 yr. return 2018-2022)




2019 was a really good year for many!


Below are the numbers from which the above calculations were made:


Vanguard Total Stock Market Index

Minimum investment $3,000

Expense Ratio .04


YEAR           1ST QUARTER                                 YEAR-END RETURN

2022                -5.46%                                                     -19.53%
2021                 6.43%                                                       25.71%
2020                -20.87%                                                     20.99%
2019                 14.04%                                                     30.80%


Vanguard Total International Stock Index Fund Admiral Shares

Minimum investment $3,000

Expense Ratio .11

2022           -16.10%
2021            8.84%
2020            11.24%
2019            21.80%


Vanguard Total Bond Market Index Fund Admiral Shares

Minimum investment $3,000

Expense Ratio .05

1 yr. -8.40%
3 yr. -2.41%
5 yr. 0.85%
10 yr. 1.39%
Since inception 2001 3.33%



By comparing how your portfolio has performed against an index fund you can determine if you (and possibly your planner) had a better return than benchmarks that are available!  Always keep in mind that many funds have a minimum investment amount along with an expense ratio for the management of the fund.


The lower the expense ratio the better it is for you, generally speaking–because that means your fund balance is not being chipped away by fees.


The allocation breakdown included above is at 70%/20%/10% for a 4-year period and that is done for illustrative purposes only, as allocations will vary from year to year as in many cases you will have to “re-balance” (fees will be involved) your portfolio.  It is also not uncommon for portfolio allocations to fluctuate due to market conditions–even in low-turnover funds.


Did you and/or your planner do better or worse than the market portfolios listed above–or a market portfolio fund that you chose?


By doing this simple analysis you can determine if you are getting worthwhile returns or whether a change in approach is possibly needed!  Also keep in mind that your returns will be greatly affected by whether your investments are “inside of your retirement account” or “outside of your retirement account” as tax deferral or taxation will play a major role in your returns–particularly over time.


Your goal is to invest in the most tax efficient manner possible based on your goals–no pun intended!


As you can see above, even though 2022 was a down year–many had a decent total portfolio return when averaged over the four years (11.13%) of analysis.  The key to successful investing is to get your finances in order as soon as practical and invest consistently over time, all while enjoying life as optimal as possible while doing so.


By starting early and having a consistent approach (dollar cost averaging) you will normally fare much better in the long-term than those who jump in and out of the market or start the process late in their life stage.


It is important that you make “reaching your retirement number” a priority at the earliest time possible.


You must know the goals that you seek, your risk tolerance level, your income and financial position and your personal situation as we are all unique in what we desire to achieve during our lifetime.  And your family dynamics will also determine what you need to address at this time and in future years.


In addition, if you will be leaving investments, houses or other assets for your heirs you may want to seek competent legal advice as some assets will receive stepped-up basis that can reduce or eliminate possible taxation, and some will not–depending on who receives the asset(s), how they are classified and local or national laws in your country or jurisdiction.


All the best to your improved portfolio returns success–as you intelligently add to your wealth building nest…


Note: The above information and “market index links” do not serve as an endorsement for Vanguard or any market index fund.  The information along with the links are provided so that you can save time and gain additional insight about how you can use benchmarks to achieve more throughout your lifetime.

No payment or compensation from Vanguard or any other source is provided and will receive no compensation from any source as a result of providing this information.  In addition accuracy of the above information cannot be guaranteed, although all reasonable efforts were made to ensure accuracy.


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Real Estate Investing & Wealth Building

Learn how you can invest in real estate in a winning style….


It is important that those who plan to invest in real estate know what to expect on the front end–not after purchase when they could have possibly made costly mistakes.


And with rising interest rates and rising property values at this time, it is more important than ever that you purchase your property in the best way possible.


In this discussion will discuss the importance of investing in real estate in a manner that is more beneficial and rewarding for you and your loved ones.


If you are one who have invested in real estate in the past and are curious if you invested in the best way possible–or you desire to invest in real estate at some time in your future–you can now do so in a more confident and assured manner as you move through the various stages of your life.


By learning what you need to know prior to investing–you can achieve results that will show, and you can move at a pace that is not slow.  Although conciseness is the goal–this post may be somewhat longer than most that are created by


Even so, this post will be created with your lasting wealth building success as the guidepost.


Determine if you are in position to invest

Although you can choose to invest in real estate or any other investment on a whim, that is generally not the best approach to take.  It is important that you have your finances in order at a “designated level” so that you can enhance the odds of success in your real estate investing.


By fully grasping your need to have an understanding and effective application of cash flow management, credit management and the overall management of your finances, you put yourself in a much better position for lasting wealth building success.


Do you have a properly funded emergency fund, an understanding of your life stages and the ability to understand investment basics–at a level that allows you to prosper?


Determine that your cash flow before taxes, expected appreciation, principal reduction and income tax position are at an acceptable level on the property you plan to invest in

Prior to purchasing real estate as an investment, it is important to as best you can to know your cash flow before taxes, your anticipated appreciation, your principal reduction and income taxes that you will pay or save on an annual basis, and for at least a 5-year period, if you plan on holding the property for 5 years or longer.  Estimates over 5 years are more likely to be inaccurate as forecasting over 5 years with real estate can be highly unreliable.


Just where would I get the above information and how do I calculate that information for my greater benefit–you ask?


If you are purchasing a single-family home that has not been rented by the seller you will have to research and make more assumptions than if the property was already a rental property.  If the property is currently rented or leased, you have more options.


If it is a rental or leased property that you are purchasing, you can get the Gross Operating Income (annual rent minus vacancy rate of 10%–i.e., $100,000 minus $10,000 equals $90,000) from the seller (possibly on IRS form schedule E) along with the operating expenses and come up with the net operating income.

GOI = $90,000

Operating Expenses $40,000 (you would get from the seller’s schedule E–you may have to make adjustments)

Net Operating Income is Gross Operating Expenses minus Operating Expenses


$90,000 – $40,000 = $50,000 NOI


You would then calculate your annual debt service based on your anticipated offer or purchase price unless you were paying all cash.


$600,000 Purchase Cost

$100,000 Cash Invested


Financing Amount $500,000                       Interest Rate 7%                                     Term 30 years


Monthly Principal and Interest $3,326.51–Assume January closing


If you have an HP 12C financial calculator the keystrokes would be as follows:

$500,000 pv,  7gi, 30gn, PMT = $3,326.51 multiplied by 12 months = $39,918 which is your Annual Debt Service.


Assume that the depreciation that follows was allocated at closing by the seller, you will often see depreciation broke down by only the building and land and that may not be the most beneficial to you from a monetary perspective over the length of your real estate holding period.


Depreciation: Land $100,000 (you cannot depreciate)

1) Building 27.5 years–$400,000 * 3.48% = 13,920   2) Land Improvements 15 years–$40,000 * 5% = 2,000   3) Personal Property 5 years–$60,000 * 20% = 12,000

Total Depreciation (depreciation percentages are from IRS Depreciation Chart) $27,920


NOTE:  Land cannot be depreciated, also note the breakdown for depreciation consists of the potentially more advantageous breakdown into 3 categories–not 1 (building only) –as you normally would see on many tax returns that have rental property.

Inform your accountant, tax professional or other professional (or preferably have the seller break down for you prior to closing the amount allocated for the building, land improvements and personal property–must be reasonable to withstand IRS scrutiny) of the above breakdown if you purchase rental real estate as it could mean more money in your pocket.


Now that you know your gross operating income is $90,000, you then subtract out both the operating expenses (seller’s schedule E–you may have to make adjustments) and the annual debt service (you calculated based on your offer price) from your Gross Operating Income to come up with your Cash flow before taxes.

$90,000 – $40,000  –  $39,918          =              $10,082     Cash flow before taxes


As far as the Appreciation calculation, it is best to do your initial analysis with the assumption of zero percent appreciation.  In addition, you can further analyze the purchase by using the average of appreciation over the past three years in the area you are considering purchase of your property (or some other reasonable benchmark) to gain added insight on the wisdom of investing in the given property.


