From: owner-persfin-digest@lists.xmission.com (persfin-digest) To: persfin-digest@lists.xmission.com Subject: persfin-digest V5 #42 Reply-To: persfin Sender: owner-persfin-digest@lists.xmission.com Errors-To: owner-persfin-digest@lists.xmission.com Precedence: bulk X-No-Archive: yes persfin-digest Saturday, August 8 1998 Volume 05 : Number 042 In this issue of the Personal Finance Digest: Re: Asset Allocation , part 2 looking for Expenditure verses Income Level statistics Re: Speaking of wills Re: Buying or renting a home Re: persfin-digest V5 #41 Mortgae for Mutual Funds Re: Speaking of wills Re: Speaking of wills High income, low risk? :-) Re: capital gains tax Disney's controversy neural networks Re: Disney's controversy IRA expenses part of contributions, or separable? capital gains tax, renting vs. owning retirement accounts for contract employees? Re: refinancing advice The messages posted to the Persfin-Digest are opinions and are not intended to substitute for qualified professional advice. Subscribers should seek the services of qualified professionals for such advice. The publisher, Internet provider, and Digest contributors cannot be held responsible for any loss incurred as a result of the application of any of the information provided here. To ask questions or provide answers, send your email to "persfin-digest@lists.xmission.com". Also, you can "reply" to the persfin-digest and your email tool should fill in the same address. However, if you "reply", be sure to edit the subject field in your email to reflect your topic. Copyright (c) 1998, Jeff Salisbury POSTED SUBSCRIPTION FEE: $20/year. Payment is optional. You will not be billed. The Digest is available to all subscribers, whether or not they pay. I do not discriminate either in favor of paying subscribers or against nonpaying subscribers. If you feel that the information presented here is worth the fee, and you feel comfortable paying it, send cash, check, or money order (U.S. funds), payable to "Jeff Salisbury", to: Jeff Salisbury 65 North 1300 East Logan, Utah 84321 Payment will be acknowledged by e-mail if you include an e-mail address. Subscribe: e-mail majordomo@xmission.com, text: subscribe persfin-digest Unsubscribe: e-mail majordomo@xmission.net, text: unsubscribe persfin-digest ---------------------------------------------------------------------- Date: Wed, 05 Aug 1998 23:00:53 -0400 From: Randy Barnes Subject: Re: Asset Allocation , part 2 >Really? If I had to choose, I would choose Vanguard Windsor II for the >longer haul. It has the same beta as Janus and charges less in internal >transaction fees. If I had my choice, I would own both Windsor II which >is a more value-oriented stock fund and Janus, which is a more >growth-oriented fund. Performance: Trailing Return % (SOURCE: Morningstar) 3 Yr 5 Yr 1 Mo 3 Mo 1 Yr Avg Avg ........................................................................ S&P 500 Index 4.06 3.30 30.15 30.22 23.06 Janus 6.01 6.12 31.99 25.60 19.23 Vanguard/Windsor II 1.33 1.80 30.43 30.18 22.29 Vanguard/Windsor -0.79 -2.24 17.01 22.35 19.03 ~~~~~~~~~~~ Primo, Three cheers for your opinion and input. Serious discussion of investment topics has been pretty lame around here for a good while. I applaud your effort and think you could be right. I took a second look at the reasons I'd picked Janus in the first place and rediscovered another reason I'm no fan of mutual funds. Fund data is available in a million places but it is very inconsistent and VERY easy to manipulate. I too went to Morningstar to get a peek at performance figures etc. This is where I found the data that led to my previous post. The funny thing is that the figures I find aren't the same as those you quote. Sometimes different services report different figures and sometimes the same service reports different figures for the same thing. Go figure;-) At the following links you'll see Janus beating the S&P in the 10 year time frame buy better that 1%. THe WinsorII lags the index, as does just about every mutual fund in the universe. I give Janus the nod, with a 1.68% advantage (at least using this particular quote). Janus - http://www.morningstar.net/FundQT/RR_Performance/JANSX.msfhtml Winsor - http://www.morningstar.net/FundQT/RR_Performance/VWNFX.msfhtml A small account of $200 per month for 10 years gains $7,600 more using the Janus 10 year figure. (Ignoring taxes completely!) [pv=-200,pmt=-200,n=12,r=.x/12] - Careful. The next 10 years results will be different. Now, this brings to mind another question. Are the S&P returns inclusive of dividends, or not? THis is quoted both ways depending on who is reporting. Before you know it you've written a thesis on which mutual fund manager beat the market, or at least came close. SPYders,(or index