Index Fund Investors Do Better in the Long Run

If your not much of a gambler then index funds are best suited for you. Trying to find the hot stock or mutual fund is a lot of work and the odds that you will pick a winner are extremely low. The returns on index funds are better than the average active funds in every investment category  It's easy to build a portfolio of all index funds because there are funds covering every asset class in every market in the world.

Thirty-five years ago Vanguard CEO John C. Bogle along with his meager staff launched the first publicly available index mutual fund. It was named the Vanguard First Index Trust, later renamed the Vanguard 500 because it tracks the S&P 500 index.

Vanguard has recently released a white paper on performance entitled The Case for Indexing. It documents the poor results of active management versus indexes over the years — a result that worsens over extended periods. The following chart illustrates the decreasing success rate of active management.

A portfolio that holds only index funds in different asset classes has a very high probability of beating a portfolio that holds only actively managed funds in those asset classes. The table below highlights the probability of an all-actively managed fund portfolio outperforming an all-index fund portfolio.

There is a 30 percent chance that a single actively managed mutual fund will outperform an index fund over a 10 year period of time, but that probability drops to 9 percent when three managed funds in a portfolio are judged against three comparable index funds. The results get worse as more active funds are added and as more time passes. A portfolio with 10 active funds held for 20 years has only a 1 percent chance of beating a comparable all-index fund portfolio.

Index fund investing has proven to be the best strategy for most people. A low-cost index portfolio has the greatest probability for meeting long-term financial goals. 

Shopping for Car Insurance Online Has Never Been Easier

insurance (Photo credit: Alan Cleaver)

A survey by the American Automobile Association (AAA) has found that, 62 percent of people looking for car insurance, begin their research on the Internet. Also most car insurance shoppers go to at least two online insurers websites prior to arriving at a decision.

Today we are using the Internet more and more to research most large purchases. With so many car insurance companies competing for our insurance dollars, competition has driven down the costs and it is of great benefit for consumers. The Internet has made it easy to find discount insurance quotes online.

Before doing some online shopping take time to prepare.

1. Get all your important documents together. Your going to need your drivers license. If you had any accidents, have that information ready. Also have your address and social security number ready. You will need the year, make, model, license plate, mileage, and VIN (vehicle identification number) from your car.

2. Use your computer to search for "discount insurance quotes." When you see your search results first check out aany companies you are already familiar with. Also find insurers that will show quotes from many car insurance companies. Some companies represent a lot of different insurance companies. They can compare reates for you and deliver the cheapsest one to you.

3. Choose the kind of coverage you need. It depends on the state you reside in what our options are for what required insurance you need to have. The website will know and walk you through the specifics of your states car insurance requirements.

4. Input all necesary information and get your free quote. There are too many insurance companies that offer free quotes, stay away from websites that require a deposit, credit card number, or any kind of fee.

5. Compare the rates and coverage along with the costs. When you feel comfortable about your selection you can pay with a credit card. You will be able to print out a temporary insurance I.D. car and later a formal one will be mailed to you.

Buying insurance online has been streamlined and simplified for the consumers convenience. Remember if you need to talk to a person or if you have any questions an 800 number is always provided.

Investing in Rental Property Can Be a Profitable Business If Done Right

(Photo credit: Wikipedia)

Investing in rental property seems easy. Buy a rental house, find some tenants, and let the money roll in. It's not as easy as it looks. Before jumping into this glamorous business be sure to investigate and get some buy to let mortgage advise . 

The Upside to Being a Landlord.

For some people, investing in anything but land is dumb. Owning a mutual fund or stock is like owning air, it's intangible you can't hold it or see it. Then we have the land owners who think that a piece of land is a real asset. It's solid, you can walk on it, if it is a house you can paint it or just look at it. It's real. For many, they would have it no other way.

1. Cash Flow.

As a landlord, if you have done it right you have a positive cash flow that puts money in your pocket every month. Your rental income, minus your mortgage and expenses is your profit. Your property is producing something for you.

2. Appreciation.

Your property is increasing in value every year if you purchased it right. Appreciation, though a small amount, over the years it can turn into a substantial amount. Even if there is not appreciation you still are going to experience an increase in the house value because of inflation.

3. Leverage.

Unlike buying a mutual fund or stock, with a rental home you only have to invest a percentage of the homes value. You control the entire investment, but only pay a small fraction of it's cost. The property is the security for the debt and not your personal property. Only the purchased property is at risk.

4. Tax Advantages.

Even if you do not receive a positive cash flow you still are deducting expenses. You are paying down your mortgage and are not paying taxes on this money. There are many types of deductions that can be beneficial in reducing your tax liability overall.

There are some good financial reasons to own rental property. Especially the tax advantages. But there are also quite a few downsides to owning a rental house. 

1. Bad Tenants.

Getting the tenants from hell is a distinct posibilty in the rental business. Many people do not respect other peoples property and treat your lovely rental like it's a dumpster. The nightmare scenarios are infinite.

2. Liability.

If someone gets hurt on your property you are responsible and could be in line for a lawsuit. Having adequate liability insurance is an absolute must or someday your tenants will be owning your nice rental home.

3. Vacancy.

There is the distinct possibility you may not be able to rent the home. Are you able to cover the mortgage and expenses for an extended period of time. It's important to have enough cash in reserve for this occurrence.

