MoneyGuidePro financial software available free to eMag subscribers

A few simple keystrokes today can put you on the road to reaching your financial goals.

Subscribers to the free monthly May-Investments eMag can now gain free access to the MoneyGuidePro financial-planning software that May-Investments uses to help clients prepare for the financial challenges that lie ahead in life.

“I want to give loyal readers a reward for subscribing,” says Doug May, owner and chief investment officer for May-Investments. To begin using MoneyGuidePro, subscribe to the eMag at http://www.fund-scout.com/ (don’t forget to reply to the confirmation message you will receive so that you will be added to the mailing list), then send an email to May-Investments Retirement Concierge Lisa Mauser at http://www.blogger.com/Lisa@gjstocks.com asking for access to the software. You will receive information about how to access MoneyGuidePro.

May says eMag readers can use MoneyGuidePro to update their retirement plans and determine the amount of money they need to save and invest now in order to meet retirement needs or other financial goals.

MoneyGuidePro is an extraordinarily comprehensive financial-planning tool – much more comprehensive than the free financial-planning tools available online – and it is fairly easy to use if clients have complete, up-to-date records of their financial assets.

“I would encourage people to try it on their own and give it a shot,” May says.

MoneyGuidePro uses personal, financial, and investment data supplied by the user and develops a set of calculations based on the information. The program also uses a series of scales to determine the relative importance of several variables in the individual’s profile, such as willingness to save more or delay retirement.

The program uses personal data and preferences to calculate various options, which it presents in a range from “Ideal” to “Acceptable.” For example, based on an individual’s profile and resources, the program might determine that 65 is an “ideal” retirement age, but 67 would be an “acceptable” retirement age. MoneyGuidePro lets users create various scenarios to determine how certain changes in their goals or financial strategy might affect their likelihood of reaching their financial goals.

Finally, MoneyGuidePro can produce a customized report outlining the user’s chance of reaching financial goals and suggesting changes that might help the user reach those goals more effectively.

The program resides online and can be accessed from any computer with an Internet connection. May says data that users enter into the program is private and securely stored; it cannot be seen by anyone except the user and May-Investments staff.  

May-Investments weekly educational workshop on Tuesday, December 14, will focus on how the online planning tool works.

It’s a great deal. Sign up for a free subscription to the eMag and receive May-Investments’ fun and informative electronic magazine each month, plus gain free access to one of the top financial-planning tools available today. Visit http://www.fund-scout.com/ to get started.

Everyone should have an inventory of important documents

Everyone should have one,

Putting one together seems tedious and time consuming,

It’s easy to put off,

But very important!

What is it? No, it’s not a riddle – it’s an inventory of important documents and family records, and the first line says it best – everyone should have one!

We live in an unpredictable world, and (unfortunately) emergencies are a fact of life. Because emergencies are by their nature unexpected, we cannot possibly anticipate what future problems we might face, but we can eliminate some of the anxiety surrounding the unknown by being prepared, no matter what comes our way.

The Federal Trade Commission (FTC), the nation’s consumer protection agency, says that when it comes to preparing for emergencies, financial readiness can be as important as a flashlight with fully charged batteries. The agency offers several tips to help consumers prepare:

• It recommends buying a fireproof file box where you can place your important documents, extra keys, safe deposit box key, and a small amount of cash. The box should be kept in a location that is easily accessible in case of an emergency, and it should be portable – something that you can ‘grab’ quickly.
• The agency recommends that you keep backups of important financial data maintained on your computer. This backup should be kept in your fireproof file as well as your safe deposit box.
• AND the agency recommends that you compile complete inventories, including:
• An inventory of household belongings (to help with insurance claims);
• A list of emergency contacts and your insurance policy information;
• An inventory of current prescriptions and your medical history;
• A list of phone numbers or email addresses and websites for your creditors, financial institutions, landlords, and utility companies, as well as a list of account numbers;
• Copies of financial and family records that include deeds, titles, wills, birth and marriage certificates, passports, and relevant employment, benefit, retirement, and Social Security documents.