funds if you have a very small account), will outperform almost every mutual fund over the long haul. SPYders are far less trouble to own, and will serve you better for the future, with much less energy. Save money by not buying crap like magazines with "10 HOT Funds to Buy NOW!!" on the cover. Instead, buy yourself a self-help book, put an extra few bucks in your account, buy a kid something foolish, take a class, you get the picture. Use the savings to not pay your accountant to figure out the mutual fund statements you will no longer get each year. Even more valuable than the money is the time. If your time isn't worth $20-100 an hour then get busy and figure out what you need to learn to make something of yourself. For SPY info see - http://www.amex.com or http://www.fool.com/funds/funds5.htm One more tidbit. The S&P is always got a wonderful blend of growth and value stocks. No muss, no fuss. FYI, I DO own positions in 2 funds, but only in a 401k, and there I have no tax issues (for now) and I don't have much to choose from. We don't even have an index fund in the mix .(Not my decision!) I am not really trying to flame mutual funds. (lie) It's just that anyone with a little common sense and intelligence soon sees the fact that funds are too often laggards. Smart money just buys the market and leaves it alone. (still my favorite link, see: http://www.pathfinder.com/fortune/investor/1998/980706/dfa.html If you're like me and must spend hours knee-deep in invest-o-mania, then stick to owning stocks, not funds. Statistics have shown that owning just 16 stocks eliminates 93% of market risk, so the diversification issue that this started with is sorta meaningless. The average person really can beat the market, but not in a fund. God bless you for sharing an opinion that is more insightful and valuable than how to save 8 bucks on a credit report! - -Randy - - ------------------------------ Date: Thu, 06 Aug 1998 08:45:16 -0700 From: Tim Glaze Subject: looking for Expenditure verses Income Level statistics I was hoping someone might be able to help me locate statistics showing expenditures as a percent of income for various income levels. I have looked in the Statistical Abstract of the United States (http://www.census.gov/prod/www/abs/cc97stab.html). It has great detail of average expenditures for various regions and family size, but not expressly for income levels. My thought would be that people would pay proportionally more ($) on housing as their income rises, giving a (more or less) constant percent verses income level. While the amount of food ($) would increase as income rises, it would not increase proportionally. Thus higher income levels would spend less percent of their income for food. Has anyone run across such statistics or know where I might look? Thanks for any suggestions. tim glaze - - ------------------------------ Date: Thu, 6 Aug 1998 12:30:01 -0400 From: "Jackson, Anthony D." Subject: Re: Speaking of wills Lisa wrote: - ---------------------------------------------------------------------------- - -------- Date: Wed, 05 Aug 1998 22:48:05 -0400 From: Lisa Bellamy Subject: Speaking of wills My husband and me -- both in our mid-30s -- have two preschoolers and are expecting a third child. We've some assets, though not a ton. We think it's time we did a will. Anyone have ideas on software that would allow us to do our own, customizing it to fit North Carolina law (our home state) so that it would be legally recognized should the need arise? Any recommendations appreciated. - ---------------------------------------------------------------------------- - -------------- Lisa I use Quicken Family Lawyer. It has a good will option and can be customized for North Carolina. I would use it as your baseline then take it to a lawyer to make sure its OK. DO IT YESTERDAY! "TJ" P.S. Are you related to Mike Bellamy in Charlotte? - - ------------------------------ Date: Thu, 6 Aug 1998 13:51:37 EDT From: Subject: Re: Buying or renting a home << For many years I have wondered whether it was financially smarter to purchase a home or to continue renting an affordable apartment that allows me to make tax deferred contributions to a pension plan. As a renter, I am neither building equity nor reaping tax benefits. However, as a renter, I believe I am able to save greater sums of money than I would otherwise and I have shown myself to be a disciplined saver. Also, although I have lived in this area for more than five years, this was not a given when I first moved to this area. At this time, it is much more of a given. Any comments would be appreciated. >> It's financially better to own if real estate in your area appreciates. It's financially better to rent if houses in your area are depreciating! Hindsight's