Explore "nefesh" with insightful episodes like "Destroying Desire (Nazir 48)", "Life After Death: Part 1 - What Are We?", "Can Bonds Increase Income from Your Investment Portfolio?", "The Best Way to Update Investments in an Inherited IRA" and "What Should You Do With Money in the Bank?" from podcasts like ""The Transformative Daf", "119 Audio Streaming", "4-Minute Money Ideas", "4-Minute Money Ideas" and "4-Minute Money Ideas"" and more!
Have you ever wished you could eradicate your temptation for a certain desire? Today we learn that desires are what fuels our ability to live and function in this world. We don’t seek to destroy them, but to transform them!
Can Bonds Increase Income from Your Investment Portfolio?
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
A retired widow met with me last week to discuss how to increase income from her investment portfolio. I reviewed her account and made some suggestions for restructuring her investments to get predictable income. We spoke a lot about bonds. Here’s why:
Bonds pay a set amount on a fixed schedule, so if you are looking for predictable income, bonds may work for you. A bond’s interest rate is often commensurate with the level of risk; if you buy a “high-yield bond” (or “junk bond”) you get a higher interest rate than if you buy a high-quality bond. A well-designed portfolio incorporates different types of bonds in order to diversify risk and maximize returns, and it reflects the risk tolerance of the client.
Build a bond ladder
Another way to diversify risk while creating a predictable income stream is to use a technique called “bond laddering.” This means you buy a series of bonds with successive maturities, such as one, two, three, four, and five years. When the first bond matures at the end of the first year, you reinvest the principal in a new five-year bond at the prevailing interest rate. The following year, when the next issues matures, you do the same thing. This way, you have ongoing and dependable returns. You can customize the rungs of your ladder (i.e., the amounts of money you wish to invest), the height (meaning the longer and shorter term investments), and materials (types of bonds, like corporate or government bonds) to suit your own personal needs and risk tolerance. Bonds do have risks, so be sure to speak to your financial advisor, or get in touch with my office, to determine which specific bonds may be right for you.
Two videos on bond ladders
Watch two short videos about creating a bond ladder at: www.Profile-Financial.com/bond-ladder. If you have investments in the United States or are interested in receiving dependable income from your portfolio, call my office (02-624-2788).
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
The Best Way to Update Investments in an Inherited IRA
By Douglas Goldstein, CFP®, - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
If you inherit an IRA (Individual Retirement Account), you must be aware of the regulations concerning transferring the account to you, the “beneficiary.” Apart from the technical requirements for processing the account, which a financial advisor should be able to handle, some people also feel a moral responsibility.
When a client recently called me about an inherited IRA, he said, “I would like to sell some of the stocks in the account. Am I legally allowed? And if I do, am I being disloyal to my father’s memory by getting rid of what he bought?”
Personal finance is personal
This client is far from unusual in the loyalty he feels to his benefactor. Many beneficiaries feel as if they are betraying the person who left them the account if they change anything in it. But that is far from being the case.
When choosing investments, you need to have your own goals in mind, rather than those of the deceased, which may have been quite different. I told my client, “I’m sure your father wanted the best for you, which is why he made you beneficiary. Improving the IRA’s portfolio by acquiring investments that are more appropriate for your situation isn’t being disloyal. It’s actually the best way to make the most of the inheritance.”
How should you optimize the investments inside an IRA?
If you sell investments inside an inherited IRA, you don’t pay U.S. tax on capital gains until you withdraw the money. Be aware that generally you shouldn’t hold an annuity or other tax-advantaged investments like municipal bonds in an IRA. Furthermore, if you’ve made aliya, if you transfer the funds out of an IRA to an Israeli investment account, the funds immediately become taxable and would lose their U.S. tax benefits.
Not sure how to properly protect an IRA that you inherited? Go to Profile-Financial.com/inheritedira.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
What Should You Do With Money in the Bank?
