How to Practice Ho’oponopono in Four Simple Steps

Have you heard of the Hawaiian therapist who cured an entire ward of criminally insane patients, without ever meeting any of them or spending a moment in the same room? It’s not a joke. The therapist was Dr. Ihaleakala Hew Len. He reviewed each of the patients’ files, and then he healed them by healing himself. The amazing results seem like a miracle, but then miracles do happen when you use Ho’oponopono, or Dr. Len’s updated version called Self I-Dentity Through Ho’oponopono (SITH). I had the pleasure of attending one of his lectures a few years ago and started practicing Ho’oponopono immediately. The results are often astounding. Do you need a miracle?

What you might wish to understand is how this can possibly work. How can you heal yourself and have it heal others? How can you even heal yourself?

Why would it affect anything “out there”? The secret is there is no such thing as “out there” – everything happens to you in your mind. Everything you see, everything you hear, every person you meet, you experience in your mind. You only think it’s “out there” and you think that absolves you of responsibility. In fact it’s quite the opposite: you are responsible for everything you think, and everything that comes to your attention. If you watch the news, everything you hear on the news is your responsibility. That sounds harsh, but it means that you are also able to clear it, clean it, and through forgiveness change it.

There are four simple steps to this method, and the order is not that important. Repentance, Forgiveness, Gratitude and Love2 are the only forces at work – but these forces have amazing power.

The best part of the updated version of Ho’oponopono is you can do it yourself, you don’t need anyone else to be there, you don’t need anyone to hear you. You can “say” the words in your head. The power is in the feeling and in the willingness of the Universe to forgive and love.

Step 1: Repentance – I’M SORRY

As I mention above, you are responsible for everything in your mind, even if it seems to be “out there.” Once you realize that, it’s very natural to feel sorry. I know I sure do. If I hear of a tornado, I am so full of remorse that something in my consciousness has created that idea. I’m so very sorry that someone I know has a broken bone that I realize I have caused.

This realization can be painful, and you will likely resist accepting responsibility for the “out there” kind of problems until you start to practice this method on your more obvious “in here” problems and see results.

So choose something that you already know you’ve caused for yourself? Over-weight? Addicted to nicotine, alcohol or some other substance? Do you have anger issues? Health problems? Start there and say you’re sorry. That’s the whole step: I’M SORRY.

Although I think it is more powerful if you say it more clearly: “I realize that I am responsible for the (issue) in my life and I feel terrible remorse that something in my consciousness has caused this.”

Step 2: Ask Forgiveness – PLEASE FORGIVE ME

Don’t worry about who you’re asking. Just ask! PLEASE FORGIVE ME. Say it over and over. Mean it. Remember your remorse from step 1 as you ask to be forgiven.

Step 3: Gratitude – THANK YOU

Say “THANK YOU” – again it doesn’t really matter who or what you’re thanking. Thank your body for all it does for you. Thank yourself for being the best you can be. Thank God. Thank the Universe. Thank whatever it was that just forgave you. Just keep saying THANK YOU.

Step 4: Love – I LOVE YOU (Love transforms you)

This can also be step 1. Say I LOVE YOU. Say it to your body, say it to God. Say I LOVE YOU to the air you breathe, to the house that shelters you. Say I LOVE YOU to your challenges. Say it over and over. Mean it. Feel it. There is nothing as powerful as Love. Divine Love Transforms You.


That’s it. The whole practice in a nutshell. Simple and amazingly effective.


Generally, I will teach you a way to get rid of sub conscious memory. Your mind will know the way all by itself, as you will progress.

The method basically uses a kind of therapy which helps remove all kinds of negative thoughts from your mind. This can include thoughts which can hold you back from your success, slowing or stopping you down completely. These are mostly the thoughts which make you believe that a particular thing is not achievable, thus you will always find yourself not being able to achieve what you want.

You then get to the zero stage, the stage which basically is the beginning. The stage where you will believe in anything you want to believe, and you’ll feel renewed with this new kind of energy, the spirit to reach out and touch your dreams with your bare hands. All of this is going to happen, just with the help of this single course.

 That is when you know you’re spiritually clean and healed, ready to go on your way to success.

A strong will is the only requirement for the process to work.

What you basically have set the goal in the your ho'oponopono is to cleanse your mind, and then heal it. The cleansing part includes eliminating all thoughts which might be bad for you, and keeping and enhancing all of them which will bring you closer to success. The healing part is when the course will help you implant positivity in your mind, which will just give you a boost and encourage you to achieve everything you want to.

Advantages of

 

Ho’oponopono Course:

• Helps boost your mental skills, which includes the ability to solve any and every problem mentally. Your brain will be able to work faster and more efficiently on its own, and you will start to rely lesser on the others, and more on yourself.

               

• It will help improve your concentration, so you can really focus on everything you desire. Focusing is the key to success, because that way you know exactly what you want. If you concentrate on the things you want, you’ll have a clearer image of the things you are required to do to be able to reach your goals.

               

• Teaches your powerful techniques to relax yourself, so that the next time you find yourself facing any difficult or if you find yourself getting hyper, you’ll always know how to calm yourself down and motivate yourself. In short, you’ll never be losing hope again!

               

• Helps you realize that what you deserve is much more than what you already have. It makes you realize that in order to get to your ambitions, you’re going to need to struggle. But the best part is that this particular method will help make the struggle look all too appealing and worthy of the gift we are going to have at the end.

               

• Last but not the least Ho’oponopono has helped change hundreds of lives, helped hundreds of people through their problems. You can be like them too.

*Disclaimer: Individual results may vary.

Disadvantages of

Ho’oponopono Course:

• The requirement to put in the effort and the struggle is always there. Your goals won’t just walk up to you and embrace you; you’re going to have to work harder than you ever have to achieve something. And without the will power to do so, this product will be little more than waste.

 

The only requirement is that you are

eager to learn.

It is important to know that if you ever face failure in life, it really isn’t the end of the world. There are hundreds and thousands of methods out there to get you through, several people who can guide you through your difficult phases. But to completely leave failure behind, and face success throughout, Ho’oponopono is a proven and certified way to get on your way!

I am sorry,
please forgive me,
thank you,
I love you,

Who is in charge of you?
(Click here * )

The Evidence (Click & Read here)

"Hoʻoponopono" is defined in the Hawaiian Dictionary as:

(a) "To put to rights; to put in order or shape, correct, revise, adjust, amend, regulate, arrange, rectify, tidy up make orderly or neat, administer, superintend, supervise, manage, edit, work carefully or neatly; to make ready, as canoemen preparing to catch a wave."