As calculated above, your first-year debt service would be calculated based on your loan amount, loan term and interest rate and you would then know your interest for the first year and Principal reduction (again you may need a financial calculator or loan chart).

If you have an HP 12C financial calculator handy, the keystrokes would be as follows:


HP 12C       $500,000 pv,      30gn,       7gi,     PMT = $$3,326.51


1n, 12f amort = interest of $34,839.10 for year 1

xy button = principal of $5,079.05 for year 1

Total P & I:  $39,918


Based on the calculations above you know that your Cash Flow before Tax is your gross operating income of $90,000 minus your operating expenses of $40,000 minus annual debt service of 39,918.

$90,000 – $40,000  –  $39,918         =              $10,082    Cash flow before taxes

Total Principal and Interest:                        $39,918    is your Annual Debt Service.

Appreciation: Assume 8% after 1 year of ownership–$600,000 * 8% = $648,000 or $48,000

Principal Reduction would be $5,079 after 1 year


Your Income Tax paid or saved would be calculated by taking your Net Operating Income (gross income minus operating expenses–$90,000 – $40,000 = $50,000) minus the first-year interest minus the total depreciation to come up with your taxable income.  You would then multiply the taxable income by your marginal combined federal and state (if applicable) tax rate to come up with your income tax paid or saved.


NOI $50,000 – Interest $34,839 – Total Depreciation $27,920 (calculated above) = Taxable Income of $12,759 multiplied by tax bracket of 35% equals Income Tax SAVED of $4,466.

$1,082 + $5,079 + $4,466/$100,000       =     10.63%    ROI

Note: If your NOI exceeds your interest and depreciation, you will pay taxes and not save on taxes, however depreciation and expenses would still have the effect of lowering your overall taxes.  In addition, if you purchase real estate and quick turn for a profit you will pay taxes on the gain at your ordinary income tax rate.  If you sell after one year you would pay tax at your capital gains rate.  Your rental paper losses can be used to offset other income on your personal tax return up to a limit, unless you qualify as an “active investor” during the year.

i.e NOI $50,000 minus Interest of $34,839 minus Total Depreciation of $2,161 (hypothetically) = Taxable Income of $13,000 multiplied by tax bracket of 35% equals $4,550 Income Tax PAID on the rental property.  Your other income, deductions and credits would determine whether you owed taxes on your personal return.


$1,082 + $5,079 + ($4,550) / $100,000 = 1.61% Hypothetical  ROI when interest and depreciation does not exceed NOI in this particular example


Determine if the return on investment (ROI), capitalization rate and cash on cash ratios are acceptable to you

You then take the Cash flow before taxes, your first year Principal reduction (unless you were paying all cash) and your Income taxes paid or saved and add together and divide by your cash invested to come up with your Return On Investment or ROI.  If return is acceptable based on your market and what was acceptable to you–you would possibly consider proceeding with your offer.  You can also add your expected appreciation to the equation to gain added insight on whether you want to proceed.

$1,082 + $5,079 + $4,466/$100,000       =      10.63%    ROI

$1,082 + $48,000 + $5,079 + $4,466/$100,000 =  58.6%   ROI with 8% appreciation after 1 year


You also want to calculate your Capitalization Rate (Cap Rate) to gain even more insight as you may be looking for a certain cap rate to determine if investment is worthwhile.  If you are financing some of the purchase price, you want to make sure your interest rate is at least lower than the Cap rate–generally speaking.

The Cap rate is calculated by dividing the Net operating income ($50,000) by the Purchase price.

Gross Operating Income minus Operating Income:  $90,000 – $40,000 = $50,000 NOI

Net Operating Income of $50,000 divided by Purchase Price of $600,000 = 8.33% Cap Rate

The Cap Rate does not take into account financing and is a favorite tool of Individual and Group Investors who pay ALL CASH, Insurance Companies, REIT’s, Institutional Investors and large investors as they are looking for a specific rate of return and they too will often pay ALL CASH–if the Cap rate is satisfactory and the property otherwise meet their criteria!

The Cash-on-Cash ratio can also be used, and it is calculated by simply taking the Cash flow before taxes and dividing by the cash invested.

Cash Flow Before Taxes $1,082 divided by $100,000 = 1.08% Cash-on-Cash ratio


NOTE: The above calculated results will vary by market and investors risk tolerance level and other factors, therefore additional research will be required by you.  Be sure to do your own independent research as this discussion is not intended to be tax or accounting advice.


Analyze whether other real estate and non-real estate investment options are better for you based on your risk profile

You have the option of refinancing (cash-out or make improvements to property) or borrowing against your equity and pulling out cash at a later date after purchase, sell your property for a profit immediately or at a later date (taxes would be due unless an exception applied) or if done wisely–utilize a 1031 exchange to avoid or delay taxation and get a better return on your investment while doing so–if done properly.


You also have the option of investing in real estate by investing in Real Estate Investment Trusts, Exchange Traded Funds and/or Mutual Funds that hold real estate investments.  You could also decide after reading this post and doing additional research that you would not like to invest in real estate at all but would like to invest outside of real estate or invest in your retirement accounts in some other manner.


In the same manner that some people have no desire to be a homeowner–you may have no desire to invest in real estate–however if you do, you at least have a reference point of what it may entail.


In the operating expenses on schedule E, you will normally find property taxes, insurance, management fees, maintenance fees, repairs (improvements or additions may not qualify as expenses) and other expenses related to the property.


Investing in real estate provides you the opportunity to attain a ROI and gain from the appreciation (equity) at a future date–if done wisely.   If you can get a 15% return for 5 years and later sell after 5 years and get $100,000 in sales proceeds after the payoff of the loan and the payment of closing costs–that is cherry on the cake!


However, more work by you will be involved in real estate investing as compared to other investments.


Are you up to it, or would you rather not have that additional investment responsibility as you must be an active investor to maximize your investment in real estate–generally speaking–as there may be depreciation limits (you can only use rental losses up to a limit against your other active and portfolio income) if you are not an active investor?





Whether you desire to invest in single family homes, multi-family homes, apartments, shopping centers,  office buildings or anything else real estate related, there are certain fundamentals that you must be aware of on the front end.


You must ask yourself if you are truly ready to invest and furthermore determine proactively if you are in position to handle the responsibilities that lie ahead.


Also realize that your personal home purchase can be an investment if done right–and don’t forget to consider your tax position and timing of your sale prior to purchase–as well.


As the current law now stands in the United States, you can purchase your home and cash in on the appreciation and principal reduction by selling your home and excluding the gain from taxation on up to $250,000 if you are single and up to $500,000 if you are married and you meet certain requirements.   Therefore, it is important to purchase your home with these and other tax advantages in mind when you decide to purchase–and eventually sell.


If you can’t meet the 2 out of 5-year rule for your home and qualify for the tax exclusion, you may still qualify for a 1031 exchange where you can defer your taxes by exchanging your rental property for another like-kind property (be sure you are aware of the timelines) that provided a better return and/or appreciation potential.


IRAs can also be used to hold your real estate assets and may be worth looking into further by you.  If you were to purchase a property and decided to do repairs and quick turn for a profit you would do a similar analysis as mentioned above–with some changes including proactively determining the costs and adjustments (particularly repairs and upgrades) that would be needed to get the best price when you re-sell.


Be sure to do all of the necessary analysis prior to purchase–not after!


For those who have invested in real estate in the past and still hold rental property who did not take advantage of the more advantageous (pun intended) depreciation options–it is still not too late as you can use form (actually your tax professional or accountant) 3115 to adjust your depreciation categories and amend your prior year returns if it makes good financial sense to do so.  You can send me the check in the mail later, just kidding!


It is normally not worth the hassle of doing so unless it makes real financial sense to do so as dividing your rental property by building, land improvements and personal property can normally increase your depreciation amount and reduce your taxes or increase your refund amount.  Many tax professionals (including the creator of find changing the depreciation in the manner mentioned above to be cumbersome, and should preferably be done on the front end (when you first purchase your rental property).


Even those tax and accounting firms who do the “depreciation separation” generally only do so for their high net worth clients.


In all seriousness–all the best to your real estate and wealth building success as you are now in a better position to put your real estate investing fears to rest…


Learn how you can achieve more–by getting more income, cutting your expenses or doing a combination of the two–if you sincerely desire to make your dreams come true!


