THE RETURN OF UNCLE SAM’S 30-YEAR BOND
Nearly five years after offering its last issue of 30-year bonds to individual and institutional investors—causing some to warn of a bond shortage—the U.S. Treasury has returned to the market place with a $14 billion issue of its longest maturity, perhaps leading you to ask yourself whether you should consider adding some to your portfolio.
The likely answer? Probably not.
To be sure, U.S. Treasury securities have the highest credit quality of all private and public sector U.S. debt issues, given that the Federal Government could always tax or borrow to repay principal and pay interest on time—a meaningful reassurance if you’re lending your money to somebody for as long as 30 years. Moreover, being available in denominations of only $1,000, they are easily affordable for most investors.
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THE TRIALS AND TRIBULATIONS OF MEASURING AND COMPARING INVESTMENT PERFORMANCE
Measuring and comparing investment performance is not an easy task. Consider, for instance, something as simple as the daily comings and going of the stock market. One month the Dow Jones industrial average (DJIA) is up and the next month it’s down. But do those changes really tell the whole story?
Not really. The continuous changes in the DJIA merely represent the change in the market value of the 30 stocks that make up the DJIA. The actual change would reflect not just the change in market value but the income from the dividends from the companies comprising the Dow. And since the DJIA currently has a dividend yield of 2.5 percent, the actual investment performance, or what some refer to as the actual total return of 30 stocks in the Dow, would be different from what is typically reported based only on price changes. In addition, the DJIA is a “price weighted” index, so that higher priced stocks have a higher impact on index performance. Most of the other common indexes are “market weighted,” reflecting the relative market composition of the stocks in the index.
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YEAR-END TAX PLANNING TIPS
Although it’s too early to know what your taxable income will be in 2005, it’s not too late to plan strategies to lower it by means of legitimate tactics that can impact your total income, the expenses you may deduct against it, or both.
You might want to hold down your taxable income for 2005 by deferring income to 2006 and accelerating expenses when you have the opportunities—especially if you expect to be in a lower tax bracket next year. But you would want to do the opposite—accelerate income and defer expenses—to lift your 2005 taxable income if you expect to be in a higher bracket next year.
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RULES FOR HIRING FAMILY MEMBERS
Many self-employed people want to hire family members to work for them. But as with many things in life, there’s a right way and a wrong to do this. Doing it right can promote family togetherness. But it can also create tax savings for you.
How so? In essence, you are shifting business income to a relative. And your business can take a deduction for reasonable compensation paid to an employee, which in turn reduces the amount of taxable business income that flows through to you according to the AICPA’s financial literacy Web site, www.360financialliteracy.org.
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Other articles: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26]