By Douglas Goldstein, CFP®, - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
Recently, a couple asked me what they should do with their money in the bank. I hear this question quite often. However, as every individual investor’s situation and circumstances are different, there is no standard response that fits everyone. To figure out an answer for this particular couple, I asked:
What’s the intended purpose of this money?
The couple answered that it was the sum of their retirement savings that they had accumulated over the past 18 years. They had over $650,000 in bank deposits, carefully spread out among several U.S. banks so that they were fully insured by the FDIC (Federal Depository Insurance Corporation). However, they also admitted that they were earning next to nothing in terms of interest.
“So for almost two decades you’ve been keeping money in the bank, and you’re thinking of leaving it there for another fifteen years until you retire?” I asked.
When the husband and wife understood that they were not even beating inflation, and the money wasn’t going to be needed in the short term, we spoke about designing a well-balanced portfolio that balanced their risk tolerance against potential growth.
Is there a chance you’d need the money sooner?
If the couple needed the money in the short term to buy a house or pay for a wedding, I would advise keeping it in the bank. For a short-term goal, the money should be liquid, since there might not be time to make up losses if the market dropped.
Are you wondering whether the bank is the best place to keep your assets? To find out more about how to decide to invest for the long or short term, read: www.profile-financial.com/short-term-investing.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
How to Overcome the Challenges of Receiving an Inheritance
By Douglas Goldstein, CFP®, - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
What would be your first reaction if you received an inheritance?
When a client received an inheritance from her elderly aunt, she told me:
“I thought she was going to leave everything to my cousin. I never imagined in my wildest dreams that any of it would come to me. Although the extra money will come in useful, I don’t know what to do with it! I spend my nights worrying about whether I should invest it or if I can spend any of it.”
You are not alone
This client’s anxiety about what to do with an inheritance is not unusual. Strange as it may sound, many people who receive an inheritance or windfall worry about losing their new assets, and this fear paralyzes them. Other people go to the opposite extreme and spend it all without a second thought.
Another common problem that inheritors face is when other people somehow find out about their new wealth and want some of it. In the same conversation, my client told me:
“When a distant cousin heard that I’d been included in my aunt’s will, he called me up for the first time in over 20 years and begged me for a sizable loan to start a new business. What do I tell him? It’s hard to say no to family.”
Get some answers
Since people often ask me questions on what they should do after they receive an inheritance, I created a 20-minute online webinar called, “How to Invest an Inheritance.” The webinar addresses the following points:
Register for the webinar at: Profile-Financial.com/webinar so you’ll know what to do if you receive an inheritance.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
Avoid This Portfolio Management Mistake
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
At an initial meeting, a new retiree told me, “I’m not really sure what stocks I own.” When I asked how he had put together his portfolio, he explained that some of the positions came from an inheritance, while others… “Well, I’m not really sure,” and a couple of stocks were recommendations from “this guy who sits next to me in shul.” When I asked him if that guy still thinks they’re good stocks, the gentleman admitted, “I don't know. I don't go to that shul anymore!”
This conversation is a superb illustration of a huge mistake that people often make with their investments: following a “hands-off approach to investing” – in other words, not having a clear strategy and buying/selling stocks without oversight. They don’t give much thought to important issues, such as setting goals, diversification, and risk management. I understand that not everyone wants to be involved in the details of their portfolio management, but that is not an excuse for your money to go unsupervised.
A great solution to handling money if you don’t like to deal with it
There is a way to have a properly managed account without having to do all the work yourself: using money managers and a Separately Managed Account (SMA). You can hire a professional money manager to make the day-to day buy/sell decisions on your account so you can sit back and watch from on high.
No matter how removed you want to be about the details of your finances, you (and your spouse) must be able to answer these basic questions:
Answering these questions will help you keep your financial focus.