(b) "Mental cleansing: family conferences in which relationships were set right (hoʻoponopono) through prayer, discussion, confession, repentance, and mutual restitution and forgiveness."

Literally, hoʻo is a particle used to make an actualizing verb from the following noun, as would "to" before a noun in English. Here, it creates a verb from the noun pono, which is defined as: "...goodness, uprightness, morality, moral qualities, correct or proper procedure, excellence, well-being, prosperity, welfare, benefit, true condition or nature, duty; moral, fitting, proper, righteous, right, upright, just, virtuous, fair, beneficial, successful, in perfect order, accurate, correct, eased, relieved; should, ought, must, necessary."


Ponopono is defined as "to put to rights; to put in order or shape, correct, revise, adjust, amend, regulate, arrange, rectify, tidy up, make orderly or neat."



Beyond Traditional Means: Ho'oponopono

New York Times contributor Deborah King interviews Morrnah Simeona & Dr. Ihaleakala Hew Len about their Ho'oponopono philosophy and work:

"We can appeal to Divinity who knows our personal blueprint, for healing of all thoughts and memories that are holding us back at this time," softly shares Morrnah Simeona. "It is a matter of going beyond traditional means of accessing knowledge about ourselves."

The process that Morrnah refers to is based on the ancient Hawaiian method of stress reduction (release) and problem solving called Ho'oponopono. The word Ho'oponopono means to make right, to rectify an error. Morrnah is a native Hawaiian Kahuna Lapa'au. Kahuna means "keeper of the secret" and Lapa'au means "a specialist in healing." She was chosen to be a kahuna while still a small child and received her gift of healing at the age of three. She is the daughter of a member of the court of Queen Liliuokalani, the last sovereign of the Hawaiian Islands. The process that is now brought forth is a modernization of an ancient spiritual cleansing ritual. It has proven so effective that she has been invited to teach this method at the United Nations, the World Health Organization and at institutions of healing throughout the world.

How does Ho'oponopono work? Morrnah explains, "We are the sum total of our experiences, which is to say that we are burdened by our pasts. When we experience stress or fear in our lives, if we would look carefully, we would find that the cause is actually a memory. It is the emotions which are tied to these memories which affect us now. The subconscious associates an action or person in the present with something that happened in the past. When this occurs, emotions are activated and stress is produced."

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US Savings Bonds

How to Invest in US Savings Bonds

 

 Investing in US savings bonds is a simple and easy way to put your money to work and begin saving money. This guide to investing in US savings bonds features in-depth information on how savings bonds work, the Series EE savings bonds, Series I savings bonds, and other products issued by the United States Treasury Department. It will explain tax benefits, where to purchase bonds, how to find out the interest rate you are earning on your money, and much more.

01 The History of US Savings Bonds  

From the time they were introduced, U.S. savings bonds have proven to be one of the most popular investments thanks to the government's guarantee that you will never lose money. Read about the history of the United States savings bond program ...



02

Should Savings Bonds Be In Your Portfolio?

You may have an image of savings bonds as being nothing more than stodgy investments given by older relatives on birthdays, holidays, and special occasions. Nothing could be further from the truth. In fact, over the past decade, savings bonds have crushed stocks and real estate, all backed by a promise that you would never lose money. That's an unbeatable record. The question remains: Should you invest in savings bonds and if you do, how big should your savings bond investments be? Discover whether savings bonds are right for your portfolio ...

 03 Guide to Investing in Series I Savings Bonds 

Series I savings bonds are one of the greatest inventions in the history of finance. They combine a guaranteed fixed rate of return with an inflation adjustment so that you won't ever lose purchasing power if prices rise. On top of this, the United States Government guarantees that they will never lose value and won't charge you a penny in fees when you place your savings bond order! Discover everything you need to know about investing in the amazing Series I savings bonds ...

04 Guide to Investing in Series EE Savings Bonds 

The Series EE savings bond is probably the one with which you are most familiar. In fact, it could very well be thought of as the grandfather of most modern savings bonds. It has some of the great features of the Series I bonds but investing in them, including how the face value is calculated, is very, very different. Find out how Series EE savings bonds work and what you need to know before investing in them ...

05

Series HH Savings Bonds

If you or a family member used to invest in savings bonds, you may have Series HH savings bonds still in your portfolio. Don't cash them in right away until you've read this special! They are special because you can no longer get them and they regularly generate cash income that you can live on or use to pay your bills. Read more about the now-rare Series HH savings bonds ...

06

What Are the Savings Bonds Tax Traps I Should Avoid?

How you fill out the paperwork the first time you invest in savings bonds could have big tax implications for you and your family down the road. In fact, if you do it wrong, it could cost you tens of thousands of dollars in taxes that could have been avoided. Uncover these savings bonds tax traps ...

How You Title U.S. Savings Bonds Can Have Big Tax Consequences

Think Carefully About the Way You Title Your U.S. Savings Bonds

How you title your U.S. savings bonds can have major tax and inheritance implications for you and your family, regardless of whether you choose to own Series I savings bonds, Series EE savings bonds, or both.  In a broad sense, there are only three ways you can title your savings bond ownership or, really, any new bond investment you may make.

Holding Title to U.S. Savings Bonds as an Individual

Titling a savings bond under the name of a single owner is the easiest.

 It means legally speaking, there is only a single owner of the bonds.  When this owner dies, the bond becomes part of his or her estate.  If there is no valid will and testament, and you have not selected a beneficiary (we'll discuss this in a moment) the savings bonds may be subject to the laws of Intestate Succession via probate.  These inheritance laws vary from state to state and take time, money, and effort for your heirs.  For example, in some states, your spouse will receive half of the property while your parents will receive the other half.  In certain states, your spouse will receive up to a fixed amount (e.g. $20,000) with everything thereafter divided equally between your spouse and your children.

One way to avoid probate and intestate succession while still having single ownership is to title the savings bonds in the name of a living trust.  That way, when you die, the trustee(s) can continue to transact business, your heirs immediately receiving the benefit of the property in a way spelled out within the trust instrument.

 To learn more about this topic, read How to Setup a Trust Fund.

Another way to avoid probate when using a single ownership title on a U.S. savings bond is to explicitly name a beneficiary with the U.S. Treasury Department through TreasuryDirect.  Upon the death of the original, titled savings bond holder, the beneficiary establishes his or her own TreasuryDirect account and follows a straightforward process to have the bonds transferred to it.