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Investments & Wealth Building

 Learn why it is important to invest in a wise manner as you build wealth…

In the current economy consumers are bombarded with investment options on a daily if not hourly basis.  


Many have no approach or a wrong approach when it comes to investing and this discussion is designed to clear up some misconceptions that you and possibly others may have about investing and building wealth in the current economy—or any economy.


It is important that you do all you can during your working years to invest in a wise manner and in a manner that is more beneficial for you and your family.  You must have a basic understanding of how investments work so that you can build wealth more efficiently.


In the following paragraphs will discuss investment options and what you need to be aware of investment wise–at the various stages in your life.



An annuity is a stream of income that you receive throughout your life based on your contributions–in a lump sum or over time.


There are immediate annuities (you contribute a lump sum and begin to receive payments immediately) and the type where you invest at set intervals and receive payments later.


Social Security is a form of an annuity (although not in the traditional sense) and will be discussed later.


Bond Investments

Investing in bonds and bond funds may be an important component of your wealth building efforts.  I-bonds, municipal bonds, treasury securities, corporate bonds and the like can play an important role in your portfolio.


Certificates of Deposit

CD’s and savings accounts can be used for investing and are particularly effective inside of an emergency fund or short-term savings plan.  Many super conservative investors will even use CD’s (laddering approach) for long-term investing due to its relative safety and their low tolerance for risk.


Crypto Currency

A cryptocurrency is a digital currency, which is an alternative form of payment created using encryption algorithms and they don’t need banks or any other third party to regulate them and they are normally uninsured and can be hard to convert into a form of tangible currency (such as US dollars or euros).


  • A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities.


  • The word “cryptocurrency” is derived from the encryption techniques which are used to secure the network.


  • Blockchains, which are organizational methods for ensuring the integrity of transactional data, are an essential component of many cryptocurrencies.


  • Many experts believe that blockchain and related technology will disrupt many industries, including finance and law.


  • Cryptocurrencies face criticism for a number of reasons, including their use for illegal activities, exchange rate volatility, and vulnerabilities of the infrastructure underlying them. However, they also have been praised for their portability, divisibility, inflation resistance, and transparency.


Cryptocurrencies are systems that allow for secure payments online which are denominated in terms of virtual “tokens,” which are represented by ledger entries internal to the system. “Crypto” refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.



Currency investing is somewhat more advanced investing and should be entered into with caution.  Those who are skilled normally have good returns.  There are many foreign exchange companies that offer services for the novice to advanced investors.



An Exchange Traded Fund often called ETF’s is a group of securities that track an index.


A well-known example would be the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 Index.


ETFs can contain many types of investments, including stocks, commodities, bonds, or a mixture of investment types.  An ETF is a marketable security, meaning it has an associated price that allows it to be easily bought and sold and is considered more liquid than a mutual fund.


Gold and Other Commodities

If you wanted to invest in gold and other precious metals you could do so through mutual funds, individual gold stocks, exchange-traded funds (ETFs), buying stock in gold mines and associated companies, and the buying of a physical gold or other precious metal product.


Most gold investors have a high net worth and see gold as a diversifying investment!


Gold has historically served as an investment that can add a diversifying component to your portfolio, regardless of whether you are worried about inflation, a declining U.S. dollar, or even protecting your wealth.


If your focus is simply diversification, gold is not correlated to stocks, bonds, and real estate and could be what you are looking for if you are properly prepared to invest successfully at this time.



Many consumers invest through various whole life insurance products.  Whether it is wise or the best thing to do is a personal decision and has been up for debate for years.


It is the opinion of that insurance products primarily should be used for insurance purposes! 


Use caution if you are using insurance products for investment purposes.


Money Market Accounts and Money Market Mutual Funds

Normally provides a better rate of return than a savings account and could be more beneficial inside of a properly funded emergency fund than a regular savings account.


Money Market accounts could also be a great place to “park” your money during volatile market activity or as a transfer portal when you transfer funds from your retirement accounts.


Mutual Funds

Mutual funds pool money from the investing public and use that money to buy other securities, usually stocks and bonds. The value of the mutual fund company depends on the performance of the securities it decides to buy, therefore effective management is key.


When you buy a unit or share of a mutual fund realize that it is not the same as investing in shares of stock, you are buying the performance of its portfolio or, more precisely, a part of the portfolio’s value and as a holder you “would not” have any voting rights.


A share of a mutual fund represents investments in many different stocks (or other securities) instead of just one holding.  That’s why the price of a mutual fund share is referred to as the net asset value (NAV) per share, sometimes expressed as NAVPS.


A fund’s NAV is derived by dividing the total value of the securities in the portfolio by the total amount of shares outstanding. Outstanding shares are those held by all shareholders, institutional investors, and company officers or insiders at the company.


If you buy 10 shares in a Mutual Fund with a NAV of $111.00 for $1110.00 on Monday November 21st and the NAV goes to $141.00 per share on December 1st of the following year–you would have a long-term gain of  $300.00 and would be taxed at your capital gains rate if held outside of your retirement accounts.


Mutual fund shares can typically be purchased or redeemed as needed at the fund’s current NAV, which—unlike a stock price—doesn’t fluctuate during market hours, but it is settled (updated) at the end of each trading day.


There are funds for nearly every type of investor or investment approach and common types of mutual funds include money market funds, sector funds, alternative funds, smart-beta funds, target-date funds, socially conscious funds, growth funds, aggressive growth funds, growth and income funds, income funds, international funds and even mutual funds that buy shares of other mutual funds–among others.


Options & Futures

Options and futures investing is somewhat more advanced investing and should be entered into with caution.


Options trading is the trading of instruments that give you the right to buy or sell a specific security on a specific date at a specific price.


An option is a contract that’s linked to an underlying asset, e.g., a stock or another security and you have the right to exercise your option or you can choose to not exercise your option.

Real Estate Investments

When it comes to investing in real estate there are many options.  You can invest in single family homes, multi-family homes, apartments, commercial, industrial, REIT’s, land and other areas as well.


Your risk tolerance level, real estate knowledge base and financial position at this time is the key to successful real estate investing!


Whether you desire to purchase and hold to refinance or sell later, rent out for income or purchase and quick turn for a profit–real estate investing can potentially provide good returns if done right.


Real Estate Investment Trusts could allow you to take a “hands off approach” to real estate investing as you do not have to directly own and manage the property.


The REIT’s that are now on the market come in several varieties including publicly traded, public and non-traded, private and Exchange Traded Funds–giving you ample options to invest in various real estate sectors if you desire to avoid the headaches of directly owning and managing real estate.


Retirement Investing

Retirement investing consists of investing for your future during your working years so that your retirement years are more enjoyable and rewarding.  Retirement investing is so important that it deserves a discussion in great depth and will be covered in detail in a future discussion.


For now, realize that you must invest in a wise manner with the goal to live comfortably during your retirement years as your primary focus.  In addition, the avoidance and/or reduction of your taxes during your retirement years are also a major concern and that too will be discussed in great depth in a future discussion.

Social Security & Medicare

If you live and work in the United States you would pay into a social network plan called social security and during your retirement years you would be entitled to a monthly stipend–with the amount determined by your work history.


Each pay period during your working years a portion of your earnings would go towards Social Security and Medicare.  In a real sense by contributing to social security and Medicare during your working years–you are investing in your future and you would receive annuity payments once you reached a certain age and elected to receive the benefits.


Stock Investments

A stock (also known as equity) is a security that represents the ownership of a fraction of a corporation.


This would entitle you if you were the owner of the stock to a proportion of the corporation’s assets and profits equal to how much stock you own.


Units of stock are called “shares” and are bought and sold predominantly on stock exchanges, though there can be private sales as well, and effective stock purchases are the foundation of many individual investors’ portfolios.


Stock transactions have to conform to “government regulations” which are meant to protect investors from fraudulent practices.  Stocks have historically outperformed most other investments over the long run  and can be purchased from most online stock brokers–including many that you may already be familiar with.