a great thing, ain't it? :) - - ------------------------------ Date: Thu, 6 Aug 1998 14:06:58 -0400 From: GeorgeS Subject: Re: persfin-digest V5 #41 Mortgae for Mutual Funds > My question is should a refinance ( at around 7%) at a thirty-year > mortgage and invests the cash (approximately $40,000) in a mutual fund. I probably should work the numbers, but this seems like a non number issue. At base, you are mortgaging something you need to live, your home, for something you do not particularly need, the return on the money. Now if things turn out well, the return on the money can pay off the mortgage early. But.. if they turn out poorly, you can loose the house, or at least, your fincancial interest in the house. I've often wondered why folks consider a house an investment, to me, it's where I live. To put it in play in the markets, like I would disposable income, seems to treat it too lightly. >From a tax point of view, you borrow the money at (bank interest) (1- tax rate) you make mone at a rate (return on mutual fund) (1 -tax rate) So the taxes drop out of the equation, and so long as the return on the mutual fund is better than the bank interest, you are better off. Part of the problem is the return on the mutual fund varies, sometimes you win, sometimes you loose. - - ------------------------------ Date: Thu, 06 Aug 1998 14:22:32 -0400 From: John Leipold Subject: Re: Speaking of wills > My husband and me -- both in our mid-30s -- have two preschoolers and > are expecting a third child. We've some assets, though not a ton. We > think it's time we did a will. Anyone have ideas on software that would > allow us to do our own, customizing it to fit North Carolina law (our > home state) so that it would be legally recognized should the need > arise? Any recommendations appreciated. Lisa & others: It's not time; it's past time. If you have children & don't have a will and you both die, then the state assumes guardianship of your children and places them wherever the judges decide. If you're comfortable with that, don't worry. Otherwise, RUN, don't walk either to the nearest software shop or lawyer & get one done. A simple will, in which there are not a whole lot of assetts to divy up, is not that expensive, even if done by a lawyer. In most states, all you absolutely have to have is a statement of what you want, signed & dated, with the signatures of two people who witnessed your signature. They don't have to read any of the will; they only witness your signature. Some states require three witnesses. Then file your will with the local probate court, and your children have much more protection than they currently have. You really don't even need a lawyer to do enough of one to specify who gets what and who you would like to be your children's guardian. HOWEVER, such an informal document could only be considered a temporary, stop-gap measure, to be used only until a more formal will can be done, via lawyer or software. Now, to specifically answer your question, I have used Parsons Technology software for wills and other legal documents, and have been satisfied. The software is called "Quicken Family Lawyer" and is available on CD-Rom or 3 1/2" floppy. The cost is $34.95. Their phone number is 800/223-6925 and their website address is http://www.parsonstech.com (it can be downloaded from their site for $29.95). I am not an employee, just a satisfied user of their products. Big disclaimer: I am not a lawyer and my free advice may be worth no more than you paid for it, etc etc yadda yadda yadda Good luck! John Leipold - - ------------------------------ Date: Thu, 6 Aug 1998 13:26:28 -0600 From: "J. Morgan" Subject: Re: Speaking of wills >Date: Wed, 05 Aug 1998 22:48:05 -0400 >From: Lisa Bellamy >Subject: Speaking of wills > >My husband and me -- both in our mid-30s -- have two preschoolers and >are expecting a third child. We've some assets, though not a ton. We >think it's time we did a will. Anyone have ideas on software that would >allow us to do our own, customizing it to fit North Carolina law (our >home state) so that it would be legally recognized should the need >arise? Any recommendations appreciated. We're in a similar situation, and what I'd advise is to pay a good lawyer the few hundred bucks it'll take to draft a will (and possibly a trust and powers of attorney), and *not* rely on a do-it-yourself kit. (Sorry, Nolo. ;-) Guardianship of your children is probably of primary importance. My wife and I recently had our wills redone, and created a trust that will become effective on both of our deaths. In essence, if I go, she gets all our stuff, if she goes, I get all our stuff, and if we both happen to step in front of the same bus, my sister has guardianship of our kids and control over our