 Even if the original owner left a will, it doesn't matter because the beneficiary designation on the savings bonds override it.

There is a major tax advantage to using the beneficiary designation in conjunction with a single owner title.  You already learned from the Investing in Savings Bonds guide that you can either pay taxes on the interest that is added to your bonds each year, or wait until you cash the savings bonds, paying all of the taxes at once. Most people choose the latter. If the owners of the savings bonds dies and passes them to the beneficiary, then the beneficiary can elect to have all of the interest earned on the savings bonds included on the last Federal tax filing of the original, now deceased owner of the bond, making it a liability of his estate. In effect, the savings bonds are being passed tax-free with the estate itself picking up the tab. This is far preferable to receiving cash, where this is not an option.

Holding Title to U.S. Savings Bonds as a Co-Owner

Co-ownership between spouses, family members, parents and children, or other parties, means that two people hold title to the savings bonds together. Either title holder can cash the savings bonds without the permission or knowledge of the other party, triggering a taxable event for both, so only do this if you have total, absolute faith in the other person.

Co-ownership title of a savings bond means that if one party dies, the other co-owner becomes the new, sole owner.  The bonds pass directly to the surviving, titled owner while avoiding probate.

Learn More About Investing in U.S. Savings Bonds

Although they are frequently written off as not worthy of serious consideration for an investor's portfolio, perhaps due to an association with old-fashioned gifts received by children at birthday parties and Christmas from distant relatives, a substantial percentage of American families should keep savings bond investments in the back of their minds as a potentially wise place to employ funds.  This is especially true when interest rates are reasonably attractive and equity prices are rich.  Savings bonds provide absolute safety of principle backed by the full faith and credit of the United States Government.

 They offer meaningful protection against interest rate and duration risk.  If you select the Series I savings bonds, they can even keep pace, to some degree, with inflation.

The biggest drawback of investing in savings bonds is the annual purchase limits Congress puts on them.  For the past few decades, it has almost been as if Wall Street has influenced politicians to take away many of the advantages of savings bonds, making them less attractive compared to other, traditional financial securities that generate profits for the firms that back them.  Frankly, I'd like to see the savings bond limit raised to something like $50,000 per individual, per year compared to the rather pathetic limit that is currently available on issues such as the Series I bonds.

401k Retirement Plan for Beginners

Begin Providing for Your Future

 

Anyone familiar with the time value of money knows that even small amounts, when compounded over long periods, can result in thousands, or even millions, of dollars in additional wealth. This simple truth is one of the reasons many financial planners recommend tax-advantaged accounts and investments such as traditional/Roth IRA’s and municipal bonds. In the past, these decisions were not as crucial because of the prevalence of defined-benefit pension plans.

Today, those old-world pensions are going by the wayside at many U.S. firms; instead, most of today’s workforce is likely to find their retirement years funded by the proceeds of their 401k retirement plan.

What Is a 401k Retirement Plan?

A 401k retirement plan is a special type of account funded through pre-tax payroll deductions. The funds in the account can be invested in a number of different stocks, bonds, mutual funds or other assets, and are not taxed on any capital gains, dividends, or interest until they are withdrawn. The retirement savings vehicle was created by Congress in 1981 and gets its name from the section of the Internal Revenue Code that describes it; you guess it — section 401k.
What are the benefits of a 401k retirement plan?
There are five key benefits that make investing through a 401k retirement plan particularly attractive. They are:

• Tax advantage
• Employer match programs
• Investment customization and flexibility
• Portability
• Loan and hardship withdrawals

Tax Advantage of 401k Retirement Plans

As touched on in the introduction, the primary benefit of a 401k retirement plan is the favorable tax treatment it receives from Uncle Sam. Dividend, interest, and capital gains are not taxed until they are disbursed; in the meantime, they can compound tax-deferred inside the account.

 In the case of a young worker with three or four decades ahead of them, this can mean can mean the difference between living at the Plaza Hotel or the Budget 8.

Employer Match for 401k Retirement Plans

Many employers, in an effort to attract and retain talent, offer to match a certain percentage of the employee’s contribution. According to Starbucks’ “Total Pay Package” brochure, for example, the company will match a percentage of the first 4 percent of pay the employee contributes to their 401(k) retirement plan. Employees at the company for less than 36 months receive a 25 percent match; 36 to 60 months receive a 50 percent match; 60 to 120 months receive a 75 percent match; 120 or more months receive a 150 percent match.

In other words, an employee working at the coffee giant for over ten years earning $100,000 that contributed $4,000 to their 401(k) would receive a $6,000 deposit in the account directly from the company (150 percent match on $4,000 contribution.) Anything the employee deposited above the 4 percent threshold would not receive a match.

Even if you have high-interest credit card debt, it is preferable, in almost all cases, to contribute the maximum amount your company will match!

The reason is simple math: If you are paying 20 percent on a credit card and your company is matching you dollar-for-dollar (a 100 percent return), you are going to end up poorer by paying off the debt. Factor in the tax-deferred gains generated by the 401(k) plan, and the disparity becomes even larger. For more information on this topic, I suggest you read the work of Suze Orman.

Although the topic will be discussed in further detail later in this article, be aware that employer matching contributions up to 6 percent of an employee’s pre-tax salary are not included in the annual limit. For example, if you qualified, you could make a 401k contribution of $16,500 in 2009 and have your employer still match the first 6 percent of your salary; that match would be deposited above and beyond the $16,500 you contributed directly.

Investment Customization and Flexibility

401k retirement plans give employees a range of choices as to how their assets are invested. An individual that knows he or she does not have a high tolerance for risk could opt for a higher asset allocation in low-risk investments such as short-term bonds; likewise, a young professional interested in building long-term wealth could place a heavier emphasis on equities. Many businesses allow employees to acquire company stock for their 401k retirement plan at a discount although many financial advisors recommend against holding a substantial portion of your 401k in the shares of your employer in light of the Enron and Worldcom scandals. You can get more information by reading Investing in Your Employer's Stock - Good Idea or Disaster Waiting to Happen?.

One of the benefits of a 401k retirement plan is that it can follow an employee throughout his or her career. When changing employers, the investor has four options:

1.) Leave his/her assets in the old employer’s 401k retirement plan
Many 401k plan administrators charge record keeping and other fees to manage your account, regardless of whether you are still with the company. These fees can take a significant bite out of your future net worth, especially if you have accounts maintained at several different employers.