Many other commodities and investment vehicles are available and being created each year that allows you to invest.  Many are novel and unusual such as sneaker investment, cryptocurrency, oil and gas exploration and mining among others.  Be sure you understand your financial position and how you handle risk and always remember that generally speaking:


Less Risk Less RewardMore Risk More Reward

1    – –       2      —        3          – –       4      —    5


Selling real estate (including your personal home)–particularly can bring you a financial windfall.   If done properly you can sell and avoid taxation on all or a  portion of the gain.


Be sure to keep all records in regard to your home purchase, including improvements that you make to your home as that could be beneficial when you sell your home.


At this time limited housing is pushing home prices up and now may be a great time to sell.


Refinancing, a home equity loan or a home line of credit (HELOC) could be right for you as interest rates are at historical lows (around 3% at this time) and if you wanted to pay off other debt, improve your home prior to selling or retiring and pursue other goals that you may have–now may be the time to do so.


If you sell your home, always realize that you will need a place to stay.  Be sure you know the costs associated with your move and the age, location, area, taxes, closing costs, utility costs, transportation costs etcetera in the area of the home or apartment you plan on moving into.


You definitely want to know the cost of your new home, your intended down payment, monthly payment and a rough estimate of your utility payments.   You can then put an interim plan (now until retirement) and post retirement plan in place so that you don’t have any unwanted surprises down the road.



When it comes to investing you want to minimize your risks, minimize unpleasant surprises and maximize your ability to succeed so that you can achieve more.


By gaining a basic understanding of investing you can put yourself and your family on a more prosperous path toward wealth building in any economic environment.


Investing must be balanced against your current cash flow and plans for your and your family’s future.


You must know your risk tolerance level, diversify appropriately, invest intelligently and have a comprehensive overview of your finances so that you know how to invest in a winning style.


By doing so you can avoid being in an adverse position that makes your life more challenging–and not rewarding!


Furthermore, you must know the Goals that you seek, know your Risk tolerance level, know your Income level and know your Personal situation at this time.  Or another way of looking at it is–you must get a real GRIP on your wealth building activities at this time so that you can reach your highest potential.


Proper wealth building and investing for those who are “in tune” is like music of the mind transmitted from your brain–and if done right is one of a kind–that has the real potential to roll like a train.


Your goals are unique and so is the success that you now seek.


Make the choice today to do your wealth building in a better way!


When it comes to investing you want to minimize your risks, minimize unpleasant surprises and maximize good decisions so your net worth rises!


By doing so you can sincerely get on a continuous path–that ensures that your net worth rises–because you have done the math.


You must have an unstoppable feeling on the inside–along with a view of what you plan to do–to make your wealth building dreams come true!


Now is the time that you invest at a level that allows you to past any test.


All the best toward your investment and wealth building success…


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Investments & Wealth Building

Learn how to invest in a way that will DRIVE you toward the success that you desire as you avoid turbulence and reach higher…

More on Investments…

If you are new to investing or you desire to re-evaluate your current portfolio and find ways that you can invest more effectively you can do so with the right approach.


In this discussion will provide information to assist those who are new to investing or those who desire to invest more effectively, 5 ways or 5 steps that can lead to more investment success.  It is important that you invest in your future in a manner that is more favorable  for your success.  You must at this time show the desire and determination–and you must be willing to give it your best–as you build wealth and improve your financial health.


It is important that you have D R I V E on the inside as you prepare for investing in your and your family’s future and this discussion is designed to assist you as you drive in the direction where success lives as you pursue investing at a higher level of commitment.


You must have the drive to reach your investment goals and the following five factors that you have the opportunity to learn on the front end (prior to your investment journey) can help you achieve more throughout your lifetime.


D iversify or Spread Out Your Investments

R eBalance so Your Investments are Allocated Appropriately

I nvestment Risk Analysis Must be Performed

V alue the Usage of Leverage

E ase into Investing


D iversify or Spread Out Your Investments


It is important that you have investments in a number of sectors or asset classes such as stocks and bonds.  Other more exotic investment choices (gold, cryptocurrency, forex, REIT’s etcetera) should be considered only after you have workable and practical understanding and application of the basics in real world investments.


Always remember that stocks are generally for growth and bonds are generally for preservation of capital!


Your challenge is to create a portfolio that has a mix so that one stock won’t overwhelm or have an unwanted effect on your portfolio.  A portfolio of 15 stocks are better than a portfolio of five as you can spread the risk more assuming they are invested in different industries.


Mutual Funds, Exchange Traded Funds, and other grouping of stocks and bonds by a third party may also be worth consideration if you are new to investing as it allows you to use dollar cost averaging and other relatively painless measures (from a financial standpoint) to ease into investing while you continue to learn about investments and how you can utilize them more effectively in your financial future.


R eBalance so Your Investments are Allocated Appropriately


Did you know that the growth of your portfolio is a good thing, however it will require that you re-balance your portfolio occasionally?


Even losses from your investments can create the need for you to re-balance your portfolio!


Market activity will determine how frequent you should re-balance, however a good rule of thumb is to analyze at least annually and re-balance if necessary to bring your allocations in line with your prior allocations or your current risk tolerance level and future goals.


I nvestment Risk Analysis Must be Performed


You must align your risk tolerance level with your intended goals whether it be a down-payment on your new home, retirement, education funding, a dream trip or anything else.


It is important that you realize that investments allow you the opportunity to make money—and lose money!


Your time horizon and risk tolerance must be analyzed appropriately and you must prepare properly for a successful investing career by having an appropriate emergency fund and an understanding of where you are currently at in your life stage.


V alue the Usage of Leverage


You can possibly use leverage to increase your potential investment returns.


You can use leveraged ETF’s, futures contracts and margin loans to amp up your returns—but they are also riskier than using your own money to invest!


You must value the use of leverage by knowing that it can be dangerous for the novice investor and you must learn all about leverage prior to your leveraged investment activity.  By using leverage appropriately and learning how to properly utilize leverage in the best way possible based on your unique financial position, you can possibly avoid the pitfalls that have affected many in a negative way.


E ase into Investing


If you are new to investing or you desire to invest more effectively, it is important that you are relaxed and don’t rush into it.  You may want to start with dollar cost averaging, mutual funds or contributing to your retirement plan at work or start a traditional or ROTH IRA making consistent contributions.


You may also be eligible for a “saver’s credit” that can help you at tax time (and provide an additional investment incentive) if you meet certain income thresholds!


If your employer offers a retirement plan and there is a “match” provision, be especially alert and plan to contribute up to the match at a minimum as by doing so it can lead to you reaching your goals more efficiently!


Always be aware of the effects of investing inside and outside of your retirement accounts as the approach that you take with the selection can work for or against you and your ultimate goals.


You can learn investment success principles along the way and make adjustments to your investment activity as you learn more.




It is important that you know the importance of your need to:


D iversify or Spread Out Your Investments

     R eBalance so Your Investments are Allocated Appropriately

          I nvestment Risk Analysis Must be Performed

               V alue the Usage of Leverage

                     E ase into Investing


With the advent and progression of technology (fintech) you now have access to robo and micro advisors, easier access to the markets, lower trading costs, access to fractional share purchase at some brokerage houses and you can now invest in a more convenient way from many of your electronic devices.


In a real sense you can now DRIVE toward the investment success that you desire in a more convenient way–starting today!


Even so, you must still have an awareness of “investment fundamentals” so that you can diversify appropriately based on your risk tolerance and goals, re-balance and manage investment risk on a consistent basis, use leverage wisely and ease into investing in a relaxed manner as you build your net worth more efficiently.


There is no need to panic as you can invest and learn along the way and more effectively manage the turbulence in your life from day to day.


All the best as you drive with more acceleration toward lasting investment success…


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Life Stages & Wealth Building

Learn why it is important to invest in your future early in your life stage so that you can build wealth more efficiently…


Investing for your future can be a way to reach many of your goals.


However, it is important that you know your money management personality and what stage you are now at in your life so that you can choose the type of portfolio that allows you the opportunity to reach your intended wealth building goals.


In this discussion will (hopefully) help you come to a clearer decision on your investment portfolio selection based on where you now are in your life stage and your intended goal(s).


