Bonding With Your Portfolio

Nearly all investors realize the importance of diversification to the investment process. Many may not be as familiar with the importance of asset allocation— dividing your portfolio into the appropriate mix of stocks, bonds, and cash. Although assets can also include real estate (homes, vacation homes, and rental properties) or business ownership, the most widely held asset classes are stock, bonds, and cash. In a strong economic climate, the potential for gain when stocks perform well opens up. Typically, most people who invest in the stock market also see value in having a liquid cash reserve set aside for emergencies and larger expenditures. But, what about bonds? Are they affected by economic swings and what are the risks involved? There is interest rate risk associated with investing in a bond or bond mutual fund, referred to as an inverse relationship. This means that as interest rates rise, generally, prices of …

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A Short Lesson on Whole Life & Term Life Insurance

When faced with the wide range of life insurance coverage available, you may wonder what type fits your needs now and what coverage you should consider for future needs. A good first step is to look at two basic types of insurance coverage: whole life and term life. Whole Life Insurance—Cash Value for Your Dollar Whole life insurance helps to provide not only security from financial hardship in the case of a death, but also a cash value component of the policy. Under a cash value life insurance policy, premium payments cover the cost of pure insurance coverage first, including the expenses and mortality factors of the insurance company; the insurance company then accumulates “leftover” dollars to build the cash value of the policy. In addition to cash value buildup in the policy, some insurance companies may provide whole life insurance policyholders with dividend payments—due to lower expenses, lower mortality …

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Nonqualified Plans – Baiting the Benefit Hook

Attracting and retaining qualified employees and managers is always a challenge for companies of all sizes. Most employers realize competitive salaries are not the only things desired by the best workers. Sought-after employees also expect compensation packages to include valued benefits. A qualified retirement plan is a traditional component of many employee benefit packages. As a business owner, you’re likely to appreciate the advantages: Your contributions are tax-deductible and accumulate on a tax-deferred basis. However, these plans can be difficult to administer and contain many regulations restricting employee eligibility, participation, vesting, and employee contributions. What’s the alternative? Nonqualified plans offer the flexibility to selectively choose whom you’ll cover and how much you’ll contribute for each individual. Many companies use them to supplement or replace their qualified plans. Although there is a wide range of nonqualified plans from which to choose, executive bonus plans and deferred compensation plans are among the …

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