2.) Complete a 401k rollover to the new employer’s 401k plan
Practically speaking, this option is only available if the employee has another job offer before leaving their current employer. In some cases, a rollover IRA may be the best option as it is simple. How do you know if it is the right choice? The decision should largely be made based on the investment options of the new 401k plan. If you are unsatisfied with the choices available to you, completing a 401k rollover to an IRA may be a better option.

3.) Complete a 401k rollover and move the assets to an Individual Retirement Account (IRA)
Completing a 401k rollover is almost always the best choice for those interested in providing for a comfortable retirement because it allows the investor’s capital to continue compounding tax-deferred while providing maximum control over asset allocation (i.e., you aren’t limited to the investments offered by the 401k plan provider.) Here’s how it works: A distribution of the current 401k plan assets is ordered (this is reported on the IRS Form 1099-R.) Once the assets are received by the employee, they must be contributed into the new retirement plan within sixty days; this deposit is reported on IRS Form 5498.

The government limits 401k rollovers to once every twelve months.

 

4.) Cash out the proceeds, paying taxes and the 10% penalty fee

With the exception of failing to take advantage of an employer’s contribution match program, cashing out a 401k when leaving jobs is the single most stupid decision a working individual can make.

According to a press release by the 401K Help Center, research indicates “as many as 66 percent of Generation X job changers take cash when leaving their jobs, and 78 percent of workers aged 20-29 take cash.” The tragedy is far greater than the taxes and penalty fee alone; indeed, the greater financial loss comes from the decades of tax-deferred compounding that capital could have earned had the account owner chosen to initiate a 401k rollover.

 

The purpose of your 401k retirement plan is to provide for your golden years. There are times, however, when you need cash and there are no viable options other than to tap your nest egg. For this reason, the government allows plan administrators to offer 401k loans to participants (be aware that the government doesn’t require this and therefore it is not always available.)
The primary benefit of 401k loans is that the proceeds are not subject to taxes or the ten-percent penalty fee except in the event of default.

The government does not set guidelines or restrictions on the uses for 401k loans. Many employers, however, do; these can include minimum loan balances (usually $1,000) and the number of loans outstanding at any time in order to reduce administrative costs. Additionally, some employers require that married employees get the consent of their spouse before taking out a loan, the theory being that both are affected by the decision.

401k Loan Limits

In most cases, an employee can borrow up to fifty-percent of their vested account balance up to a maximum of $50,000. If the employee has taken out a 401k loan in the previous twelve months, they will only be able to borrow fifty-percent of their vested account balance up to $50,000, less the outstanding balance on the previous loan. The 401k loan must be paid back over the subsequent five years with the exception of home purchases, which are eligible for a longer time horizon.

401k Loan Interest Expense

Even though you’re borrowing from yourself, you still have to pay interest! Most plans set the standard interest rate at prime plus an additional one or two percent. The benefit is two-fold: 1.) unlike interest paid to a bank, you will eventually get this money back in the form of qualified disbursements at or near retirement, and 2.) the interest you pay back into your 401k plan is tax-sheltered.

The Drawbacks of 401k Loans

The biggest danger of taking out a 401k loan is that it will disrupt the dollar cost averaging process. This has the potential to significantly lower long-term results. Another consideration is employment stability; if an employee quits or is terminated, the 401k loan must be repaid in full, normally within sixty days. Should the plan participant fail to meet the deadline, a default would be declared and penalty-fees and taxes assessed.

401k Hardship Withdrawal

What if your employer doesn’t offer 401k loans or you are not eligible? It may still be possible for you to access cash if the following four conditions are met (note that the government does not require employers to provide 401k hardship withdrawals, so you must check with your plan administrator):

1. The withdrawal is necessary due to an immediate and severe financial need
2. The withdrawal is necessary to satisfy that need (i.e., you can’t get the money elsewhere)
3. The amount of the loan does not exceed the amount of the need
4. You have already obtained all distributable or non-taxable loans available under your 401k plan

If these conditions are met, the funds can be withdrawn and used for one of the following five purposes:

1. A primary home purchase
2. Higher education tuition, room and board and fees for the next twelve months for you, your spouse, your dependents or children (even if they are no longer dependent upon you)
3. To prevent eviction from your home or foreclosure on your primary residence
4. Severe financial hardship
5. Tax-deductible medical expenses that are not reimbursed for you, your spouse or your dependents

All 401k hardship withdrawals are subject to taxes and the ten-percent penalty. This means that a $10,000 withdrawal can result in not only significantly less cash in your pocket (possibly as little as $6,500 or $7,500), but causes you to forgo forever the tax-deferred growth that could have been generated by those assets. 401k hardship withdrawal proceeds cannot be returned to the account once the disbursement has been made.

Non-Financial Hardship 401k Withdrawal

Although the investor must still pay taxes on non-financial hardship withdrawals, the ten-percent penalty fee is waived. There are five ways to qualify:

1. You become totally and permanently disabled
2. Your medical debts exceed 7.5 percent of your adjusted gross income
3. A court of law has ordered you to give the funds to your divorced spouse, a child, or a dependent
4. You are permanently laid off, terminated, quit, or retire early in the same year you turn 55 or later
5. You are permanently laid off, terminated, quit, or retired and have established a payment schedule of regular withdrawals in equal amounts of the rest of your expected natural life. Once the first withdrawal has been made, the investor is required to continue taking them for five years or until he/she reaches the age of 59 1/2, whichever is longer.

A 401k hardship withdrawal should be a last resort. An IRA, for example, has a lifetime withdrawal exemption of $10,000 for a house with no strings attached.

What is the maximum contribution limit on your 401k account? The answer depends on your plan, your salary, and government guidelines. In short, your contribution limit is the lower of the maximum amount your employer permits as a percentage of salary (e.g., if your employer lets you contribute 4% of your salary and you earn pre-tax $20,000, your maximum contribution limit is $800), or the government guidelines as follows:
401k Maximum Contribution Limits
2004: $13,000
2005: $14,000
2006: $15,000
2007: $15,500
2008: $15,500
2009: $16,500
2010: $16,500 plus inflation index (in $500 increments)
Once the year 2010 has been reached, the total maximum contribution limit will be increased based on changes in the cost of living (link url=http://beginnersinvest.about.com/od/inflationrate/a/inflation.htm]inflation) in increments of $500.