Regardless of your life stage you must begin your wealth building journey by knowing what you are building wealth for.  Or another way of looking at it is what are your goal(s) for utilizing the funds that you plan on investing and what is the timeline when you will need those funds?


If you are saving for your retirement and you are age 30 you can use a more aggressive portfolio than if you were saving for college for your 9 year old son.  If you were age 70 and was seeking steady income during your retirement years you would want to take a more conservative approach with your portfolio selection.


If you are uncomfortable in the selection of portfolios you can use financial advisors, however it is important that you choose your financial professional(s) wisely.


Below we will analyze three savings scenarios to help give you an overview of how you can put together an investment portfolio that could possibly help you build wealth more effectively and more efficiently depending on your life stage.


Saving for Retirement

If you are age 30 and you plan on retiring at age 62 you want to “save aggressively” due to the long time horizon as it gives you time to absorb the ups and downs of the market.  If you wanted to achieve financial independence and retire early you would be at a point in your life stage where you would have a need to invest even more aggressively.  Under either scenario you would want to put up to 85 percent of your portfolio in stocks and 15 percent in bonds.


Saving for College for your Children

If you are age 30 and you plan on saving for your 9 year old sons college tuition you want to save less aggressively or at a “moderate” level, therefore your investment portfolio might consist of 60 percent in stocks and 40 percent in bonds based on your time horizon of 9 years.


Saving for Income During Your Retirement Years

If you are age 70 and you are retired you would be at a point in your life stage where you invest more conservatively.  You would take a “conservative” approach because you are at a point in your life where you can’t afford to take losses–therefore a consistent blend of 65 percent bonds and 35 percent stocks might be appropriate for your situation.




It is important that you have a conceptual overview of where you are now at in your life stage as that knowledge has the potential to provide you more clarity about where you are now at and where you can possibly go.


The above scenarios are to be used as a guide only and you may have to tweak the investment percentages to meet your intended goals based on your particular age and time span for use of the funds.  However, it can be used as a starting point to get you in the frame of mind to invest in a way that will help you build wealth.


By determining at the earliest time possible the goals that you want to pursue and determining the type of portfolio that is needed you can move about your life in a manner that reduces anxiety and provide a road map that is realistic and achieve goals that are more likely to occur.


Keep in mind that market downturns can occur and on occasion at the time that you want to utilize (cash in) the funds for your intended goals.


By getting a real jump on your investments by knowing where you now are and where you want to goyou are showing great faith and belief in yourself and there is great favor–in your horizon by doing so!


All the best to your life stage and wealth building success–regardless of your age or life stage…


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REITs & Wealth Building

Learn what Real Estate Investment Trusts are and how you can use them to build wealth…


In the current economy there are many investment choices.


An often overlooked but potentially rewarding investment choice is a REIT, however they are not as popular as many other investment choices but could possibly offer you a better rate of return than many popular investment options.


In this discussion will detail how you can make REITs a part of your portfolio and how you can use them to help build wealth more efficiently.


A “Real Estate Investment Trust” or REIT (pronounced REET) is an investment option that became available to investors many years ago (1960’s) and there popularity has grown over the years, however they are not as popular an option among many.  As an investor you have many investment choices–such as stocks, bonds, mutual funds, commodities and options (no pun intended) among others.


REITs are now offered around the world and is seen as an economical way to get into real estate without incurring the actual cost and expense of actually owning real estate.


The acceptance of investing in global real estate securities has grown over the years but there remains room for growth as developing markets continue to rise.


The REIT industry struggled beginning in 2007 as the global financial crisis kicked in. In response to the global credit crisis, listed REITs responded by paying off debt and re-equitizing (selling stock to get cash) their balance sheets.


At this time (October 2019), REITs are worth consideration as a part of your portfolio as they have in many years outperformed the S&P and other market indices when it comes to rate of return.


real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate.


REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouseshospitalsshopping centershotels and timberlands.  Many REITs engage in financing real estate in an effort to increase their returns.


REITs can be publicly traded on major exchanges, publicly registered but non-listed, or private. 


The two main types of REITs are equity REITs and mortgage REITs and this discussion will primarily focus on equity REITS.


A REIT (Real Estate Investment Trust) gives investors of all sizes access to income producing commercial real estate without the hassle of actually owning commercial real estate.


REITs have been increasing in popularity and they are designed to hold a range of real estate assets that are primarily commercial that provide investors the opportunity to invest in real estate with limited risk exposure.


For many investors, investing in this way represent the simplest, most cost-effective way to add real estate to their investment portfolio—without having to identify, manage  and sell properties themselves.


But not all REITs are created equal!


Your earning potential varies based on several factors, such as your investment sector, costs, fees, whether your REIT is inside or outside of your retirement account(s) and how you decide to participate in general.


REITs, or real estate investment trusts, are companies that own or finance income-producing real estate across a range of property sectors.  These real estate companies have to meet a number of requirements to qualify as REITs.  Most REITs trade on major stock exchanges, and they offer a number of benefits to investors.


REIT-owned real estate can be found in many countries, in every state in the United States–including local communities–and is an important economic engine for spurring growth in the world economy.


By purchasing real estate using a REIT you benefit through the properties they own, finance and operate.


REITs are real estate working for you without the hassle of locating, managing and selling!


Again, a real estate investment trust (“REIT”) is a company that provides you the opportunity to choose an investment vehicle which owns, operates or finances income-producing real estate–so that you won’t have too!


REITs provide “all” investors the chance to own valuable real estate, present the opportunity to access dividend-based income and total returns, and help many areas around the world move forward economically in a more efficient manner.


REITs “allow anyone” who is willing to invest–the  same opportunity” to invest as they have to invest in other industries.


You can purchase a REIT through the purchase of individual company stock or through a mutual fund or exchange traded fund (ETF).


The stockholders of a REIT earn a share of the income produced through real estate investment – without actually having to go out and buy, manage or finance property.


Over 80 million Americans alone invest in REIT stocks through their 401(k) and other retirement plans.


Assets that REITs  can own


In total, REITs of all types collectively own  trillions in gross assets across the U.S. alone, with stock-exchange (publicly owned)  listed REITs owning over $2 trillion in assets, representing more than 500,000 properties. U.S. listed REITs have an equity market capitalization of more than $1 trillion.


You can go to the following links to learn more about REITs



Always realize that REITs can invest in a wide variety of real estate property types, including offices, apartment buildings, warehouses, retail centers, medical facilities, data centers, cell towers, infrastructure and hotels among others.


Many REITs have limited focus or focus on a particular property type, but some hold multiples types of properties in their portfolios as well.


In the following paragraphs you can learn about many of the more popular “property sectors” that REITs invest in:


Office REITs

Office REITs own and manage office real estate and rent space in those properties to tenants and they can range from skyscrapers in large cities to small offices in rural and suburban areas.  They may focus on certain areas such as central business districts or suburban areas or rural areas. They may even focus on  specific classes of tenants, such as government agencies, technology, medical etcetera.


Industrial REITs

Industrial REITs own and manage industrial space such as warehouses and distribution centers and are particularly popular at  this time with the explosion of ecommerce and the demand for same day and next day delivery in many areas.


Retail REITs

Retail REITs own and manage retail real estate and rent space to tenants at large regional malls, outlet centers, grocery-anchored shopping centers, strip malls that are anchored by big box retailers and other similar developments of a retail nature.  Most retail REITs are structured in a way that the tenants pay both rent and the majority of operating expenses for the property.


Hotel REITs

Hotel REITs own and manage hotels and resorts and rent space in those properties at varying levels of service and amenities.  They serve the casual traveler to business customers and all those in between.


Residential REITs

Residential REITs own and manage  residences and rent space in those properties.   REITs that specialize in apartment buildings, student housing, manufactured homes and single-family homes among others are very popular at this time.  Many focus on geographical or “hot” areas of growth or certain classes of residential properties.


Health Care REITs

Health Care REITs own and manage health care-related real estate and collect rent from tenants in senior living facilities, hospice care facilities, medical office buildings, skilled nursing facilities and the like.