How a money manager may help you
If your savings is meant to grow and be used in the long term, and market volatility makes you nervous, consider using an SMA to provide some oversight to your account. To learn more about money managers, watch a 12-minute video at: www.Profile-Financial.com/sma.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates
What Happens to Your Retirement Plans When You Make Aliya?
By Douglas Goldstein, CFP®, - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
As a Certified Financial PlannerTM sitting in Jerusalem, I work mostly with American immigrants who keep the majority of their assets in American investment accounts. When a recent oleh listed the various retirement plans that he held in the United States, he mentioned:
Although he had some upcoming financial obligations, most of the money was intended for long-term investment.
He told me that his biggest financial problem was that his investments and money “were all over the place,” and with his busy schedule he was unable to keep track of what was going on.
Although each of the accounts came from different sources, now that this oleh was no longer working in America and contributing to the retirement plans, he could roll the 401(k) and 403(b) plans to an IRA. This would give him flexibility to choose the types of investments that he wanted and still maintain the tax-deferred status of the retirement plans, as well as avoiding the penalties for early withdrawal.
When I suggested this option of rolling over his accounts into IRAs, the oleh asked if he could still do this, even though he is now living in Israel. This is a question that many dual citizens ask, often thinking that if they inherit or have an existing IRA in the United States they must cash it out. Cashing out an IRA and moving the money overseas is a taxable event, and often a bad idea.
The good news for this oleh, and also for all Americans living in Israel, is that you can maintain your existing tax-efficient IRAs in American brokerage accounts while living in Israel. To find out more about managing your American assets from overseas, download the “Toolkit for Opening U.S. Accounts from Overseas” for free at www.Profile-Financial.com/toolkit
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
4 Points to Remember at the End of the Financial Year
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
The end of the financial year is a good time to conduct an annual review of your financial situation. If your savings plan, or the market as a whole, has swerved off course, now is an opportune time to adjust accordingly.
Are your long-term and short-term goals the same as they were last year? If your goals are both time and dollar specific, it’s easy to tell whether you are on target to meeting them.
Does the saving component of your financial plan include tax-deferred pension plans? Review the details of your pension plan to determine if the division of funds among the saving and insurance components of the plan is still appropriate for your current stage in life.
Once you’ve saved, don’t yet breathe a big sigh of relief. Now comes the hard part – making sure the funds are invested properly. Make sure your investments reflect your risk tolerance, growth objective, and time frame.
As the markets and your needs change, recheck your asset allocation to ensure that everything is in order. Consider, for example, if a stock or fund does extremely well (or extremely poorly) this can also affect the balance of a portfolio.
Before selling stocks/funds and actualizing profits/losses, ask your accountant about the tax ramifications of such sales. Depending on your situation, it may be wise to hold onto investments for at least one whole calendar year, to qualify for the long-term capital gains rate (if you are a U.S. taxpayer). While tax ramifications shouldn’t be the only factor in determining when to sell, they should certainly be taken into consideration.
Use it or lose it
In America, mandatory IRA distributions must be taken by Dec. 31. If you’re 70½ or older, you must withdraw your minimum required distribution by this date. If you haven’t done so, the IRS can impose a 50% penalty on the required amount you neglected to withdraw.
To learn what the most important variable in your financial review is, read my blogpost: www.richasaking.com/review.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
What Happens When You File U.S. Taxes From Abroad?
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
American citizens living overseas often need to file U.S. taxes from abroad, even if they don’t owe any money. If you live in Israel, gathering the information you need to complete your taxes from Israeli banking and financial institutions can be tricky since foreign institutions don’t produce 1099 forms. So what is an American living abroad to do?
The IRS requires American citizens to disclose information about their investments, no matter where they are held.
The end-of-year statements from your Israeli bank or investment company don’t provide the same information that appears on a standard 1099 – and probably won’t be in English! This means that when filing your American taxes, you (or your accountant) will need to convert currencies, tax brackets, and other information in order to extrapolate the information the IRS needs. While this may not be a deal-breaker, it certainly adds time and effort to tax reporting, not to mention extra fees for accountants. Consider this issue when you are deciding where you want to invest your money.