Catch Up Contributions

If you are fifty years or older and your employer offers “catch-up” contribution for your 401k, you are eligible to contribute additional amounts up to the maximum contribution limits as follow:
401k Maximum Catch-Up Contribution Limits
2004: $3,000
2005: $4,000
2006: $5,000
2007: $5,000
2008: $5,000
2009: $5,500
2010: $5,500 plus an inflation index (in $500 increments)
Once the year 2010 has been reached, the total maximum contribution limit will be increased based on changes in the cost of living (inflation) in $500 increments.

A Reminder on Employer Matching Contributions and 401k Contribution Limits

Once again, employer matching contributions up to six-percent of an employee’s pre-tax salary are not included in the contribution. For example, if you qualified, you could make a 401k contribution of $16,500 in 2009 and have your employer still match the first six-percent of your salary; that match would be deposited above and beyond the $16,500 you contributed directly.

Compound Annual Growth Rate or CAGR

Calculate Total Return and Compound Annual Growth Rate or CAGR

Evaluate Your Investment Performance By Calculating Total Return and CAGR

Learning how to calculate both total return and the compound annual growth rate of an investment, or CAGR, are two of the best gifts you can give yourself if you want to get ahead financially in life.

You can learn how to calculate an investment's total return and an investment's compound annual growth rate, also known as CAGR, in just a few minutes. This should help you evaluate your investment performance more easily as you'll be able to gauge how much richer or poorer you are from your investments in various asset classes such as stocks, bonds, mutual funds, gold, real estate, or small businesses.

 An Introduction to the Concept of Total Return
The total return on investment is straightforward and easy. Basically, it tells the investor the percentage gain or loss on an asset based upon his purchase price. To calculate total return, divide the selling value of the position plus any dividends received by its total cost. In essence, this works out to capital gains plus dividends as a percentage of the money you laid out to buy the investment.

How to Calculate Total Return

An investor had a cost basis of $15,100 in PepsiCo stock (she purchased $15,000 worth of Pepsico stock and paid $100 total commissions on the buy and sell orders). She received $300 cash dividends during the time she held the stock. Later, she sold the position for $35,000. What was her total return?

We can plug the variables into the total return formula to find our answer. First, we take $35,000 received upon the sale of the stock and add the $300 cash dividends received to get $35,300.

Next, we divide this by the cost basis of $15,100. The result is 2.3377% or 133.77% total return on invested principal (remember that 1.0 of the total return is the principal so we must subtract it out if we want to express the gain or loss as a percentage; 2.3377 - 1.0 = 1.3377, or 133.77% expressed as a percentage.

Had the result been 1.5, the total return expressed as a percentage would have been 50% (1.5 - 1.0 = .5, or 50%)).

 

Was this a good rate of return on the investment? Total return can't answer that question because it doesn't take into account the length of time an investment was held. If the investor earned 133.77% in five years, it is cause for celebration. However, it took her twenty years to produce such a return, this would have been a terrible investment.

An Introduction to the Concept of Compound Annual Growth Rate (CAGR)

Needing to account for the length of time it took to produce a given total return, the investor is in need of a metric that can compare the return generated by different investments over different time periods. This is where CAGR comes to the rescue. CAGR does not represent economic reality in a certain sense but rather, it is a valuable academic concept. A stock position might be up 40% one year and down 5% the next. CAGR provides the annual return for such an investment as if it had grown at a steady, even pace. In other words, it tells you how much you would have to earn each year, compounded on your principal, to arrive at the final selling value. The real-world journey could be (and often is) far more volatile.

 Practically all of the best stock investments in history have experienced declines of 50% or more, peak-to-trough, all while making their owners fabulously wealthy.

 

"Couldn't you just take the simple return and divide it by the number of years the investment was held?" you may ask. Unfortunately, no. To understand the reason, go back to our PepsiCo example and assume the investor had held her position for ten years. A person who doesn't understand the mathematics might divide the total return of 133.77% by 10 years and calculate that her annual return was 13.38%. Try to check the math using the future value of a single amount formula. If you do, you'll discover that had the investment of roughly $15,000 grown by 13.38% annually, it would have been worth an ending value of $52,657; a far cry from the $35,000 for which the investment was sold.

The reason for the disparity is that this flawed method doesn't take compounding into account. The result is a gross misstatement of the actual return the investor enjoyed each year.

How to Calculate Compound Annual Growth Rate (CAGR)

In order to calculate CAGR, you must begin with the total return. In our above example, the total return was 2.3377 (133.77%). We also know the investment was held for ten years.

Multiply the total return (2.3377) by the X root (X being the number of years the investment was held). This can be simplified by taking the inverse of the root and using it as an exponent. In our example, 1/10, or .10 (had the number of years been 2, you could have taken 1/2 or .5 as the exponent, 3 years would be 1/3 or .33 as the exponent, four years would be 1/4 , or .25, and so on and so forth.)

In our above example, CAGR would be calculated as follows:
2.377^(.10) = 1.09, or 9% compound annual growth rate (again, recall the 1.0 represents the principal value which must be subtracted; ergo, 1.09 - 1.0 = .09, or 9% CAGR expressed as a percentage).
In other words, if the gains on the PepsiCo investment were smoothed out, the investment grew at 9% compounded annually. To check the result, use the future value of a single amount. In essence, this means that if the investor had taken the roughly $15,000 to a bank for ten years and earned 9% on her money, she would have ended up with the same balance of $35,300 at the end of the period.

More Examples Showing You How to Calculate Compound Annual Growth Rate (CAGR)

Thirty years ago, Michael Adams purchased $5,000 shares of Wing Wang Industries Inc. He recently sold the stock for $105,000. During his holding period, he received a total of $16,500 in cash dividends. Both his original and selling commissions were $50 each. Calculate the total return and CAGR of his investment position.

Step 1: Calculate Total Return
$105,000 received upon sale + $16,500 cash dividend received = $117,000
----------------------(divided by)----------------------
$5,000 investment + $100 total commissions = $5,100 cost basis
= 22.94 total return (remember, had you wanted to express total return as a percentage, you would have to subtract 1 (e.g., 22.94 – 1), to get 21.94, or 2,194%.)

Step 2: Calculate CAGR
Find the inverse of the X root (1/30 years = 0.33)
22.94 (.033)= 1.1098, or 10.98% CAGR
(Again, remember that in order to express as a percentage, you must subtract the result by 1 (e.g., 1.1098 – 1 = .1098, or 10.98% CAGR.)
All in all, this is a decent return for the time period.