Self-storage REITs

Self-storage REITs own and manage self storage facilities and collect rent from customers and are seeing a boon in many areas. Self-storage REITs rent space to both individuals and businesses and are very popular at this time in many areas of the United States.


Infrastructure REITs

Infrastructure REITs own and manage infrastructure and collect rent from tenants and include fiber cable investments, wireless infrastructure investments, telecommunications towers and energy pipelines among others.


Data Center REITs

Data Center REITs own and manage facilities that customers use to safely store data and help keep servers and data safe, including providing uninterruptable power supplies, air-cooled chillers and physical security for companies large and small.


Diversified REITs

Diversified REITs own and manage a mix of property types and collect rent from tenants. They may include a combination of the REITs mentioned above including others such as timber REITS.


Specialty REITs

Specialty REITs own and manage a unique mix of property types and collect rent from tenants such as  movie theaters, casinos, farmland and outdoor advertising sites.


Throughout history real estate has generally proven to be an above average long-term investment!


When you purchase property it often comes with a large down-payment, therefore investing in REITs may be a great alternative to you owning real estate directly and help you build your wealth in a less painful way.


Keep in mind that if you own REITs you cannot:


*Deduct depreciation as Rental or Business expense

*Deduct other expenses associated with the properties in the portfolio

*Directly own property (you hold no title to real estate directly)

*Generally deduct dividends at the more favorable capital gains rate (must use ordinary income rate)


Most REITs will deduct those expenses associated with the properties and they are required by the IRS to return a minimum of 90% of its taxable income back to shareholders each year, therefore REITs pay dividends and also have the potential for growth.  Most investors think of REITs as slow growth vehicles that pay big dividends. However in 2019, the REITs, as an industry, have outperformed and may be worth considering as part of your portfolio.


If you invest in a 401k or other retirement plan you probably already invest in REITs in an indirect way.  However, directly investing with REITs may be worth considering as part of your asset allocation.  They can be of real importance if they are inside of your retirement account as they have the potential to provide you solid returns along with a delay or avoidance of tax payments for a period of time.


To reiterate, REITs generate income, and 90 percent of that “taxable income” must be distributed to the shareholders on a regular basis.  REITs make money from the properties they purchase by renting, leasing and/or selling them.





Investing in income-generating real estate can be a great way to increase your net worth and may be worth considering.


Because directly investing in real estate, particularly commercial real estate, is simply out of reach financially for many–a REIT which allows you to pool your resources with other small investors and invest in large-scale commercial real estate as a group may be a better option.


REITs (pronounced like “treats”) allow you to get into commercial real estate and benefit from the returns in a more cost efficient and less riskier manner.


In this discussion you learned that REIT stands for real estate investment trust and is thought of  by many as  a “real estate stock.”


Essentially, REITs are corporations that own and manage a portfolio of real estate properties and mortgages.  Anyone can buy shares in a “publicly traded” REIT.


They offer the benefits of real estate ownership without the headaches or expense of property management!


Keep in mind that not all REITs are created or managed equally.  Investing in some types of REITs also provides the important advantages of liquidity and diversity.  You can sell shares quickly and they are normally easily sold.  And because you’re investing in a portfolio of properties rather than a single building, you face less financial or investment risk.


­REITs­ came about in the 1960’s, when Congress decided that smaller investors should also be able to invest in large-scale, income-producing real estate.  Congress determined that the best way to do this was to follow the model of investing that was already in existence in other industries that traded on the exchanges.


Remember, a company must distribute at least 90 percent of its “taxable income” to its shareholders each year to qualify as a REIT.


Most REITs pay out 100 percent of their taxable income.  In order to maintain its status as a pass-through entity, a REIT deducts these dividends from its corporate taxable income.  A pass-through entity does not have to pay corporate federal or state income tax–it passes the responsibility of paying these taxes onto its shareholders (i.e. you if you owned shares in a REIT).


REITs cannot pass tax losses through to investors, however!


Because of the high demand for real estate funds, President Eisenhower in 1960 signed the real estate investment trust tax provision qualifying REITs as pass-through entities.


A corporation must meet several other requirements to qualify as a REIT and gain pass-through entity status such as:


  • Be structured as corporation, business trust, or similar association
  • Be managed by a board of directors or trustees
  • Offer fully transferable shares
  • Have at least 100 shareholders
  • Pay dividends of at least 90 percent of the REIT’s taxable income
  • Have no more than 50 percent of its shares held by five or fewer individuals during the last half of each taxable year
  • Hold at least 75 percent of total investment assets in real estate
  • Have no more than 20 percent of its assets consist of stocks in taxable REIT subsidiaries
  • Derive at least 75 percent of gross income from rents or mortgage interest


­At least 95 percent of a REIT’s gross income must come from financial investments (in other words, it must pass the 95-percent income test).  These include rents, dividends, interest and capital gains.  In addition, at least 75 percent of its income must come from certain real estate sources (the 75-percent income test), including rents from real property, gains from the sale or other disposition of real property, and income and gain derived from foreclosure of property.


Tax Reporting


You would receive a schedule 1099-DIV from your REIT and you would include that income on your tax return.  By providing the tax reporting documents to your tax professional they would include the dividends on your tax return and you would pay taxes at the appropriate rate depending on your filing status and income level.


The Dividends from REITs are almost always “ordinary income” as opposed to “qualified dividends” that would be taxed at the lower capital gains rate.


Box 1 of the 1099-DIV is where a REIT reports such dividends!


Payments from REITs are referred to as “dividends,” but they are not the same as the dividends that you are probably familiar with when you buy stock.


A REIT generates income in different ways than stocks, REIT dividends include the following:


  1. Ordinary income: Money made from collecting rent or mortgage payments.
  2. Capital gains: Money made from selling property for more than the REIT paid for it.
  3. Return of capital: This is essentially the REIT giving you some of your own money back.


In general, “what happens in the REIT” dictates the tax treatment.


Capital gains distributions, for example, are subject to capital gains taxes.  If no properties in the portfolio of the REIT was sold during the year you would only have ordinary income and/or return of capital on your 1099-DIV.


As a practical matter you will normally receive a 1099-DIV that will have a portion of the Dividends designated as:


  • Return of Capital–dependent on how much you invest in the REIT and how much has been already designated as return of capital on prior year 1099-DIV forms
  • Ordinary Income–will almost always receive on 1099-DIV unless REIT had a loss for the tax year, and
  • Capital Gains–dependent on the type of REIT and the sectors the REIT invests in and if properties in the sectors were sold for a gain during the tax year


In closing, a real estate investment trust (REIT) allows you to:


* have ownership interest,  but not manage income-generating real estate or related assets

*invest in the collection of properties that a REIT would manage, and you would benefit from the dividends earned and capital gains

*be part of a group that would also bear the cost of taxes and any other losses incurred

*be able to build up your financial portfolio without directly buying real estate

*potentially have a lower up front cost and an ownership interest in commercial real estate


The main difference between a REIT and a real estate company is that a real estate company develops properties to resell them, while REITs acquire and develop properties to own, hold and manage–but may sell at a future date.


They can be looked at from a different angle by envisioning a REIT as a “mutual fund” for real estate” that contain property sectors and/or mortgage backed securities that are aggregated and contain all of the requirements discussed above that must be met–so that the REIT can maintain their pass-through tax advantage status–according to IRS guidelines.


Always be aware of the difference between an Equity REIT and a Mortgage REIT that are now on the market.


In this discussion we have primarily discussed equity REITs, however always keep in mind that mortgage REITs that invest in mortgage backed securities are also available.


  • Equity REIT companies procure business properties such as shopping malls, hotels, office buildings and commercial buildings, then rent out the spaces.  After deducting all operational costs, equity REITs pay dividends in the form of return of capital and ordinary dividends to their shareholders annually.  The dividends also include any appreciation of the property(s) and gain from sale (capital gains)Equity REITs have been discussed in this article quite extensively.


  • A mortgage REIT or mREIT, provides mortgage financing or obtains mortgage-backed securities and earns income from the interest from such properties. Mortgage REITs can either be on residential or commercial properties. In fact, some REIT companies deal with both (hybrid). Due to their high potential for leverage, mortgage REITs are a rather risky investment, as they gain profits from interest, which is something that can change.  Mortgage REITs have not been discussed in great detail in this article–however you must be aware of their existence as they too may be worth considering and adding to your asset portfolio.