assets, which must be used for the benefit of our kids. Assets remaining in the trust will be distributed to the children at age 30. There are, of course, clauses addressing how much can be spent and for what reasons, and provisions protecting the trust from fiduciary irresponsibility, and sections dealing with the unlikely event that our children should predecease both of us. The two wills, the trust, two medical powers of attorney (living wills), and two springing (take effect at death or incapacity) general powers of attorney ran a shade over $400. I consider that money well spent. I think your childrens' welfare is too important to be left to some piece of software or a self help book. Curiously enough, I chose my new .sig line before I phrased this reply... :-) J. At the bookstore I asked "where's the self-help section?" The clerk said "if I told you, it would defeat the purpose." - - ------------------------------ Date: Thu, 06 Aug 1998 14:16:08 PDT From: "Melinda Johannes" Subject: High income, low risk? :-) Hi all, I hope you can help me. I'm having a difficult time determining how to allocate some assets for the short term while still maintaining liquidity and achieving a better return than that offered by CDs or money market accounts. Here are the specifics: I have $140,000 in a money market fund. There are other assets, but those are tied up in retirement accounts and don't figure in this scenario. This $140,000 is also above and beyond my 6 month "emergency fund." I'll be starting up a franchise within the next 2 to 8 months. The time frame is indeterminate because we are still looking for a suitable site. We may find one in 3 weeks, we may find one in 6 months. It'll be a retail kid's clothing operation. Up until the business opens, I'll need to make this $140,000 work as hard as possible, but will still need to keep most of it as liquid as possible, too. I plan to use up to $100,000 for startup costs (inventory, training, lease, insurance, legal fees, building out the store, etc.) and the remaining $40,000 for working capital. What I'm planning to do is maintain $70,000 in the money market account and split the remaining $70,000 between the following funds, all chosen because they're available as Fidelity "no transaction fee" funds, and have good Morningstar ratings and a good long term (5 years+) track record: 10% to Baron Asset fund (small cap) 15% to Hotchkiss and Wiley Equity Income fund 10% to Invesco Strategic Finance fund (sector) 40% to Loomis and Sayles Investment grade bond fund 25% to Dreyfus High Yield bond fund I'll be routing all the income and dividends from these funds into the money market account to bolster my working capital and protect it (the income, at least) from share price declines. As the actual startup date approaches, I'm planning on kind of "reverse dollar cost averaging" back out of the funds as necessary, until I am in a cash position (well, maybe 80-90% cash,) on the date I open. Given my short time horizon and need to preserve capital, am I too heavily vested in equities and/or high yield bonds? Can anyone suggest an alternate allocation? I realize that safety lies in money markets and CDs, but as I said, I'm willing to assume a little risk to achieve a better short term return. Am I assuming too much risk that I'll buy in at a market high if I put the $70,000 into the funds all at the same tims? I don't have time to DCA in and DCA back out. Should I just bag this whole idea and leave it all in money market and laddered short term CDs and forget about taking any risk at all? Thanks in advance for any and all responses. +=+=+=+=+=+=+=+=+=+=+=+=+=+ : Melinda Johannes : : mbjohannes@hotmail.com : +=+=+=+=+=+=+=+=+=+=+=+=+=+ ______________________________________________________ Get Your Private, Free Email at http://www.hotmail.com - - ------------------------------ Date: Thu, 6 Aug 1998 18:55:55 -0400 From: Rich Carreiro Subject: Re: capital gains tax >We just closed on the sale of a piece of land and have a capital gain on >the sale. Do we need to pay the tax now or can we wait until April 15? It depends. :-) Your best bet is to get the 1998 Form 1040ES from the IRS (it's on their web site) and complete it. If it tells you that you don't have to pay estimated taxes, then in all likelihood you won't have to do anything. You'll just have a higher bill (or a small refund) come April 15. If it does indicate that you'll need to pay estimated taxes, you can either do so or you can fill out a new W-4 form to boost your paycheck withholdings and eliminate the need to pay estimated tax. Rich Carreiro rlcarr@animato.pn.com P5-100/RedHat Linux 4.1 - - ------------------------------ Date: Thu, 06 Aug 1998 20:51:43 -0700 From: Allan Spring Subject: Disney's controversy >> First of all - I disagree with you. Anyone who thinks taxes and >> government have nothing to do with money and finances is not rational. >> If you can't handle a little disagreement - try http://www.disney.com. >With the battle Disney has because of their allowance of influence by >homosexuals, this company is not the uncontroversial company it once >was. :) Won't it be a great day when we have a society where it will be considered uncontroversial and downright positive to not be influenced by homophobes? - - ------------------------------ Date: Fri, 7 Aug 1998 05:02:56 -0700 (PDT) From: maness@sdcoe.k12.ca.us (Jay Maness) Subject: neural networks asked: Subject: Artificial Intelligence/Neural Net based mutual funds Does any know of a mutual fund that makes it stock selections based solely on a neural network (artificial intelligence) analysis of a historical database? I'm familiar with James O'Shaughnessy's work, but I don't think he used neural network software. Thanks, -- Mike Mills Mike, I have some interest in this field also. Here is a lightly edited copy of a posting from MONEY that I kept. Date: Fri, 8 May 1998 20:13:27 EST Reply-To: dailymail@LISTSERV.PATHFINDER.COM Sender: Money Daily From: MONEY Daily Subject: How one fund capitalizes on market inefficiency To: MONEYDAILY@LISTSERV.PATHFINDER.COM For an enhanced HTML version of the Money Daily, visit http://moneydaily.com. Weekend, May 9-10, 1998 How one fund capitalizes on market inefficiency The new N/I Larger Cap Value Fund trades hard and fast on a fair value model that's recalculated hundreds of times a day - and so far, it's working By Michael Brush In business school, they teach you that the stock markets are completely efficient. All public information about a company, the professors tell you, is fully reflected in a stock's price at all times. Rubbish, say many seasoned investors. They know that stock prices often bounce around maddeningly, even when there is no news. And when there is news, look out! Investors are prone to overreact, driving prices to extremes. Capitalizing on these temporary price anomalies would seem like a winning strategy. A relatively new mutual fund that tries to do just that is the Larger Cap Value Fund (NILVX), launched by N/I Family of Funds (800- NUMERIC) last December. The fund is based on the premise that when it comes to the stock markets, business school professors have it all wrong. "The markets are not efficient. They are partially efficient," says Langdon Wheeler, who founded N/I in 1989, and helped develop the computer programs behind the Larger Cap fund. "It is not all machines yet. The markets are people and people get carried away. They are out there saying `I have to buy because he is buying.' Or `I have to sell because he is selling.'" And that kind of emotion often helps drive down prices of good stocks to attractive levels. "Prices slosh around quite a bit," notes Wheeler, an former engineer who became fascinated by financial markets and changed careers. "Just look at a price chart. You see all kinds of ups and downs when the fundamentals did not change that much." To take advantage of buying opportunities caused by market inefficiencies, the Cambridge, Mass.-based N/I has developed a `fair value model' which tries to "mathematically model the excesses of human behavior in the market," says Wheeler. The first step is to figure out the `fair value' -- or how much the market is usually willing to pay -- for certain qualities of stocks. These include things like book value, expected earnings, the growth rate, the quality or consistency of earnings, and the number of analysts covering a stock. The market, for example, tends to pay less for volatile earnings as opposed to more predictable earnings. And it pays more for companies that are followed by more analysts. "You figure out how the market prices all these factors each day," says Wheeler. "Then you go back and assign each factor a weight for each stock, and bingo! You have a theoretical price." The computers at N/I x- ray the stock market about once every 90 seconds to see if investors are underpricing any aspects of a company, like its earnings growth or book value. If so, portfolio manager Arup Datta and N/I traders pounce on the stock. As you might suspect, such a portfolio management style leads to heavy trading. The fund has about a 250% annual turnover -- way above what many fund advisors believe is an acceptable level. Two factors, however, make this high turnover rate palatable. First, the fair market value strategy creates a good enough return to offset the cost of all that trading. As of March 31, the Larger Cap Value Fund had a return of 16% since it was started at the beginning of December, compared to a Russell 1000 return