Investing in rental property can be a very profitable business but can also be a nightmare if done improperly. Make sure to check out your tenants with a background check. Get all your deposits upfront and have good lease that protects you in all contigencies. 

529 College Savings Plan - 3 Factors to Check Before Picking a Plan

If you are thinking about opening a 529 College Savings plan for your child you may be confused by the shear number of choices you have to pick from. You do not have to pick the 529 plan from your resident state. You are able to choose from any states 529 plan but be sure to check if your home state offers special tax incentives.

529 plans in themselves are not confusing but picking one that suits your needs and your pocket book may take a little extra time.

According to WhatIsA529Plan.com, there are 3 factors to look at to make sure you pick the right plan that does what you want it to, for the least expense.

1. Investment Options. There are as many types of plans as there are ways to invest in them. The plan you may chose has a wide selection of investments from conservative to speculative. Picking the right one for your goals and age of the child is imperative. You can even pick the types of investments whether they be within the U.S. or globally. Picking the right ones means the difference between good growth and poor growth. It would be smart to get some good advice and recommendations from knowledgeable professionals before investing.

2. Costs. Costs subtract from your bottom line. A percentage or 2 can really add up over the life of a 529 Plan. Don't let that 1% slip away into someone elses pocket, it belongs in yours, so shop around to get the smallest expense costs.

3. Tax Benefits. Before selecting a 529 Plan out of state be sure to check your in state plan. If it has tax benefits on your state tax return it pays to invest within state even if you prefer an out of state plan. Check with your states tax rules to see if you can still invest out of state and claim the tax deduction.

There are currently 21 states where residents can choose any 529 plan without considering the impact of a state tax deduction: 

No state income tax -- Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming

No deduction for any 529 plan contributions -- California, Delaware, Hawaii, Kentucky, Massachusetts, Minnesota and New Jersey

Deduction available for contributions to any 529 plan -- Arizona, Kansas, Maine, Missouri and Pennsylvania

All other states give a state tax benefit for saving to the "home state" 529 plan.

529 plans are a great tool for funding college expenses, and selecting the right plan can be complicated. A good starting point is your home-state plan if you get a state tax benefit. If you live in one of the 21 states listed above, I recommend using the Nevada, New York, Utah or West Virginia plans, as those states offer passive investment options at a low cost.

What are the Different Kinds of Business Insurance

Insurance

Running a business normally requires making a capital investment. Business insurance protects that investment against financial risks when unexpected events occur. 

Many governments tell businesses which insurances they must have to operate legally. Depending on what kind of business you have, determines what insurance you need to carry. There are many types of business insurance. Which will apply to your business.

There are several kinds of business insurance:

General Liability Insurance.

This type of insurance covers the business owner from accidents, injuries, and claims of negligence. This kind of coverage protects against payments when the result of bodily injury, property damage, medical expenses, libel, slander, the cost of defending lawsuits, and settlement bonds or judgments that are required during a legal procedure.

Product Liability Insurance.

If your company manufactures a product that is not safe then this insurance protects your company. Because of a defect know or unknown that occurs and produces bodily harm this insurance will protect you from financial loss. The amount of coverage depends on the type of product and the size of the business.

Professional Liability Insurance.

This is like product liability insurance but this type of liability covers services. This type of insurance also is known as malpractice insurance. It's coverage is also known as errors and omissions insurance. This kind of insurance protects your business against malpractice, errors, and negligence in provision of services to your customers.

Commercial Property Insurance.

This kind of insurance covers everything related to damage caused to your business. Property insurance covers damage to property from  fire, smoke, wind and hail storms, civil disobedience and vandalism. This insurance covers the need of rebuilding after some unforeseen event destroys your business completely or partially.

Property insurance policies come in two basic forms: (1) all-risk policies covering a wide-range of incidents and perils except those noted in the policy; (2) peril-specific policies that cover losses from only those perils listed in the policy. 

Home-Based Business Insurance.

If you have a home based business your normal "Homeowners Insurance" will not cover any business related liability or damage. You have to obtain specific business insurance or have a rider on your homeowners insurance to cover business specific liability.

It takes a business insurance specialist to to set up the proper insurance coverage to stay in compliance with governmental regulation and to have proper coverage for your specific business type.

The Viagra College Fund - Social Security Secret

 (Photo credit: Wikipedia)

I recently came across a little know Social Security secret. This loophole in the Social Security rules and regulations is going to make a lot of retired fathers very happy. According to InvestmentNews.com, a parent who is receiving retirement benefits, can also receive benefits for their under 18 year old children. 

InvestmentNews' contributing editor Mary Beth Franklin had received a call from a client who told her that he was 68 years old and was collecting his Social Security retirement check. He went on to say he had a 5 year old child through remarriage.

Financial Planner Mary Beth Franklin told him that his child was qualified to also receive a check from Social Security. Franklin went on to say that the client called a few months later saying his child was now receiving a check for almost half of what he was receiving.

I couldn't believe this was really in the Social Security rules. I went to the Social Security Website. Here: Benefits for children

It clearly states that benefits could go to your children if you were disabled or the parent died. This is understandable. But it also says, if you are just retired.

The rules also say that the child could continue to receive benefits until the 19th birthday if secondary school was not completed yet.

The whole thing is crazy.

InvestmentNews' contributing editor Mary Beth Franklin did finish the story with some advice for the retired father. She said to put the income into a 529 College Savings Plan thus the name "Viagra College Fund".