NJ SENATORS PUSH MANDATED INSURANCE FOR KIDS

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May 15, 2008
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NJ senators push mandated insurance for kids

By TOM HESTER Jr. | Associated Press Writer
May 15, 2008

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TRENTON, N.J. - All New Jersey children would have to have health insurance and all taxpayers would have to annually prove they have health insurance under a plan advanced Thursday by senators.

NOTE: INSURANCE FOR ALL KIDS IS A MUST FOR KIDS IN NEW JERSEY.

The Senate health committee released the legislation designed as the first step toward universal health coverage for all residents by 2011. It's the first time the long-discussed plan has moved ahead. It can now be considered by a Senate budget panel, then likely the full Senate.

"This is a broken and dysfunctional system, and it's time for a health care plan that works," said Sen. Joseph Vitale, D-Middlesex, the bill sponsor.

About 1.5 million New Jerseyans lack health insurance, according to the Henry J. Kaiser Family Foundation, or about one in six residents. Of those 1.5 million, 275,000 are children.

NOTE: IT IS SAD TO NOTE THAT THERE ARE STILL THOSE WHO DOESN'T FIND THE IMPORTANCE OF HEALTH INSURANCE.

The measure would require all children under 18 to have insurance within a year of the law being enacted, whether through public health programs or private insurance, though it calls for no penalties for parents who fail to enroll children.

It would expand a state-run health program for the poor called NJ FamilyCare to include more parents, who presumably would also enroll their children.

Other families would be able to buy insurance coverage from the state at reduced rates.

The plan would require all New Jerseyans beginning next year to prove they have health insurance when filing income tax returns. Those who don't have insurance would be sent insurance applications.

It also proposes private insurance changes to try to make it more affordable.

Vitale said the first year's $28.8 million cost can be paid with unspent federal and state money designated for treating the poor.

Republicans question whether the state could handle the initiative, noting a recent audit found people earning as much as $295,000 enrolled in NJ FamilyCare.

"The state must learn how to prevent fraud and abuse in a limited program such as NJ FamilyCare before it tackles the much larger challenge," said Assemblyman Richard Merkt, R-Morris.



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MF's to Cash in on Commodities

Wednesday, May 14, 2008


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MFs to cash in on commodities
PERSONAL FINANCE
Vandana / Mumbai May 14, 2008, 4:23 IST

With equity markets turning bearish and the commodity cycle at its peak, mutual funds are now shifting their focus to commodities. Fund houses plan to enter this segment through commodity-oriented stocks and mutual funds abroad.

Mirae Asset recently filed its application with the market regulator to set up a global commodity stocks fund that will invest 65 per cent of its corpus in stocks or mutual funds operating in the Asia-Pacific region and emerging markets.

Similarly, Tata Mutual Fund is proposing to launch a gold and precious metals fund that will invest in mining companies. Even ING has filed for a Latin America fund, which will invest in stocks in that region. Since the region is known for its rich natural resources, commodity stocks would be a part of the fund.

NOTE: ING IS VERY KNOWN IN THE STOCKMARKET

Most of the funds are planning to take a feeder-fund structure, whereby the fund will invest in a global fund that has a past track record. Globally, this theme has done quite well.

For instance, Blackrock's World Energy Fund is one such fund that has returned 35 per cent in the last one year (between May 9, 2007, and May 9, 2008). Last year, DSP Merrill Lynch launched the first feeder fund in India, which invests in gold mining companies through its parent company Merrill Lynch World Gold Fund.

Said Dhruva Chatterjee, research analyst, Lipper, "Mutual funds are basically trying to capitalise on rising energy and metal prices. However, investors should remember that the kind of heated-up activity that is going on in commodities, one can never guess when the market will crash."

And the numbers depict this. With crude oil prices shooting up to $126 a barrel and metal prices following the same route, stocks of these companies are enjoying significant attention in international markets.

Financial experts say that such funds can be a good option for an investor looking to invest in overseas markets.

Gaurav Mashruwala, a financial planner, said, "First-time investors should start by investing 2 to 5 per cent of their portfolio in such funds. They can then gradually increase it to 10-15 per cent."

NOTE: MASHRUWALA AND OTHER FINANCIAL PLANNERS SHOULD BE CONSULTED BEFORE INVESTING.