YAHOO!
You Always Have Other Options. YAHOO isn’t only a search engine, but an acronym for a way to look at life… and investing! One possibility is to invest in Israel – but through the United States! There are many Israeli stocks, as well as exchange traded funds that track the Israeli market, which you can buy on the U.S. exchanges. That way, you can manage an internationally diversified portfolio through an American brokerage firm that issues you a year-end 1099. This would certainly make your American tax filing easier.
What you need to know to open a U.S. brokerage account from Israel
Go to www.Profile-Financial.com/interactive for an interactive questionnaire that customizes itself to your personal financial situation and helps you determine if investing with a U.S. brokerage firm is the right move for you.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
Did You Get an Unpleasant Surprise From Your Stateside Broker?
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
When your stateside broker sent you a surprise letter, did it contain good news? Many Americans in Israel (and non-Americans, too) have received a letter from their U.S. investment firm or bank informing them that they need to close out their account. In some cases, the brokerage firm does not shut down the account, but limits its services because the client no longer lives in the United States.
10-step solution
I recently produced a toolkit, which you can download for free, which answers the most common questions about handling American accounts from Israel. One of the most popular sections of the toolkit is called, “10 Steps to Opening a U.S. Brokerage Account.” Get this great resource at www.Profile-Financial.com/Toolkit.
A quick and easy solution
Though some investment problems may be insurmountable, don’t worry if you get a letter from your U.S. brokerage firm about needing to transfer your account. If the firm doesn’t want to work with people who live overseas, it’s probably best for you to avoid keeping your account there. Maybe the firm doesn’t understand some of the basic, yet very critical, regulations that a licensed cross-border financial advisor would know, such as which mutual funds you could buy, which ones you absolutely need to avoid, and how to continue investing like you always have done in a diversified portfolio.
On the other hand, a “cross-border friendly” company can open an account for you in your own name in the United States and simply transfer the assets from your current brokerage firm to one with the know-how and experience to help out. These firms can manage your account because they have taken the time to fully understand the rules and regulations and have designed the systems to help people open and maintain investment accounts in the United States.
Have you received a letter telling you to get out? Let me know the details by calling (02) 624-2788 or emailing me at doug@profile-financial.com, and let’s find the best solution for you.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
How to Grow Your Money Twice as Fast: Save More
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
What’s the best way to save, and how much money should you save?
As a panelist on the “Money Tree Investing Podcast,” I recently answered a question about how to invest monthly savings. Here’s what I advised:
Save more
Before discussing specific investment tactics, I suggested doubling the amount of money the listener was saving. My experience as a financial advisor has taught me that many folks don’t save as much as they can. One common rule of thumb is to save 20% of your income. If you reach that level or more, you’re well on your way to building serious wealth.
Choose investments carefully
There are two principles that every investor should follow:
Once you have accumulated savings and determined how you should invest, take the next step and open a U.S. brokerage account to help further your financial goals. For resources on how to do this, download the free Profile Toolkit, a guide to opening U.S. brokerage accounts from overseas. Download the toolkit at www.Profile-Financial.com/toolkit.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
If you worked in America before your move to Israel, chances are you have an IRA account. What should you do with this American account if you live an ocean away?
Should you transfer your retirement accounts to Israel?
An IRA is an “Individual Retirement Account.” There are several categories of IRA, including traditional, Roth, Simple, and SEP IRAs. The main differences between them relate to when taxes are paid. (Check with your accountant about your own situation since this article does not constitute tax advice.)
Another common type of retirement account in the United States is the 401(k), which is a “defined contribution” plan. Contributions to the account are deducted from your paycheck and you only pay tax on them when you make a withdrawal. Sometimes contributions are matched by employers, which make it an especially sweet way to save. However, when you work in Israel, you normally cannot continue contributing to the plans (unless you are employed by an American company). However, if you had such a plan in the United States, you can often roll it over into an IRA and easily manage it from Israel.