If you feel daunted by the job of putting together (and maintaining) all of these inventories and copies, you are not alone.

We can help! We encourage our clients to be prepared for emergencies by keeping inventories and guarding their important paperwork. If completing such an inventory has been on your to-do list for far too long, come to our Nov. 30 workshop, where we will present a variety of resources to assist you with the process. This workshop, which starts at noon, is designed to equip you with the tools for your individual needs and is an important first step to obtaining the peace of mind that comes with being prepared. Please RSVP to http://www.blogger.com/Lisa@gjstocks.com. Look forward to seeing you there.

Pre-Give in 2010 to Reduce Future Taxes

Investors who decided in 2010 to convert a traditional Individual Retirement Account (IRA) to a Roth IRA may be able to offset the subsequent tax liability by pre-giving the next few years of charitable contributions in 2010.  For taxpayers with no mortgage and a relatively straightforward Schedule A itemized return, in particular, pre-giving the next few years of charitable contributions may make sense.

Most taxpayers probably have mortgage interest as their primary Schedule A deduction, but for taxpayers whose Schedule A deduction is primarily a result of charitable contributions from annual tithing, only the portion of giving that exceeds the standard deduction amount is actually earning a deduction.  To offset high 2010 taxes that would result from a Roth conversion, think about donating several years of tithing "in advance" to a local community foundation as a pass-through donor account, which could be available over the next few years to use in funding annual tithing commitments.

In 2011 and subsequent years, with no charitable contributions on the Schedule A, the taxpayer would utilize the standard deduction.  However, over the course of next few years, the taxpayer would have the benefit of the full standardized deduction as well as all of the charitable deduction by lumping the deduction together in 2010, the year that it can be fully utilized to offset high marginal rate Roth conversion income.

Introduce yourself to your local community foundation before attempting this because community foundations prefer to create endowment accounts, which have a much longer lifespan.  However, large tax problems translate into large pass-through accounts, so foundations are likely to make the decision on whether to accept the donation on a case-by-case basis.  Keep in mind, also, that this large 2010 donation is irrevocable.  For some individuals, however, this strategy might be worth adding to your tax toolbox.
 
 Douglas B. May, CFA, is President of May-Investments, LLC and author of Investment Heresies .

Go to Investments main page.

“The Ultimate Gift” inspires estate-planning efforts

Estate planning is about much more than simply dividing up the money. It’s about leaving a meaningful legacy that can benefit the people and causes you care about.

The idea of planning a legacy and leaving a gift that makes a lasting impression on someone’s life is illustrated in a book and movie titled The Ultimate Gift, which makes perfect family reading or viewing during the Thanksgiving and Christmas holidays.

The Ultimate Gift, a novel by Jim Stovall, tells the story of a young man who must undergo 12 specific, life-changing experiences in order to gain an inheritance from his wealthy great-uncle. The experiences are assigned in series of videos left by the great-uncle, and in the end, the young man draws upon the lessons learned from each one to discover the “ultimate gift”: awareness of the superior importance of human relationships. The “gift” also includes a substantial financial inheritance, but the money seems a secondary reward to the life lessons.

The book was made into a movie in 2006 starring James Garner and Drew Fuller. The book and movie often are used by estate planners to emphasize the importance of leaving a non-financial legacy.  Though the book may be more effective than the movie (ever heard that before?), the movie offers a great opportunity for families gathered for the holidays to discuss what matters most.

Steve Gammill, a Grand Junction-area estate-planning attorney, says a legacy should closely reflect deeply held beliefs and values. He has a unique way of helping clients explore those values when it’s time to set up a will or trust.

“I use storytelling in my estate-planning practice,” Gammill says. “You can learn what’s important to people by getting them to tell you their life stories instead of just asking them what’s important.”