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Make The Most Of Your Tax Rebate

Note: Make The Most Of Your Tax Rebate

Those federal tax rebates you've been hearing about? The IRS is due to send the first checks on May 9. Payments will continue for months. But don't get too excited. If you have a decent income, you may get little or nothing.

Still, your children might get rebates. Ditto for your parents, if they're retired.

Note: Even children get rebates as well as retired parents.

So here are a few ideas for using the rebates. Discuss them around the family dinner table.

Not all of these ideas will stimulate the economy, as Washington intended. But hey, it's your family's money.

The basic rebate amount equals the income tax owed for 2007 with limits. There's a cap of $600 for single taxpayers. For married couples filing jointly, the cap is $1,200.

There's a $300 rebate for every child who was under 17 at the end of last year.

Say a hypothetical John and Mary Smith file a joint return. They have three young children. They might expect a $2,100 rebate: their $1,200 plus $900 for their three children.

But they might not get it. To get a full rebate, their adjusted gross income (AGI) must be no more than $150,000.

Over that threshold, there's a 5% phaseout.

Suppose the Smiths report AGI of $170,000 in 2007. That's $20,000 over the limit.

Five percent of $20,000 is $1,000. Their rebate would be reduced by that $1,000. Instead of $2,100, the Smiths would get $1,100.

The size of the rollback increases as a taxpayer's AGI rises. So if the Smiths' AGI is $192,000 or higher, they would get no rebate.

The calculation is the same for single taxpayers. The phaseout starts at $75,000 of AGI.

A childless single taxpayer would get no rebate with AGI over $87,000. If any taxpayer has children, the top end of the parent's phaseout range is extended by $6,000 for each child.

If your AGI tops the phaseout ceilings, you won't get a rebate. But your children might.

To get a rebate, they can't be claimed as dependents on your tax return. They must file a 2007 return. They must have paid tax or had at least $3,000 of earned income.

What To Do?

If your kids ask for advice about handling that money, what should you tell them?

"Tell them to pay down credit card debt," said Jamshed Gandi, a CPA in San Francisco who is a spokesman for the California Society of CPAs.

Interest rates on credit card balances may be as high as 20%, Gandi says. Paying down such a debt is the same as earning 20% per year on an investment, after-tax, with no risk.

If your children don't have credit card debt, they may want to pay down other debts such as student loans. That will depend on the interest rate being charged.

Say your children have no high-interest loans to pay down. The next alternative may be boosting 401(k) contributions.

If their employers are matching 401(k) contributions, your children should contribute at least enough to get the maximum employer match.

Say your daughter earns $40,000 a year. Her employer offers to match 401(k) contributions 50 cents on the dollar, up to 6% of pay.

So her maximum match would be $1,200: 50% of $2,400. If your daughter contributes less to her 401(k), she should adjust her periodic contributions so an amount equal to all or part of her rebate goes into the plan, up to the level where she'd get the maximum match.

Contributing more to a 401(k) might not make sense. Your daughter, in a low tax bracket, wouldn't get much benefit from the upfront tax deferral.

Instead, the next choice on the list might be contributing to a Roth IRA. In 2008, the top contribution for people under 50 is $5,000.

Roth IRA contributions deliver no initial tax advantages. But investment income is untaxed, inside the account.

And all withdrawals are tax-free, after five years. You also must be older than 59 1/2.

Say your daughter is 28. She puts $600 into her Roth IRA. Her money earns an average of 9% a year.

By the time she's 60 that $600 — excluding any other contributions she makes over time — will have grown to around $9,500. Your daughter could withdraw it all, tax-free, or let it keep growing in her Roth IRA.

Advice For Your Parents

So your children have several ways to profit from tax rebates. What if the money goes to your parents, who have relatively low income in retirement?

If they're concerned about running short of money, they can invest it, says Tom Ochsenschlager, vice president of taxation at the American Institute of Certified Public Accountants.

He suggests an exchange-traded fund. Many are low-cost and tax efficient.

"If your parents are comfortable with what they've saved, they might consider a contribution to a 529 plan for their grandchildren," Ochsenschlager said. These plans offer tax-free investment buildup and tax-free withdrawals if the money is spent on higher education.

Note: These are the info about how to make most of your tax rebate.

Assets Ease in Money-Market Mutual Funds

Note: These are info about percentage in marketing mutual funds.