Useless or useful?
Having American retirement accounts when living in Israel can be useful. One reason is because the money invested can continue to grow. If you were to withdraw the savings and deposit them in Israel, depending on your age, you may be hit with penalties and taxes on the amount withdrawn.
A second benefit of having American retirement accounts while living in Israel is that the savings are held in America, and that means easier reporting on American taxes. Your pension plans produce IRS-friendly tax reports so you save yourself (and your accountant) hours of paperwork.
Also, American retirement accounts are already in Uncle Sam’s purview, and therefore don’t need to be reported on FBAR forms.
Everything changes when you move abroad
If you made aliya, the incongruity of the tax laws in America and Israel create certain complications that affect how retirement accounts are run and their tax status. Work with an international brokerage firm that understands the regulatory requirements of dealing with cross-border clients. In this way, you get the best of both worlds. You can live in Israel – and still benefit from your American retirement accounts.
To learn more, download the Profile Toolkit, a guide to handling your U.S. investments from Israel at: www.Profile-Financial.com/toolkit
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates
Should Your American Assets Stay in the United States?
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
When making aliya, many olim move their American assets to Israel and convert all their dollars to shekels. However, there is a strong case to be made for leaving your dollars in America. Here’s why:
Efficiency
U.S. securities markets may still be the most efficient, and individual-investor friendly in the world. You can have a diversified basket of global assets within a “regular” U.S. brokerage account, and do it cost effectively. America has an established market, with steady government regulations and investor protection programs like SIPC, protecting the investor and his assets.
Diversification
A U.S. brokerage account can host a variety of investment vehicles in American or global companies. Furthermore, you can have checks, debit cards, and other instant access to your funds, even if you are an ocean away.
Mutual funds
Mutual funds are an easy way to spread risk among different stocks and bonds. They are one of the most popular investment vehicles, both for beginning and professional investors, and they come in many forms, including “Exchange Traded Funds” (ETFs).
Uncle Sam’s bureaucracy
Having the majority of your financial investments in the United States means it might be simpler to file an FBAR, as there will be fewer foreign institutions and accounts to report. Having U.S. compliant accounts makes it easier to meet all your reporting requirements.
Cross-border expertise
Make sure your advisor is licensed in both the United States and Israel, and has experience dealing with issues that you are facing.
Free Toolkit
For more about having a U.S. brokerage account from Israel, download the most comprehensive, simple-to-use guide, “Toolkit for Opening U.S. Brokerage Accounts from Overseas” at www.Profile-Financial.com/toolkit.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
Did You Make a Mistake When You Opened Your Bank Account?
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
What happened when you opened your first Israeli bank account after making aliya?
A new oleh recently told me: “I just tried your online tool [www.profile-financial.com/olim] to find out what I need to know about having a U.S. brokerage account now that I’ve made aliya. But I think I made a mistake when I opened my new Israeli bank account.”
He had gone to a local bank and told them that he wanted to bring some money over to Israel. The clerk there answered that as there is now an information exchange agreement between Israel and the United States (true), he needs to sign an IRS form called a W8 (false). The mistake was the form number, not the fact that the details of the Israeli bank account would be available to the IRS.
What forms do I sign?
If you open an Israeli bank account, you need to sign a W9 form (not W8), which tells the bank that you are a U.S. citizen. It provides the bank with your Social Security number to allow for easy reporting to the IRS. The W8 form is used for non-U.S. citizens.
You might be familiar with the W9 form from opening accounts in the States. In fact, when we help American olim with their IRA (Individual Retirement Account), brokerage, or other investment accounts, we have them sign a W9.
Are there restrictions on my investments from Israel?