Up for trying another? Good. Let's go.
Jasmine Washington purchased $12,500 of common stock in Midwest Bank Inc. She recently sold the investment for $15,000 and received cash dividends of $2,500 during her holding period of four years. She paid a total of $250 in commissions. What is her CAGR?

Step 1: Calculate Total Return
$15,000 received upon sale + $2,500 cash dividends received = $17,500
----------------------(divided by)----------------------
$12,500 investment + $250 commissions = $12,750 cost basis
= 1.37 total return

Step 2: Calculate CAGR
1.37 (.25)= 1.08, or 8% CAGR

Some Final Thoughts About Total Return and CAGR

I've talked quite a bit in the past about how investors are duped into ignoring total return, which is ultimately the only thing that matters once you've adjusted for risk and moral considerations.  One illustration is the way most stock charts are structured.  This has important real-world consequences because you can materially improve your understanding of your investment performance, and make better-informed decisions as a result, by focusing on total return.

Consider a former blue chip stock, the now-bankrupted Eastman Kodak.  With the shares getting wiped out, you'd think that a long-term investor did poorly, wouldn't you?  That he or she would have lost all of the money put at risk?  Not by a long shot.  Though it could have turned out much better, obviously, an owner of Eastman Kodak for the 25 years prior to its wipeout would have more than quadrupled his or her money due to the total return components are driven by dividends and a tax-free spin-off.  In addition, there were tax benefits to the ultimate bankruptcy that, for many investors, could shield future investment profits, further softening the blow.  It's related to a phenomenon I call, "the math of diversification".

On the topic of compound annual growth rate, the important thing is to internalize how extraordinarily powerful it can be over long stretches of time.  An extra percentage point or two over twenty-five or fifty years, which most workers will be fortunate enough to enjoy if they begin the investing process early, can mean the difference between a mediocre retirement and ending up on top of a sizable fortune.  Whenever the news is filled with yet another minimum-wage earning janitor dying and leaving behind a secret multi-million dollar portfolio, one of the common themes is that the person who built the private empire harnessed a good CAGR over many, many, decades.  This is one of the reasons it is important to avoid things like shorting stock, trading on margin, and exposing yourself to blow-up risk.

Before You Buy Your First Investment

3 Questions To Answer Before You Buy Your First Investment

Get the Foundation

 

Right Before You

 

Construct Your Portfolio

A question I am asked fairly often by new investors is, "How can I build the best investment portfolio possible?"  The problem with the inquiry, as well-intentioned as it appears, is that there's no such thing as a "best" portfolio because every individual, and every family, has its own unique set of opportunities, risks, abilities, and emotional temperaments.  What works for your neighbor or brother might not work for you.

In fact, what works for you in your 20's might not work when you're 70 and thinking about setting up trust funds for your grandchildren.
Here are three questions you should consider before you even start the process of constructing your investment portfolio.

In Which Asset Classes Will You Concentrate Your Funds and Why?

Every asset class behaves differently.  That is the reason an asset allocation strategy is so important.  Balancing the competing benefits and drawbacks of each of these asset classes, as well as taking into account the need you have for stable cash flow, will inform your decision about how to employ the money you are putting to work between them.

• Stocks have historically provided the highest long-term returns because they represent ownership stakes in real businesses that sell real products and services.  Some of the profits are paid out as cash dividends and some go back into retained earnings on the balance sheet to fund future growth.  Unfortunately, stocks fluctuate in day-to-day and even year-to-year market value, often significantly.  It isn't unusual to watch the temporary quoted market value of your holdings decline by 30% or more at least once every 36 months.  At least several times in your life, you will see your holdings decline by 50% on paper from peak-to-trough.  It's the nature of the opportunity.  For good companies, with real profits, this doesn't matter match.

• Real estate is the second best long-term holding.  Although it tends not to grow much beyond inflation, unless you're fortunate enough to hold property in landlocked areas such as San Francisco or New York where supply is limited and population growth continues its upward trajectory, it does often keep pace with the inflation rate as well as throw off large amounts of cash that you can reinvest, save, or spend.  For investors comfortable using a little bit of leverage in the form of secured mortgages, every dollar in equity can go much further as it will allow you to buy $2 or $3 worth of property.  This can cause bankruptcy if things go south, but a wise and prudent real estate investor knows how to manage his or her risks.

 Bonds and fixed income securities represent a legal claim on the output of a company entitled to both a return of the money lent (principal) and "rent" on the money (interest) during the time the company used it.  Bonds have an inherent safety mechanism in them that no matter how far the price declines, as long as the underlying company has the money to meet its contractual obligations, the bond will be redeemed at par on the maturity date.  Unfortunately, when the inflation rate accelerates, the value of each future dollar you are promised decreases in terms of purchasing power.  This can be devastating to long-term fixed-rate bonds that are locked in for 20 or 30 years.

• Cash and cash equivalents, including FDIC-insured bank deposits and short-term Treasury bills, are among the safest asset classes for an investment portfolio as they provide a lot of dry powder to pick up cheap stocks, bonds, and real estate during crashes or pay your bills during a second Great Depression, yet they return almost nothing.  In fact, depending on the way you park the money, you might even be losing purchasing power after inflation.  This wasn't always the case and surely won't be forever.  The day will return will checking and savings accounts will generate good interest income for savers, but there is no telling if that is a year away or ten years in the future.

 Will You Prioritize Cash Flow Over Long-Term Growth?
Even within asset classes, some investments plow their earnings back into future expansion while others distribute most of the income in the form of partnership distributions or cash dividends.  One provides money that you can use today, the other can mean a much bigger reward later.

 Furthermore, even those companies that pay dividends can be a vehicle for long-term growth if you opt to plow the dividends back into more shares; over decades, the difference between reinvesting and not reinvesting the dividend income is enormous.

It's a very different investor who becomes an owner in a business like Kraft Foods, which is large, diversified, and slow-growing so it pays out most of its income and one who becomes an owner in Amazon, which has kept its cash to expand into e-reading devices, digital movies, digital music, groceries, light bulbs, and shoes.

The same goes for real estate investments.  Some projects, especially those that utilize leverage or involve developing new projects, might require a lot of cash flow to be retained for the sake of building equity but can pay off bigger in the end, while others don't offer much opportunity for reinvestment, such as a profitable but landlocked apartment building that can't be expanded.

What Is Your Liquidity Need?