NEW YORK -- Investors to money-market funds subtracted $34.53 billion in the week ended Tuesday, bringing total net assets to $3.416 trillion, according to the Money Fund Report.

Institutional investors withdrew $11.93 billion, while individual, or retail, investors withdrew $22.60 billion.

Assets in taxable money funds fell $29.43 billion to $2.926 trillion.

The average seven-day simple yield for taxable funds fell to 2.01% from 2.08%. The average seven-day compound yield, which assumes reinvestment of dividends, declined to 2.03% from 2.10%. Thirty-day simple yields dropped to 2.12% from 2.16%, while 30-day compound yields fell to 2.14% from 2.19%.

The fund with the highest seven-day compound yield among retail taxable general-purpose money funds was Touchstone MMF/CL at 3.01%, followed by Dreyfus BASIC MMF at 2.94% and Morgan Stanley ActiveAssets MT at 2.93%.

About $5.09 billion was withdrawn from tax-free funds, putting total tax-free assets at $489.61 billion.

The average seven-day simple yield for nontaxable funds rose to 1.95% from 1.64%. The average seven-day compound yield, which assumes reinvestment of dividends, increased to 1.97% from 1.66%. The average 30-day simple yield rose to 1.66% from 1.64%, and the average 30-day compound yield increased to 1.68% from 1.66%.

The fund with the highest seven-day compound yield among retail tax-free money-market funds was Alpine Municipal MMF/Investor at 2.92%.

Note: These percentage will help you decide the percentage you want in your mutual funds.

Cheap Stocks, Everywhere

Note: Cheap Stocks, Everywhere

Of course, you don't a newsletter or a website to tell you that many retail, homebuilding, financial and healthcare stocks are trading near five year valuation lows. The stampede and overweights in many commodity areas are not as extreme as the tech mania in 1999, when mutual funds managers tripled weighted tech and ended up with 60% of their funds in the sector, but a sustained rotation out of the market darlings sets up the potential for a sustained move in the laggards of the last year.

Note: Its good to have a stock in your business.

MUTUAL FUND SALES PLUNGE IN APRIL

Breaking News from The Globe and Mail
Mutual fund sales plunge in April

SHIRLEY WON

Friday, May 02, 2008

Mutual fund sales in Canada plunged sharply to about $300-million in April, from $2.5-billion a year ago.

All the cash continued to flow into money market funds as it has done for much of this year, according to preliminary figures released Friday by the Investment Funds Institute of Canada.

"It's surprising, because we did see some pretty good equity markets last month," Dennis Yanchus, manager of statistics and research at IFIC, said in an interview.

In April, the S&P/TSX Composite Index rebounded 4.4 per cent after falling 1.7 per cent in March. In the United States, the benchmark S&P 500 Composite Index jumped 4.8 per cent last month.

It will probably take "a few months" before investors become confident about jumping into long-term funds, he said.

The April sales number is a continuation of a trend in March and January when all the net sales in mutual funds went into money market investments. In the first quarter of this year, sales of money market funds hit a record high of $10.7-billion.

NOTE: MUTAL FUND IS REALLY UPTRENDING.

April's estimate stems from IFIC's projections that net sales would come in between $57-million and $557-million.

The April number is not only down substantially from 2007, it is also off from $468-million in net sales in the same month in 2006 and $540-million in 2005, Mr. Yanchus added.

The leader in net sales last month was the mutual fund arm of Royal Bank of Canada, which took in $760-million. Dynamic Mutual Funds Ltd. attracted a robust $274-million.

Among the non-bank fund companies, Fidelity Investments Canada brought in $171-million, and CI Financial Income Fund attracted $170-million in net sales.

AIM Funds Management Inc., which has seen three key managers leave the firm and has suffered from poor performance in its value-oriented funds, suffered from $653-million in net redemptions.

NOTE: IT IS IMPORTANT TO CHOOSE A CREDIBLE FIRM.

The fund arm of Canadian Imperial Bank of Commerce saw $263-million in outflows, while IGM Financial Inc., which owns Investors Group and Mackenzie Financial, was $186-million in the red.

© The Globe and Mail

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GO FORTH AND DIVERSIFY TO MAKE YOUR MONEY GROW

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* May 3, 2008
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Smart investors spread their cash among all asset classes to get the best possible return, writes Simon Hoyle.