“I rarely do a trust or a will for a client unless we have gone through one of those interviews first,” Gammill says.

The Ultimate Gift serves as a source of inspiration for Gammill’s unusual approach to estate planning.

“The Ultimate Gift is all about relationships,” Gammill says, noting that the nephew often begins the assigned tasks with a poor attitude but comes out with a sense of growth and accomplishment. “There’s always a piece of positive emotion in each of the stories. Each of those tasks gets closer to a life change for this guy.”

Gammill’s estate-planning process tries to uncover a client’s core values to help guide the actions of the trustee who will administer his or her estate. The centerpiece of his process is a focused interview with clients that goes far beyond what they think is important and gets to the root of what is important to them.

Gammill says he starts by asking clients to draw a floor plan of the one place they consider home and then take him on a verbal tour of the house, room by room.

“You’re going to remember the sounds, the smells, everything that made it your house,” he says.

Some clients who are reluctant to talk soon warm up, and the stories start rolling.

“When we get into it, you can’t shut them up,” Gammill says.

The wide-ranging interviews are recorded and often become part of a family’s history, Gammill says. In the end, the stories reveal the client’s core values that can be reflected in the distribution of their assets and the administration of their estates.

Gammill collected 14 of his interviews into a book titled Swimming in a Sea of Success, and the interviews share a common conclusion about the meaning of a life well-lived.

“Everybody ended up with the same concept: It’s about relationships and what you’ve given back,” Gammill says. “No one said it’s about the accumulation of stuff.”

“That’s what this book (The Ultimate Gift) is about – it’s about relationships,” he says.

Kids Fund aims to raise next generation of philanthropists

There’s no better time than the holidays to begin teaching philanthropy to children. During the season of giving, kids can become aware of the needs of others, the charities that serve those needs, and how they can help those charities financially.

That’s the idea behind the Philanthropic Kids Club administered by the Western Colorado Community Foundation (WCCF).

The Philanthropic Kids Club is a way for families to establish donor-advised funds that let children or grandchildren determine how the annual proceeds are distributed. “The donor-advised fund is by far the favorite for donors because it’s so flexible,” says Anne Wenzel, executive director of the WCCF.

Depending on the amount invested, Kids Club funds generally produce up to a few hundred dollars a year that children can recommend for distribution, Wenzel says. Annually, often during the holidays or around children’s birthdays, families that have Kids Club funds gather to research charities, discuss what’s important to children in their giving, and determine the fund distribution. The funds can make philanthropy a family activity that emphasizes the holiday spirit of generosity and giving.

“We see a lot of kids’ grants going to Roice Hurst Humane Society or save-the-animals type of causes,” Wenzel says.

Wenzel says she set up a fund for her children that has made them more aware of the needs in the community.

“I started my kids when they were 6,” she says. “We talk to the kids about why you give and how do you determine who to give to when there are so many needs.”

Teaching a spirit of giving at an early age can instill values of generosity and philanthropy that last a lifetime.

“What we see in America is that volunteering and giving are closely linked,” she says.

Each family that participates in the WCCF’s Kids Fund program gets a copy of a book, The Giving Family: Raising Our Children to Help Others by Susan Crites Price. Wenzel says the book is an excellent resource about raising a new generation of philanthropists.

The WCCF is an organization that builds and manages charitable endowment funds to benefit a variety of community organizations in the region. Funds under its management provide a significant number of scholarships, grants, and other financial support to various individuals and organizations each year.

Help the WCCF grow

If the idea of a Kids Club endowment doesn’t fit your financial needs, you can still help the WCCF by subscribing (or asking a friend or spouse) to subscribe to the free, monthly May-Investments electronic magazine (we call it an “eMag”) that you’re reading right now.

To subscribe, visit http://www.fund-scout.com/ and fill out the “Join Our Email List” box in the upper left corner of the page. You will receive a confirmation email in your inbox that you’ll need to respond to for the subscription to begin.