Now that you live overseas, you may find that some companies, banks, and mutual funds won’t want to work with you. But don't worry. Even if your old firm has a problem with overseas clients, it’s easy to set up a U.S. brokerage account while you live in Israel. You can find answers to many common questions on this subject at www.profile-financial.com/olim . If you’d like to discuss your situation, call 02-624-2788.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
What You Need to Know About Premium Bonds
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
Premium bonds may be a good investment choice for retirees looking to increase their income. (For solutions to other problems retirees face, download a free copy of The Retirement Planning Book at www.profile-financial.com/rpb.)
Consider premium bonds
In today’s low interest rate environment, if you park your money in bank deposits or money markets, the interest you receive generally will not be enough to pay your bills. Even leaving a million dollars in Certificates of Deposit (CDs) in a bank will only generate a few thousand dollars a year of spending money. So how can retirees supplement their income without too much risk to their principal?
A solution may be to purchase bonds, especially “premium bonds.” Buying a bond means lending money to a country or a company. In return using your money for a set period of time, they pay you interest. Since bonds are not as safe as bank deposits, they generally pay a higher yield.
Some bonds issued previously offer high “coupon rates.” They may be higher than what newly-issued bonds pay today. Since everyone wants to get a higher interest rate, these high-coupon bonds sell at a premium price. By buying a premium bond, you get more cash flow from your investments than if you buy a bond at par or at a discount. When the premium bond matures, you won’t get the same amount back that you paid. But you will have received more cash flow every year, which means that you have effectively achieved your goal.
Premium bonds are not for everyone, and they carry risks, but anyone who is looking for income should consider if they are appropriate for their individual situation. For more information about how to have a financially stronger retirement, download a free copy of The Retirement Planning Book at www.profile-financial.com/rpb. Alternatively, call me on 02-624-2788 and let’s start talking about the best way to get income from your investments.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
The Best Way to Invest When You Want to Gift Money
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
Recently, a couple with four children of various ages asked me for advice on how to invest funds that they had just inherited. They didn’t need the inheritance for themselves, and they wanted to pass it along to their children.
The couple’s oldest child was married and wanted to buy a house, so getting her share of the funds now made a lot of sense. “What stocks should we invest in for her?” the clients asked. “None,” I said. “Money that you want to use in the short term should be in cash or short-term bank deposits because it needs to be safe. The stock market carries risk.”
As the next two children wouldn’t need the money for the next four or five years, they could afford to take some risk and try to grow their gift. A broadly diversified portfolio that included stock and bond funds could increase their odds of growth. Before getting started, though, I explained the level of the risk and tried to give the clients a sense of what to expect with regard to volatility.
Should you invest aggressively?
The couple’s youngest child was only 14 and would not need the money for some time. So the clients thought that they could afford to take more risk with his portion and put it all into stocks. I warned them that even though the stock market has traditionally offered stronger returns than other asset classes, growth is not guaranteed and they could lose money. In the end, the couple chose to use a “money manager” to handle that portfolio as they felt that this would be the best way to diversify and manage these funds.
To find out more about using a money manager, watch the 12-minute video at www.profile-financial.com/videos/SMA. To start a conversation about handling your investments, call my office (02-624-2788).
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
Why Interest Rate Risk is Important
By Douglas Goldstein, CFP®
Conservative investors who buy bonds to avoid high risk might inadvertently be exposing themselves to a potentially devastating risk: interest rate risk.
If you are concerned that you may have interest rate risk or other hidden risks in your investments, call my office at 02-624-2788 to discuss your portfolio.
Are bonds safe?