It is common knowledge - or it ought to be - that the cornerstone of successful investment is effective diversification. Diversification is the term used to describe the process of spreading your money among different asset classes. The aim is to combine the different characteristics of each asset class to generate the best "risk-adjusted" return - that is, the best possible return, for the lowest amount of risk.

The way you spread your money among the different asset classes is called asset allocation. Your asset allocation drives your investment portfolio's overall long-term return, but it also determines how much volatility, or risk, you are exposed to.

When your asset allocation includes a significant exposure to so-called "growth" assets (including Australian shares), and those assets are falling in value or lurching from one apparent crisis to another, the temptation can be to abandon the long-term asset allocation plan and head for the peace and quiet of something less volatile.

NOTE: STUDYING ASSET ALLOCATION NEEDS AWARENESS AND ENTHUSIASM TO CREATE GOOD GROWTH.

When investment conditions are rocky, it might feel like we're getting all the risk of equity markets, with too little of the return. But Chris Condon, chief investment officer for MLC, urges investors to stay focused on the future. He says the principles of sound diversification and strategic asset allocation that have stood investors in good stead for decades will continue to do so, despite the market's current gyrations.

"When you think about returns, what you need to be thinking about is the return you can reasonably expect to get in the future, rather than the return you have just received," Condon says.

"But the paradox for investors is that when you've had a period of very poor returns, that means the asset prices have gone down, and the earnings you are getting from the productive activities of the companies you are investing in will, as a proportion of the asset price … look like it has improved.

"But if, then, the markets chase the share price down even further because of momentum or sentiment, then your returns can look poor, even though you were expecting them to look good."

Symon Parish, chief investment officer, Australasia, for Russell Investment Group, says asset allocation and diversification decisions should be based on long-term data, not on movements in prices over three to six months. That means portfolios can be constructed to ride through periods such as the one we are going through.

"When we look at the theoretical side of asset allocation, and try to model how investment markets perform, you want to base that on as much data as possible," he says.

"So we look at the entire history of the sharemarket in Australia. The last five years have been unusual, not just in terms of how strongly the market has performed, but also for the low level of volatility.

"There's probably a lot of retail investors who haven't had the full experience of investing in shares, and how it works, in their minds, will be based on how it's been in the past five years.

"What we have seen this year, compared to the past five years, is extremely high volatility - but compared to the whole history of the market, it's not unusual. It's a little bit high."

NOTE: TRENDS CHANGES FROM TIME TO TIME.

The accompanying table, prepared by Russell, shows that over the 28 calendar years from 1980 to last year inclusive, the average annual volatility for Australian shares has been almost 22 per cent. But Parish says that in the past five years it's been closer to 10 or 12 per cent - unusually low.

Parish says investors whose diversification and asset allocation are soundly based on long-term data should have the confidence to ride out the current market volatility.

"They should stick to their guns," he says.

How the past looks, and what you think the future holds, can depend greatly on the moment in time you choose to look back from, and how you feel about the present.

For example, if you'd taken a moment in, say, early last November, to look back over time and to cast your thinking forward a few years, you might have come to a very different set of conclusions than if you undertook the same exercise today.

Back then, the equity market correction and subsequent volatility had not yet happened. The past looked good; the future looked rosy. But now the market has changed. In addition, interest rates have risen, and the whole investment world seems to have shifted on its axis. Your outlook, appetite for taking on investment risk and your expectations of likely future returns are quite possibly very different today from what they were six or seven months ago.

Even so, investment experts are quick to remind us that the benefits of diversification - of spreading your money among different asset classes - are no different today than they were towards the end of last year.

The table shows the returns and the volatility of a range of different asset classes and of notional investment portfolios over the 28 calendar-year periods to last year. The period includes the sharemarket crash of 1987, so it has some parallels with the present day, in the sense that it incorporates at least one significant market correction that had a profound effect on investor confidence (and arguably a greater one than the recent market turmoil).

The table reveals a number of interesting things about how diversification works over a long period of time, even when that period includes a market crash.

First, every asset class except for cash has at some point or other suffered a negative 12-month return. The asset classes with the highest long-term returns tend to have the greatest number of negative 12-month returns - that's in keeping with the investment principles that state you cannot achieve a return without taking some risk with your money, and the higher the return you strive for, the greater the risk (that is, the greater the chance of short-term loss).