For every new eMag subscription we receive by next Monday, Nov. 15, May-Investments will contribute $25 to the WCCF. By subscribing now, you will not only help the WCCF raise money, but you will treat yourself to a useful helping of financial insight and news about community events and organizations each month.

Spellbinders CD makes a great gift for kids

Amid the modern cacophony of video games, personal music devices, and mindless programs on television, old-fashioned storytelling can seem like a lost art.

But just in time for the holidays, Spellbinders of Mesa County rides to the rescue. An article by Holli Dawn Means in the October 2010 issue of Grand Valley Magazine spotlights this dedicated group of volunteers who keep the oral storytelling tradition alive by telling stories to elementary school students throughout the Grand Valley.

Spellbinders has put some of its finest tales on an audio CD that makes a great Christmas gift for young children or grandchildren. Kids whose imaginations are captured by the vividly told stories will listen to them over and over. Do them a favor and tuck the Spellbinders CD into their Christmas stockings this year.  It makes the drive over the hill to Denver much shorter...for the kids and the driver!

The CD is available for purchase in Grand Junction at Enstrom’s Candies, 701 Colorado Ave.; Toys for the Fun of It, 519 Main St.; and The Frame Depot, 529 Bogart Lane.

Click here to read Grand Valley Magazine’s story about Spellbinders of Mesa County. Grand Valley Magazine, a high-quality publication that focuses on the people, the arts, the landscape, and some of the unique aspects of life in the Grand Valley, celebrated its second anniversary in October. For more information about Grand Valley Magazine, visit http://www.grandvalleymagazine.com/.

Is It Time to Sell Gold?

In 30 years of investing, June of 2009 was the first time I've purchased gold. Investors are asking if it's time to give in to the contrarian impulse to sell gold now. But with gold in rally mode and now within a whisper of $1,400 per ounce, you can see why I'm glad we own it. I agree that gold is not something you buy and stick in the portfolio forever. But selling now might be a bit too soon, based on valuations, momentum, and the advent of QE2 (the second round of Federal Reserve "quantitative easing," which is also known as printing money like there's no tomorrow...or at least like tomorrow's consequences don't matter).

Investors don't own gold for its earnings power. You can use earnings to try to sort among the gold alternatives, but a better measure is the value of the gold in the ground. If you do use an earnings-based methodology, you have to use an inflated P/E on the earnings power, with target prices set at about 30X earnings. And that’s not just in this frothy environment, but that’s looking back 15 years. Gold companies simply don’t qualify as a low P/E “value” investment.

However, there is a time for “growth” and a time for “value.” Each style has its day in the sun. To really excel, you need to be more flexible and let the portfolio characteristics drift according to the current market environment. Legg Mason’s Bill Miller lost a lot of money by investing in “value” in 2008, because the best “value” stocks were in the financial sector – and cratered. We are not completely style agnostic. I do have a value bias. However, we are flexible so that if the market isn’t rewarding that style, we can go elsewhere. For example, we can go to gold.

It is also true that gold hardly qualifies as a contrarian investment at the moment. However, the time that you make the most money is as the market is changing its opinion on an asset from “out of favor” to “in favor.” For a period of time, it makes sense to ride the investment up with the herd.

If you look at the gold-vs-stocks valuation, gold is just slightly above its normal price. I would guess that gold would have to reach $2,000 per oz., or the stock market would have to drop 50% or more from current levels, before the value of gold, in comparison to the stock market, looks as rich as it got in 1979/1980, the last major peak. Though it’s making “new highs,” it’s not necessarily incredibly overvalued. Nonetheless, when the major upward trend in gold ends, it’s not an asset class that I want to own forever.

I agree with pundits who say that it’s best to prepare to get rid of gold on a moments notice. We won’t be right to the split second. We won’t catch the exact top. However, it’s one of the best trends in the market right now, and as the tech bubble showed us – tops are almost as difficult to predict the timing (exactly right) as bottoms. I don’t want to walk away from the most profitable area of the market, while it’s still working better than anything else.