When you buy a bond, you lock in a specific interest rate that you'll earn until the bond matures. Assuming the issuer of the bond remains solvent, you’ll receive your interest payments (usually every six months), and on the "maturity date" you’ll get the principal value of the bond. That’s what happens in most cases. But…
When interest rates rise, people who have locked in a lower yield discover that their bonds decrease in value. For example, let's say you own a $50,000 bond that pays 3%. After you have bought the bond, if rates for similar issues rise, say to 5%, the principal value of your investment drops. It drops, since a 3% return pales in comparison to a 5% yield. If you hold your 3% bond to maturity, you will get your principal paid back, but if you need to sell it beforehand, you will likely lose money. That is interest rate risk – the fear that if you have to sell your bonds before maturity you’ll potentially lose out on regaining your full principal.
Longer term bonds and preferred stocks
If the bonds you own will reach maturity relatively soon, the rise in interest rates will have a limited effect on their price. But longer term bonds and preferred stocks (which often act like long-term bonds) can drop in value significantly if interest rates rise.
If you own bonds and would like to discuss the risks, please call (02-624-2788). If you see yourself as a conservative investor but worry that you might be exposed to interest rate risk, be in touch right away.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates
What You Need to Know About Financial News
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
Should financial news and media reports affect the way you make your investment decisions?
Recently, a client said: “I just read about _________ (fill in Israeli company name) in The Jerusalem Post, and I’d like to buy 1000 shares.” I hear comments like this fairly often. Since I help people who live in Israel with their U.S.-based IRA and brokerage accounts, I am able to help them trade stocks. However, before putting in an order, I recommend that they ask a few questions before considering buying an investment.
How accurate is the news?
The media frequently misrepresents information. News reports are only as accurate as the journalist’s orientation. Therefore, it may be reasonable to assume you are not getting the complete story.
Is the information fresh?
Once “hot” news reaches the general media outlets, it probably isn’t hot any longer. It might be warm at best. Some types of news items about long-term company strategies might give you an indication of where the firm wants to focus its growth. Such reports (e.g., that the company wants to enter the self-driving automobile market) may not have an immediate impact on its stock price. However, if you believe in the future of the product/company then it may be appropriate to invest. However, if short-term news breaks, for instance, a drug company receives FDA approval, and you think the stock will shoot up in value as a result of the new information, be aware that you’re possibly already too late for the party.
Does news make you a better investor?
Studies have compared investors who have made decisions with the input of news versus those who made decisions in a news vacuum. Interestingly, those folks who weren’t distracted by the media hype outperformed their well-informed peers. I wrote about this, along with many other behavioral finance facts, in Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing. Check it out, and sign up for the free articles and podcast at www.RichAsAKing.com.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
How to Increase Your Retirement Cash Flow
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
When you retire, your cash flow changes. Since most pensions won’t replace 100% of your pre-retirement income, you need other ways to increase your monthly cash flow.
A bank may not meet your needs
If you put your money in a regular savings account in the bank, you have little risk of losing your principal. But, you also will receive relatively low interest, as banks normally pay the lowest yields in the world of fixed income. This prevents you from “growing” your money. Whatever money you have may lose value due to inflation. If you have the tolerance to take on some level of risk, consider adding bonds to your portfolio. (Watch a 12-minute video on bonds at www.profile-financial.com/bonds.)
Bond coupons are usually higher than bank rates
A bond is a loan that you make to a country or company. You lend them money, they pay you interest on a set schedule, and at some point in the future, on the “maturity date,” they return your principal. The main risk of bonds is that the issuer of the bond will default. However, default in the quality bond market is not common. Bonds are rated according to their risk level, and more conservative investors choose high-rated quality bonds to generate income from their portfolio.
An easy tool to buy bonds
Depending on the amount of money you want to invest, you may buy a portfolio of individual bonds yourself, or you might find a bond mutual fund (or exchange traded fund - “ETF”). These investment vehicles own lots of different bonds and you own a piece of the whole pie, which gives you instant diversification. Make sure to check with an investment advisor and read the prospectus before investing, though, since there are real risks.
If you are worried about cash flow during retirement, email me (doug@profile-financial.com) to start a conversation about whether bonds make sense for you.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
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