At some point during those 28 years, each asset class has held the mantle of the best-performing asset class of all. And each asset class has also held the mantle of the worst-performing asset class.

The trouble for investors is that the distribution of best returns, worst returns, positive returns and negative returns is more or less random - which means picking, in advance, which asset class to invest in, and which to avoid, is more or less impossible.

So smart investors respond by saying, well, if we can't pick the best-performing asset class, and if we want to avoid being fully invested in the worst-performing asset class, we should spread our money among them all.

NOTE: NAME OF THE GAME IN ASSET ALLOCATION IS NEVER TO PUT YOUR MONEY IN ONE POT.

But it's not simply a case of picking, say, five asset classes and putting 20 per cent of your money in each. As the Russell table shows, different asset classes have different levels of risk. To work out the optimum mix of assets (or asset allocation), you have to understand your tolerance for risk, and then effectively "spend" this risk "budget" on buying asset classes in the right proportions.

Condon says there are two aspects to our risk tolerance. One is our physical or financial tolerance, and the other is our psychological tolerance.

These are not always easy to work out, and so it is best to analyse them with the help of someone who knows what they're doing. There are firms that specialise in analysing risk tolerance; all good financial planners will go through a risk-assessment process as part of a comprehensive financial plan.

"It really does come back to understanding your own tolerance for risk … where you are in your life cycle, [how much money] you need, and how soon you need it," he says.

"And secondly - and it's a separate question - understanding your own view of the amount of time you can bear, psychologically, [losses]."

Condon says financial tolerance is, simply, how much you can actually afford to lose. Clearly, you can afford to lose 10 per cent of your money more than you can afford to lose all of it. But you might not like the idea of losing even 1 per cent - and that's your psychological tolerance. It is separate from your financial tolerance, and it is often harder to determine.

It is possible to have a high psychological tolerance for risk, but a low financial tolerance (your entire wealth could be wiped out, but it doesn't worry you), or vice versa (a tiny fraction of your wealth is destroyed and you end up with sleepless nights and high stress levels).

The correct asset allocation takes into account both of these aspects, and will (if done properly) lead to a portfolio that gives you the best possible investment return without exceeding your risk boundaries. Diversification helps us, therefore, to optimise the return we get for the amount of risk we're willing to take.

As a crude example, the Russell table shows that an investment in Australian bonds returned an average of 10.3 per cent each year for the 28 years, with annual volatility of about 7.1 per cent. The table also shows that a portfolio holding 30 per cent growth assets (which Russell says is made up of 15 per cent Australian shares, 40 per cent Australian bonds, 30 per cent cash, 10 per cent international shares and 5 per cent property securities) had about the same level of risk - 6.9 per cent a year - but returned 11.5 per cent a year.

It means that for more or less the same amount of investment risk, effective and disciplined diversification delivered a 1.2 per cent a year higher return. Over 28 years, that is the difference between a $10,000 investment growing to $155,000 and it growing to almost $210,000 - a difference of $55,000.

The story is similar with international shares: over 28 years, an unhedged $10,000 investment in international shares grew to $263,000; a $10,000 investment in a portfolio with 50 per cent growth assets grew to $257,000 - but with less than half the volatility.

These examples illustrate why diversification was once described as the closest thing you will ever get to a free lunch when it comes to investment markets.

Condon says MLC applies the principles of diversification to its own managed funds, and will continue to do so, because the potential cost of not diversifying, or of making unwise changes to asset allocation in response to short-term influences, is simply too high.

"We've developed an asset allocation for [our] funds, and we do not make significant changes for what may be only short-term valuation effects," he says. "If you do that, you might be making the right decisions for the right reasons, but you cannot be certain that it will pan out correctly in a [given] period of time. It's very hard to be disciplined."

Hard, but often worthwhile: Parish says that on each of the past five occasions when the sharemarket has fallen by 20 per cent or more, it has rebounded strongly in the following 12 months - by, respectively, 38 per cent, 42 per cent, 50 per cent, 20 per cent and 26 per cent.

"If you get spooked, you can miss out," Parish says.

In any case, "it's a bit late now" to be thinking of abandoning your long-term plans.

"You've already taken the pain. If you wanted to get out, you should have got out last year. People should just get back in the saddle, as it were, and make sure they follow their long-term plans, and not get scared off.

"Often the best opportunities will come up when there's blood on the streets - that's when the real money gets made."

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