Finally, there is the current monetary trend toward currency debasement. In a grand experiment to avoid the consequences of too much leverage, the Federal Reserve has announced $600 billion in QE2 spending. In the boldest off-balance sheet maneuver seen since Enron took the practice to new heights a decade ago, the U.S. Government is extending its current practice of expanding the size of the Federal Reserve balance sheet, which is not counted in the normal government accounting conventions, as if this explosion of currency doesn't matter because it's not on the official balance sheet.

Our concerns about whether investors will continue to buy U.S. bonds have not yet come to pass. As a result, the economy continues to expand based on lower borrowing rates for U.S. companies, which are issuing 30-, 50- and even 100-year bonds at rates so low it would make Bernie Madoff blush. Until the market starts pricing debt rationally, the current rally may be safe. It certainly doesn't pay to hide in money market funds while others make money. Of the things we own, however, gold seems like the safest bet to continue rallying, long after the bloom is off the rose in other types of investments because too many dollars chasing the same amount of goods is the textbook definition of inflation, and eventually that will be the result of today's easy money policies.

The increase in the price of gold and other commodities, in the face of relatively anemic economic growth, especially in the U.S., is probably an early indication of what is to come. The price off "stuff" will keep going up, and the ability of U.S. consumers to be able to pay for it - in dollars - will lag behind. Rising oil and natural resource prices will eventually trickle down to the U.S. consumer, and leave less income in the bank account each month for eating out, or travel. We are seeing hints of what is to come, but before it is over it will be a 2-by-4 across the forehead of Americans everywhere. Even Federal Reserve economists will understand it, by the time this ends.

Protecting against the downtrending dollar means, naturally, not owning things demonated in U.S. currency - especially U.S. government bonds. Additionally, owning natural resource investments, which are priced in dollars and will inflate to compensate for the declining value of the U.S. dollar, makes sense. Energy and commodity investments are starting to make a comeback, and we will invest in them as soon as they can sustain enough momentum to become buy-able in our discipline.
 
 Douglas B. May, CFA, is President of May-Investments, LLC and author of Investment Heresies .

Go to Investments main page.

Portfolio Changes Boost Commitment to International Stocks

During the first week of November, the mutual fund model portfolio eliminated its real estate income fund position, which was primarily a bond fund but also included some preferred and Real Estate Investment Trust securities, in order to increase its commitment to international equities, which now comprise nearly 37 percent of the total portfolio.

The model portfolio added a fund that focuses on Latin America’s emerging manufacturing industries, although the fund’s largest holding is the Mexican cellular phone company, American Movil. With this purchase, U. S. stocks now comprise 44 percent of the total portfolio, with international stocks making up 37 percent of the mix, and high yield bonds another 15 percent.

The portfolio is dominated by large cap stocks (66 percent, versus 35 percent in mid-cap or small-cap names), and the “growth stocks” are more prevalent than what Morningstar classifies as “value stocks.” The “growth” label comes more from the portfolio’s 12.7 percent projected 5-year growth rate (30% faster than its S&P 500 benchmark projected growth), than from valuations. Selling at 12.7X projected earnings, the forward P/E ratio is very reasonable, and nearly identical to that of the benchmark.

The portfolio’s current dividend yield, at 2.5%, is higher than the benchmark yield.

U.S. and Canadian companies make up 60% of portfolio holdings. Asia and Australia holdings comprise over 16% of the portfolio, with Latin American companies making up another 13%. European companies make up only about 6% of the total equity holdings.
 
Broken down by industry, health care companies make up almost 23% of the portfolio, followed by industrial companies (17%) and then by computer hardware companies (15%).

Note:  These portfolio weightings are viewed at a snapshot in time, on November 6, and could change without notice as a result of our active management discipline. 

 Douglas B. May, CFA, is President of May-Investments, LLC and author of Investment Heresies .

Go to Investments main page.