of 11.6%. And over a full year, use of a similar model in private accounts has produced the same kind of edge. Second, N/I has a record of keeping down other costs. Like other mutual funds at the group, the Larger Cap Value fund has annual expenses capped at 1% -- below average for an actively managed fund. And there is no load or 12(b)-1 fee. Sometimes, of course, the model leads fund managers in the wrong direction. Stocks, after all, do sometimes go down in value because of bad news that is not yet out. "You know you are going to be wrong on some of them," admits Wheeler. "But you have to follow the discipline, if you have a discipline that works most of the time. A relatively small informational advantage applied over a large number of trials will get you a persistent outcome." One of the advantages of the system is that it leads the fund to low valuations "in stocks that most value investors would not understand," says Wheeler. By that he means that it finds bargains not only among the typical down and dirty value stocks, but among quality growth stocks as well. If you are interested in the fund, don't wait too long to look it over. To date, it only has about $15 million in assets. But N/I, which has about $5 billion in assets under management, has a habit of shutting down funds to keep them manageable -- and this one is scheduled to close at $500 million. - - ------------------------------ Date: Fri, 07 Aug 1998 10:36:16 -0500 From: Bill La Mar Subject: Re: Disney's controversy Allan Spring wrote: > >> First of all - I disagree with you. Anyone who thinks taxes > and > >> government have nothing to do with money and finances is not > rational. > >> If you can't handle a little disagreement - try > http://www.disney.com. > > >With the battle Disney has because of their allowance of influence by > >homosexuals, this company is not the uncontroversial company it once > >was. :) > > Won't it be a great day when we have a society where it will be > considered uncontroversial and downright positive to not be influenced > by homophobes? Won't it be a great day when we have a society where it will be considered uncontroversial and downright positive to not be influenced by homo-philo activists? - - ------------------------------ Date: Thu, 06 Aug 1998 20:19:25 -0400 From: Stephen Brodeur Subject: IRA expenses part of contributions, or separable? I'm probably going to start a Roth IRA this year. My retirement funding rate is now a mere shadow of its former self after a job change, and I like the idea of starting the 5 year Roth clock ticking. I'll probably open the account with an online discount broker. I have two questions for the group. I plan to hold mutual funds and/or stocks. Any broker recommendations? Are there any expenses (commissions, annual fees, service fees) related to the account that I can pay with "non-contribution" cash- that is, can I buy $2000 worth of stock in the account with my annual contribution, and pay for the commission with additional money out of pocket? I suspect that I can't get around the "commission bite", and it's probably small money in the long term, but even a $20 commission on a $2000 trade is a 1% "front end load" on the investment. Thanks in advance. - -Steve - - ------------------------------ Date: Fri, 7 Aug 1998 15:11:12 -0500 (CDT) From: ldavis@ix.netcom.com (Lynn R Davis) Subject: capital gains tax, renting vs. owning You wrote: > >Date: Mon, 3 Aug 1998 22:20:36 -0700 >From: Marcia Cramer >Subject: capital gains tax > >We just closed on the sale of a piece of land and have a capital gain on >the sale. Do we need to pay the tax now or can we wait until April 15? > > Thank you. > > Marcia Marcia: The answer is rather more complex than now or April 15th. If your tax withholding is not enough to cover the total income tax that you will owe next April, then you may need to either increase the withholding or pay additional estimated tax payments, due quarterly. (Next due date is September 15th.) It is rather complicated to figure out whether or not you need to do one of these things. It depends upon (a) your estimated total taxes due, (b) how much you are having withheld, (c) what your income tax was last year, (d) how much your income is growing this year over last. For example, you are usually safe if your withholding is 100% of what you owed last year - but NOT if your income is over a certain amount THIS year! My advice is to call the IRS and ask them to send you the 1040-ES form. Finally, if you find that your withholding totals will not be enough to keep you from owing a penalty, then the better choice is to increase withholding rather than make an estimated tax payment. This is because the IRS considers withholding as having come in evenly through the year, even