Liquidity is so important it even comes before earning a good return.  What are your liquidity needs? What is the likelihood you will need to tap the wealth you've put aside?  If you don't have at least a five-year horizon, most stocks and real estate (other than special operations or arbitrage) are out of the question.

Some investors follow general rules of thumb, such as always keeping at least 10% of their portfolio in cash equivalents for the sake of liquidity.  Otherwise opt for less liquid assets at higher allocations, such as never keeping less than 25% of funds in high-quality bonds.  The right answer depends on the price you can get at the time and the goal you have for your portfolio.

Love and Money

Couples Need To Be Financially Compatible If They Want to Avoid Strife


Love and Money

Couples Need To Be Financially Compatible If They Want to Avoid Strife

 

The person you marry, and your compatibility on issues of money, will profoundly influence your happiness in life.

Rule #1 in the article I penned years ago titled 7 Rules of Wealth Building and Amassing Money  states that finding a compatible spouse is paramount to achieving financial independence and freedom. But as you probably know, relationships and investing are extremely complex subjects and mixing the two could be a recipe for disaster. Here's what you should and shouldn't do with your money when you are seriously involved with someone.

 Love and Money Point 1: Single vs. Joint Accounts
Couples and experts alike have debated over single and joint accounts for as long as most people can remember. The two sides are both striving for the same goal - creating a stronger marriage while maintaining financial responsibility. The arguments go something like this: 1.) joint accounts create a sense of unity that is vital to a relationship. If you separate the money, you take away a degree of integration that should be present in any long-term relationship, or 2.) separate accounts allow each the ability to retain their independence, actually strengthening the relationship.

Which side is right? That depends.

Before you can even consider planning a financial future with someone, you have to look at what type of personality you each have. If you managed your finances, made your own investment decisions, and had qualified retirement accounts before you got involved, you will probably be very hesitant to give up that control to anyone - including the person with whom you may spend the rest of your life.

On the other hand, if you were prone to spur-of-the-moment spending and liberal use of credit, odds are you would more readily opt to open joint accounts. In the end, the accounts should only be merged if (and this is absolutely vital) both parties have the same type of financial personality.

Love and Money Point 2: Both Parties Should Be Accountable for the Money

Please realize this doesn't mean that one of you has the right to ask for money whenever you feel like it.

Often, I'll receive letters from couples who complain that the husband or wife feels like a child receiving an allowance. In some cases, this is a valid argument. More often than not, when the entire story is told, it turns out that the party in question simply cannot handle money.

Love and Money Example: The Story of Kent and Elizabeth

We can all take a lesson from Kent and Elizabeth Washington, a real couple whose names I've changed. Before they met, Kent owned a restaurant and made around $40,000 a year. His wife was an elementary school teacher who brought home about $23,000. Elizabeth was given $200 every week to buy groceries and take care of small household expenses. She became so frustrated at receiving her 'allowance' that she actually gave Kent separation papers because he refused to change the way he managed their family's finances. She felt that, as an educated woman earning her own salary, the money was rightfully hers.

The truth of the matter was, prior to their current situation, both had separate checking accounts. Elizabeth took her weekly paycheck of $442.31 and deposited it into her account, just as if she were single. The total household expenses were just over $35,800 annually including rent, food, etc.

 Because she brought in 36.5% of the income, Kent decided that she should pay the same percentage of the bills. This worked out to around $13,067 annually. Two weeks into the new arrangement, Elizabeth had spent her entire paycheck and not paid any of the bills. She went to her husband and told him he needed to pay the them. Kent refused, and in the end, the bills were not paid, Elizabeth had no money left. Fast forward to the present and Elizabeth now receives an "allowance" while Kent effectively manages his family's funds, making sure that their power isn't shut off in the middle of the night.

 

The moral? As cruel as this sounds, Kent was absolutely right. If you or your spouse cannot be responsible with the finances, you do not deserve to have control over them if you have any hope of building wealth as a family, securing a comfortable retirement.

This is especially true if you have children. The fact of the matter is, if Elizabeth had been on her own, her monthly expenses would have been higher because the cost-savings of living with someone else would have been eliminated. In only a few months she would likely be facing the possibility of bankruptcy.

 

This isn't a game; it's your life. There are no do-overs or try-agains. Elizabeth's argument was that she felt like a child. Although this is sometimes a very real problem, in cases such as hers, that excuse is bull. As soon as Elizabeth begins acting like an adult and handles the money responsibly, she should be entitled to equality in the couple's finances. Until then, absolutely not. For the men out there who are smirking - this includes you. If your wife is the one who is saving, investing, and being financially responsible, and you are irresponsibly spending money, you have no business making financial decisions. It is not your right as "man" of the house to be in charge of the money. That job should go to the most qualified. Be responsible and honest enough with yourself to recognize who that is even if it means ceding autonomy over the checkbook.

Love and Money: The Built-In Solution

If you still want to have a joint account, but you're worried about one partner being able to control or spend part of the investments, don't fear. Most brokerage houses offer a "double sign" feature on their accounts ensuring that money can’t be spent, withdrawn or moved without the written consent of both parties. This is a great feature that not only curtails potential conflicts, but will save money. After all, if you have to get your significant other to agree to every purchase, you will probably end spending less, which is good for everyone involved!

Battle of the Love and Money Strategies

Another thing to watch out for is fights arising from different investment styles. If your wife or husband is a value investor and you are more interested in high-flying, high-risk stocks, no matter how responsible you each are, it would be wiser to have separate accounts. Otherwise, one or both of you is going to end up frustrated and angry.

In Conclusion...

1. If you and your partner have similar views on money, investing, and saving, open joint accounts.
2. If one or both of you is a shopaholic, opt for the double sign feature on your brokerage and checking accounts.
3. If you have different strategies, get separate accounts! Why create a source of conflict?
4. Have common goals in your relationship. These should not be limited to finances.
5. Keep only one credit card between the two of you for emergencies or to build up credit.
6. Keep track of your finances (both joint and individual) in a good software package like Quicken.

For more information about why financial compatibility is so important, read 8 Financial Benefits of Marriage Every Investor Needs to Know. 

Opportunity Cost

3 Types of Opportunity Cost That Influence Your Investment Portfolio

Everything You Do Has a Trade-Off -- Make Sure It Is the Right One

Though there are more, these three types of opportunity cost evaluations should help you understand why the concept is so important to your investment portfolio.