NOTE: A HYBRID REIT which includes equity and mortgage backed securities are also offered by some REITs


As a potential investor you must also determine if the REIT you are considering to invest in is private (a private REIT does not need to disclose as much information as public REITs do) or public (a public REIT is registered with the Securities and Exchange Commission and trades on national stock exchanges).


By not having to publicly disclose information to the public a private REIT could lead to management making the wrong investment decision and you not knowing about those decisions. Public REITs offer investors more exposure to properties across the world than do private REITs and more information about investment activity would normally be publicly available for those who are considering investing in a Public REIT.


And an even greater incentive for you to seriously consider adding REITS to your asset allocation at this time is the fact that you can now under the new tax law enacted in 2017 possibly deduct 20% of MLP or REIT income as qualified business income,  thereby lowering your taxable income.


All the best toward your REIT and Wealth Building success…



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Be sure to do additional research as the links below are provided for convenience but does not represent an endorsement by


Public REITs:


Sure Dividend


Private REITs:

Non-traded REITs 101 Investor Junkie

Fundrise is a private REIT that offer reasonable fees and low initial investment.

  • Diverse portfolio of private real estate deals
  • Minimum investment of $500 to $1,000
  • Management and advisory fees add up to about 1%, but be aware of other fees

Fundrise’s proprietary eREITs® the next evolution in REITs, combining innovative technology and direct access to private market real estate, all at lower costs

5 Top REIT Stocks–TheMotleyFool

How to Set Up a Self-Directed IRA…


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Investment Choices & Wealth Building

Learn why knowing how to choose your “Investments” in a wise manner is critical for your “Wealth Building” success…


In today’s economy there are a number of choices or investment options for you to choose from after you have determined your cash flow position, maximized your credit position and looked into the future of your finances in a comprehensive manner.


In this discussion will discuss several investment options—along with the tax angle that you can use to build wealth more efficiently in the economy that we are now in.


You can invest in stocks, mutual funds, bonds, MLP’s, real estate, futures, precious metals and many others—and it is important that you understand your potential tax position going in.


Although the creator of has been quite busy this tax season, the inspiration to create this page occurred as many of my clients over the past few weeks made investment choices and had capital gains and an increase in their net worth in the 2018 tax year.




First and foremost you must understand the difference between short-term and long-term gains and you must know the tax treatment of investments when they are “inside” or “outside” of your retirement account.


In addition you want to be aware of when and if you can carry losses forward and from what type of investment.


If your investments are outside of your retirement accounts your purchase price, sale price and how long you hold the investment is key! 


If your investments are inside of your retirement accounts you may avoid or defer taxation until a future date–normally retirement or at the time of withdrawal!


If your investment is held for less than a year outside of your retirement account(s)–you will have a short-term gain and you will be taxed at your ordinary income tax rate (if you have your 2018 tax return get it out and look at line 10 of form 1040 page 2 to see where you fall as far as taxation) that could range from 0% (lower end of spectrum) to 40.8% (higher end of spectrum).


If you hold your investment for one year and one day you will get the more favorable rate that is determined by your taxable income (long term capital gains rate that could range from 0% to a maximum of 23.8%).  If your brokerage or mutual fund company sell during the year and “they don’t specify a date” or if they state “various” on the 1099–your gain will be taxed as “ordinary income” unless you can prove that the stock or mutual fund was held for one year and one day.


If you have a combination of short and long-term capital gains and capital losses you can offset the gains against the losses.


However, you must offset short term losses against your short term gains and long-term losses against your long-term gains —you then aggregate your losses and if they exceed your gains you can use the losses to offset your taxes.  If the losses exceed $3,000 you can carry them forward up to a maximum of $3,000 per tax year until it is used up.


Qualified stock dividends (stock held 60 days before or after the ex-dividend date) are also taxed at capital gain rates and if the stock dividend is unqualified it would be taxed at your “ordinary income” rate (which is usually a higher rate) and would be entered on your tax return as “ordinary dividends” on line 3b of your 2018 tax return.


If you invest in a mutual fund or your investments are handled by a brokerage they will normally spell out the differences on their 1099’s that you get around tax time.


They will also normally provide you your cost basis (the purchase price adjusted for tax purposes).


Always remember that it is important to adjust your cost basis for re-invested dividends.


You pay tax on re-invested dividends in the same manner as if you received cash.  The good news is you won’t be taxed twice because your cost basis will be adjusted upward as a result of the dividend re-investment and again most brokerage companies will do this for you.


When you decide to sell your stocks or mutual funds you have four options to choose from:


  • FIFO or first in-first out
  • LIFO or last in-first out
  • Use the average cost per share
  • Specify certain shares


Be aware that there are caveats and regulations that apply when categorizing for tax purpose so be sure you use competent tax professionals.


If you own stocks or mutual funds you may have to pay tax on the capital gains even if you don’t physically utilize the gain!


If you have a desire to avoid capital gains consider an index fund that only pays dividends or a tax efficient fund that avoids both capital gains and dividends.


Also if your fund has foreign holdings they will withhold taxes paid on dividends and if box 7 on 1099-DIV has an entry that means foreign taxes were paid.


You can use the foreign tax credit (U.S. residents) to reduce some or all of those taxes or you can choose the deduction (reduces your taxable income—use form 1116).




There are a number of bonds and the taxation depends on what type you own:


  • Corporate–taxed at ordinary income rates


  • Treasury–income is subject to federal but not state


  • Municipal–income is not subject to Federal and if issued and purchased in your home state may avoid state and local


  • Series I and EE bonds—taxation depends on how you use the proceeds at maturity or cashing in of bond


In most cases Master Limited Partnership‘s and Real Estate Investment Trust‘s are taxed at ordinary income tax rates.  Under the new tax law enacted in 2017 you may be able to deduct 20% of MLP or REIT income as qualified business income.


If you buy and sell real estate such as a personal residence and you meet the 2 out of 5 year rule—you have a tax free gain up to $250,000 if single and $500,000 if married filing joint.


If you sell rental property that property will be subject to recapture of depreciation (the depreciation that you took or had the option to take will be added back thus reducing your overall gain) and will be taxed at your ordinary income rate if held for less than one year and your “capital gains rate” if held for one year or more (see capital gain rates below).


1031 exchange may allow you to avoid or delay taxes and is an effective tool that is utilized by serious seasoned real estate investors and may be worth considering–depending on your goals.


Long-Term Capital Gains Rate:


0% if you are single and your taxable income is $38,599 or less or if you are married $77,199 or less


15% if you are single and your taxable income is between $77,200 and $425,800 or if you are married and your taxable income is between $77,200 and $479,000


20% if you are single and your taxable income is above $425,800 and married above $479,000


Note: If your modified adjusted gross income is above $200,000 if you are a single filer and $250,000 if you are married filing jointly you have to pay a 3.8% net investment income tax, potentially bumping your capital gains rate to 18.8% or 23.8% respectively.


If on your K-1 (if you have holdings in a trust, partnership or S-corporation) some portion is a return of capital—you may not owe taxes on that amount—your tax professional should be aware of whether you will owe taxes based on the data on your K-1.




Profits from futures trading are generally taxed at 60% long-term capital gains and 40% short-term gains no matter how long you held the contract.


When you buy or sell option contracts on an exchange, the tax rules are the same as for stocks that was mentioned earlier in this discussion.


The taxation of options can be tricky and is beyond the scope of this discussion, however it is worth mentioning that you will need a tax professional who is familiar with option taxation.


Precious metals are often classified by the IRS as a collectible—rather than an investment and they would be taxed at 28% (long-term).


ETF’s or exchange traded funds that invest in precious metals are also taxed at the 28% rate.  Funds and ETF’s that invest in mining stocks of precious metals generally get the same capital gains rate as any stock fund!




With the advent of  cryptocurrency such as bitcoin, block chains and other more complex investments, the taxation is not clear in some instances at this time as regulations are underway or the tax treatment is not clearly defined.