when it does not. Otherwise, you may still not owe any penalty if you make a payment this quarter for the capital gains tax incurred from this quarter's sale, but you will likely have to explain the timing to the IRS and fill out a special form for that as well. Lynn Davis Fremont CA >------------------------------ > >Date: Tue, 4 Aug 1998 08:44:53 -0400 >From: "Siedlecki, Mary T." >Subject: Home Ownership versus Renting > >For many years I have wondered whether it was financially smarter to >purchase a home or to continue renting an affordable apartment that >allows me to make tax deferred contributions to a pension plan. As a >renter, I am neither building equity nor reaping tax benefits. However, >as a renter, I believe I am able to save greater sums of money than I >would otherwise and I have shown myself to be a disciplined saver. >Also, although I have lived in this area for more than five years, this >was not a given when I first moved to this area. At this time, it is >much more of a given. Any comments would be appreciated. Mary: I believe that a lot of questions come to play in that. One is the relationship between home purchase prices and rents in your area. Another is any personal preferences between apartment and house living (although you can also rent a house). Another is the question of how long you plan to stay in an area, and what could force you to move. Many homeowners run into problems when job transfers or layoffs come and they have to move out of the area at a time when real estate is in a slump. (And those two things - big layoffs in an area and real estate slumps - tend to come together at the same time!) Finally, there is the question of what you believe the real estate market will do in your area over the time you would expect to own. (But be careful, as people tend to be too optimistic when the market is going up.) The tax benefits of real estate can be overstated, as they mostly consist of the deductibility of interest paid to others. If by owning you would be merely trading the tax benefit of tax deferred contributions to savings for the tax benefit of an interest deduction, that does not necessarily sound like a good tradeoff. Of course, those are not the only two issues involved. Lynn Davis Fremont, CA - - ------------------------------ Date: 07 Aug 98 13:36:32 -0700 From: "Catherine Steinberg" Subject: retirement accounts for contract employees? Hi, Persfiners-- I haven't been following the list closely of late, so forgive me if my question has been addressed recently. Here goes: I'm currently a staff employee for a software company, and have been offered a contract position at another company for about 50 percent more than I'm making now. I have been participating in my current employer's 401(K) plan, but as a contractor, this will no longer be an option. However, I still want to sock away savings for retirement. If I understand it correctly, I *can't* open a tax-deductible IRA in the same calendar year during which I have participated in a 401(k) plan. Have I got that right? What I need to know is this: What choices do I have in the way of putting away pre-tax dollars in a retirement account this year? I will be working through an agency on a W-2, but the agency doesn't offer a 401(k) plan, unfortunately. Thanks in advance for any guidance. Cheers, Cathy - - ------------------------------ Date: Fri, 7 Aug 1998 23:46:40 -4 From: "Ken Meinken" Subject: Re: refinancing advice > From: jack law > My question is should a refinance ( at around 7%) at a thirty-year > mortgage and invests the cash (approximately $40,000) in a mutual fund. ... > What am I missing? Please advise on whether we should refinance. Well, the most obvious thing that you are missing is the possibility that your investments will drop. Have you considered the possibility that the current "correction" will lose an additional 40%? Basically, you are thinking of borrowing money to invest in the stock market. That's risky, ESPECIALLY with the market as high as it is. There are plenty of opportunities out there that could turn this into a full fledged bear market. The market is nervous and it could break down in a hurry....or slowly, bit by bit. Will the market drop 40% more? I don't know. But based on history, it certainly could. Also don't forget that the "tax writeoff" only recovers a portion of the money you are "giving away" to the bank. Ken - - ------------------------------ End of persfin-digest V5 #42 **************************** - To unsubscribe to persfin-digest, send an email to "majordomo@xmission.com" with "unsubscribe persfin-digest" in the body of the message. For information on digests or retrieving files and old messages send "help" to the same address. Do not use quotes in your message.