Lately, we've been talking a lot about opportunity cost. For an economist, opportunity cost is what you give up by making a choice; the yield you could have earned by investing or doing the next best thing. For each of us, opportunity cost is different. (That is why it is a foolish question to ask, "should I invest in stocks?" or something comparable because the answer might vary based upon your own temperament, experience, financial resources, age, and personal situation.)

This relationship between return and opportunity cost is second nature for a successful business owner. When Ray Kroc was transforming the McDonald's hamburger chain into the behemoth it is today, he understood that trade-offs had to be made when it came to menu items, quality of kitchen equipment, franchise arrangements, issuing stock to the public, and much more.  As a new investor, training yourself to view the world through that same lens of opportunity cost is one of the most important things you can do to help grow your net worth, become financially independent, and start generating passive income. But how, exactly, do you apply it to your investments? Here are a few ways.

1. Examine Liquidity Opportunity Cost

If two investments generate the same return, but one requires you to tie up your money for 3 years and one requires you to tie up your money for 10 years, one may be more attractive than the other depending on your outlook for the economy and your personal finances.

If you think interest rates are going to fall, the 10-year investment is a better choice because you can earn returns that otherwise might not be available in the future. If you think interest rates are going to rise, you may want to select the 3-year investment because it will free up your capital sooner to reinvest in something else.

 The biggest opportunity cost when it comes to liquidity has to do with the chance that you might miss a very good investment because you can't get your hands on your money. Some investors and companies, such as Warren Buffett and his holding company Berkshire Hathaway, are famous for hoarding large amounts of excess cash to take advantage of opportunities quickly. As of August 2016, Berkshire Hathaway had in excess of $72 billion in cash reserves on the balance sheet! If the world fell apart, it would be able to write checks quickly to buy distressed assets.  That is a strategy you see often among value investors.

2. Compare the Opportunity Cost of Investing Your Money Versus Spending It

Ultimately, money is only worth what it can do for you. If you don't cash it in for goods or services, or donate it to a charity that can do so, it is effectively worthless. That leaves the interesting question: When is it time to spend money, rather than put it to work in assets that generate dividends, interest, or rents?

This is an intensely personal question that can't be answered by your stock broker, accountant, parents, friends, children, or coworkers. It comes down to what you value. Would you rather have a new car or financial freedom?

Would you rather have cashmere pillows or a diamond watch? Would you rather give more money to charity or help your grandchildren through college? It's a question of values, and no one else can define your values for you.

 

This is really the process of being aware of your decisions; of making sure that you don't sacrifice what you really want for what you want right now. It isn't limited to your investments or pocketbook -- a medical student has to decide if he wants to party or study, putting off the benefit of enjoyment today for a future he really wants.

3. Look at the Opportunity Cost of Your Asset Allocation

Each asset class in your asset allocation has its own opportunity cost. Historically, investing in stocks has generated a higher return than investing in bonds but the opportunity cost is more violent price fluctuations.

Bonds, on the other hand, tend to be more stable in the day-to-day market but the opportunity cost is the risk that the inflation rate rises, causing your bonds to lose real purchasing power. No matter what you do, there is no "perfect" investment; everything has a trade-off, even down to the individual investments you choose; Apple vs. Microsoft, Google vs. Yahoo, McDonald's vs. Wendy's, Johnson & Johnson vs. Pfizer, a local hotel vs. an apartment building, municipal bonds vs corporate bonds.

Asset Placement Tax Strategy

Lowering Your Tax Liability Through Intelligent Allocation

It may surprise many new investors to discover that two people with identical portfolios can have widely disparate results over the course of several years. The reason arises from asset placement; in other words, where you hold your investments can be just as important as which assets you select. Understanding this concept is vital for you and your pocketbook.

How Asset Placement Works

What matters in investing is the compound annual after-tax, inflation-adjusted return an investor earns on his capital.

  Read that sentence again: after-tax. Learn how to calculate compound annual growth rate (CAGR).  Those of you familiar with the time value of money equations know that seemingly small-amounts can add up to significant piles of cash if left alone. If you have amounts even as little as $100 or less a month to invest, there are ways you can begin constructing a meaningful investment portfolio.  Every time a portion of your returns gets siphoned off to Uncle Sam, the future value of the asset is greatly diminished because not only have you lost the money itself, you have lose all of the profit that could have been earned by investing that money.
Asset placement works because different types of investments receive different tax treatment. Depending upon the length of time an asset is held, for example, income arising from capital gains is taxed at significantly lower rates than dividends and bond interest.

 In the cases of higher-income households, the tax on the latter type of income can sometimes reach as high as 35%.  Thus, by simply placing all of his high-yielding stocks and corporate bonds in his tax-advantaged accounts, an investor can immediately realize significant tax savings that can sometimes amount to tens of thousand of dollars a year and, ultimately, millions more in assets over the course of a successful investment lifetime.

 

A Simple Example of How Asset Placement can Save You Money
Imagine you have a portfolio valued at $100,000. Half of your assets, or $50,000, consists of investment grade bonds earning 8% which generate $4,000 per year in interest income.  Twenty-five percent of the portfolio, or $25,000, consists of common stock with high dividends that generate $1,000 per year.  The remaining twenty-five percent, or $25,000, consists of common stocks that pay no dividends.

In this scenario, an investor in the 35% tax bracket would immediately save $1,750 per year by placing the high-yielding stocks and corporate bonds in his tax-advantaged accounts.  (To calculate that, add the $4,000 bond interest income and the $1,000 dividend income together to get $5,000.  35% tax on $5,000 is $1,750.)  It makes no sense for him to place his non-dividend paying common stock in such an account because he is not going to pay taxes on the profit until he elects to sell the investment; even then, he will be taxed at a rate fully half of what he would have paid otherwise!  For most investors, capital gains are taxed at 15%.

A Guide to Asset Placement

When deciding which type of accounts to place your assets such as corporate bonds and common stocks, generally speaking, let these few simple guidelines help you with your decision:

Assets that should be placed in tax-advantaged accounts (401k, IRA, etc.):

• High-yielding common stocks with long histories of dividend payouts
• Corporate bonds
• Risk arbitrage transactions
• Shares of real estate investment trusts (REITs)

Assets that should be placed in regular, non-tax advantaged accounts (brokerage, direct-stock ownership, etc.):

• Common stocks with little or no dividend payouts that you expect to hold for more than a year
• Tax-free municipal bonds (since they are already tax-free, there is no need to place them in tax-advantaged accounts)