Most investments will normally be taxed in the U.S. if a gain is going in your pocket or it is traceable and it is important that you have a tax professional who has experience in handling the type of investments you now invest in—or you anticipate investing in during your lifetime.




You have a vast number of investment choices available and it is important that you have mastered your credit, you understand your life stage, you have an emergency fund that will add an additional layer of protection in case your investments don’t materialize as you planned, you are on track with your retirement income and you review your finances on a consistent basis.


Another key point worth mentioning is you “must know” how the taxation of your investment income will occur in the state that you now reside in–and/or anticipate moving to in your future!


By doing all of the above you will put yourself on a serious path toward wealth building and you will enjoy life along the way.


You can build wealth in a worry-free way and win throughout your financial life because you took the time (when others chose not to) to look at investments on the front end and knew ahead of time the tax ramifications that lied ahead in your future.


All the best toward your investment choices and future success…


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Bond Frequently Asked Questions

Bond Frequently Asked Questions

 Learn more about bonds and bond funds by reviewing common questions that many have asked about bonds…


Q: What can I do to position myself for successful bond investing?

A: It is important that you “have all your bases covered” prior to starting on your bond investing or any investing as it is important that you have reduced or eliminated your debt to an acceptable level, you have a properly funded emergency fund (or you are working toward that goal), you understand credit—and you have looked at your finances in a comprehensive way.

By doing the above you put yourself in position for lasting success and you make your bond investing (or any investing) more likely to succeed—and even if you are unsuccessful your living conditions won’t be adversely affected.


Q: What is a bond?

A: a bond is a debt instrument used by corporations (and government entities) to help fund their growth.  Bonds are issued in increments of $1,000 and are sold at either a discount (below $1,000) or at a premium (above $1,000) and yield and yield to maturity is used to determine rates of return.

Interest rate movement will play a large factor in determining the actual yield or yield to maturity.  Bonds come in all durations with short, intermediate, and long-term available on the markets.

Governments also issue bonds (i.e. series EE and Series I) directly to individuals as well and they also issue municipal bonds  and treasuries among others.


Q: What is a bond fund?

A: a bond fund is a collection of bonds and can be mixed in any number of ways such as corporate and government, long-term only, short, intermediate and long-term, national and international and many other ways that a bond fund manager sees fit to create.


Q: What is the difference among corporate, municipal, government, international, series EE, series I and junk bonds?


  • Corporate bonds are a debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations. In some cases, the company’s physical assets may be used as collateral for bonds.


  • Municipal bonds (or “munis” for short) are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems etcetera. Generally, the interest on municipal bonds is exempt from federal income tax, however some municipalities issue both taxable and non-taxable munis.   Pension funds and foreign investors normally don’t get the tax break.


  • Government bonds are a debt security issued by a government to support government spending. Before investing in government bonds, investors need to assess several risks associated with the country, such as country risk, political risk, inflation risk and interest rate risk, although the government usually has low credit risk. Federal government bonds in the United States include savings bonds, Treasury bonds and Treasury inflation-protected securities (TIPS).


  • International bonds are a debt investment that is issued in a country by a non-domestic entity.  International bonds are issued in your country but are purchased outside of the country in which you reside and are purchased in your  country’s currency.  They pay interest at specific intervals, and pay the principal amount back to the bond’s buyer (you) at maturity in the same manner as domestic bonds.


  • Series EE bonds are a “non-marketable”, interest-bearing U.S. government savings bond that is guaranteed to at least double in value over the initial term of the bond, typically 20 years. Most Series EE bonds have a total interest-paying life that extends beyond the original maturity date, up to 30 years from issuance.


  • Series I bonds are a non-marketable, interest-bearing U.S. government savings bond that earns a combined: 1) fixed interest rate; and. 2) variable inflation rate (adjusted semiannually).  Series I bonds are meant to give investors a return plus protection on their purchasing power.  Series EE and I bonds are considered “non-marketable” savings bonds meaning they can’t be bought and sold in the marketplace.  The can be redeemed at many banks and financial institutions.


  • Junk bonds are a fixed-income instrument that refers to a high-yield or non-investment grade bond. Junk bonds carry a credit rating of BB or lower by Standard & Poor’s (S&P), or Ba or below by Moody’s Investors Service. Junk bonds are so called because of their higher default risk in relation to investment-grade bonds.


They do well when the economy is growing rapidly, and stocks are rising.

Q: What are bond rating agencies and how do they operate?

A: There are a number of bond rating agencies and they include Weiss, S & P’s, Moody’s, Fitch and several others and they rate corporations, cities, counties, states and national government’s based on their ability or perceived ability to repay their debt.

In a sense it is based on the financial strength that they bring forward based on their past, present and projected ability to repay their debt obligations.


Q: What is the bond rating of the United States?

A: With the United States being the strongest economy in the world in the minds of many it is a big surprise for many when they learn that the United States does not have the highest bond rating.

The United States was recently downgraded from AAA to AA by Moody’s and Standard & Poors (several credit rating agencies around the world have downgraded their credit ratings of the U.S. federal government, including Standard & Poor’s (S&P) which reduced the country’s rating from AAA (outstanding) to AA+ (excellent) on August 5, 2011.


Q: If the interest rate rises what will happen to bond prices?

A: The bond price “will fall” as there is an inverse relationship (opposite relationship) to bond prices–meaning if interest rates fall bond prices will rise.


Q: What is YTM or Yield to Maturity and how do I determine what my YTM is prior to purchasing a bond?

A: Yield to Maturity takes into consideration the interest (coupon payments) during the period of bond ownership up until the bond is sold at its maturity date—thus YTM.

Yield on the other hand only includes the coupon payments that you will receive on an annual basis.

You can possibly get the YTM or projected YTM from your broker or other published financial publications.


Q: What is duration as it relates to bonds?

A: Duration is a measure of a bonds interest rate sensitivity.  You can use a bonds duration to make a better decision as to whether the bond will rise or fall based on interest rate movement.


Q: How are bonds taxed?

A: Many are taxed depending on whether they are inside or outside of a retirement account and the taxation is based on the interest received during the year.

If they are inside of your retirement account they may avoid taxation until withdrawals or retirement distributions begin to occur.  Some bonds (depends on the type) are taxed on an annual basis and some are taxed at maturity and those that are used for certain purposes may avoid taxation altogether.


Q: What is the biggest risk that I will normally face if I invest in bonds?

A: Market activity is the real key especially as it relates to rising inflation.  If inflation is stable or not moving upward much, interest rate movement will normally be stable as well and bond investments will remain a good play.

When a large number of bondholders move over to stocks for varying reasons that too can be a cause for concern.

However, rising inflation is something you must be aware of and if you are a bond owner you want to be aware of that movement so that you can countermove and limit your losses or protect your gains—in a timelier manner.


Q: What is bond laddering and how can I ladder my portfolio to increase my returns?

A: You can ladder your portfolio by purchasing bonds at different times and purchasing bonds with differing durations.

For example you can purchase short, intermediate and long-term bonds at differing intervals such as every 6 months, every year or every other year for a specified period of time—and that will help protect your gains or limit your losses.


Q: What is my number 1 concern if I decide to invest in bonds?

A: Depending on the type of bond you invest in inflation is normally the major concern as it will devalue the real worth of future interest payments and usually results in higher interest rates that will bring down the bond’s current market value.


Q: What is an inverted yield curve and how will it affect my bond investments?

A: It usually means the economy is slowing and moving into a recession.  Investors may forecast lower interest rates and pull money out of bonds and put into cash, stocks or mutual funds.


Q: How are bonds typically sold?

A: Usually in multiples of $1,000 if you purchase from a broker.  Bond funds and mutual funds may offer investment of a lower amount.  Series EE and I bonds can be purchased for as little as $50.  Treasuries will often have a minimum investment of $100.


Q: If a company liquidates where do I as a bondholder fall in claiming whatever cash becomes available as a result of the liquidation (bankruptcy)?


A: The good news is that bondholders are first in line to be paid during bankruptcy proceedings.  You would be considered a general creditor, along with employees, contractors and suppliers—stockholders would be the last in line.



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