Thursday, November 20, 2008

Roth Idea

For those of you who are married, actively participating in a company sponsored retirement plan and making over $169,000 in adjusted gross income in 2008 ( $116,000 if you are a single filer), consider making non-deductible IRA contributions in 2008 and 2009. The goal would be to convert the balance to a Roth IRA in 2010. In 2010, the income limit for Roth conversions (currently $100,000 in adjusted gross income) goes away and you can pay the tax due on the conversion over two years. Given the expectation that marginal tax rates will be going up, it may be a way to give higher earners an opportunity to get some money into Roth accounts.

There are several other aspects to consider such as will the income limit really go away in 2010, how much you can set aside and where the dollars will come from to pay the tax due. So send us an email at for more information and to discuss your specific situation.

Thursday, November 13, 2008

Dividend Aristocrats

I was doing some research this morning and came across this chart on the Dividend Growth Investor website ( It shows the performance of the S&P 500 versus the S&P Dividend Aristocrats index. It also makes pretty clear why we like companies that pay dividends.

Dividend Aristocrats are companies which have paid and increased their dividends for the last 25 years. These are the types of companies that we look at when researching stock ideas. Some examples of Dividend Aristocrats are General Electric, Johnson & Johnson, Pfizer and Procter & Gamble.

This chart may not mean much today given the turbulent market environment, but it should help to provide some comfort that buying quality dividend paying companies is an attractive long term strategy.

Tuesday, November 11, 2008

Gift of Knowledge

I saw this story about mothers talking to daughters about financial matters on NBC News last night. The basic premise was that a subset of moms consider themselves the CFOs of their households and make it a point to discuss finances with their daughters. That is great, but the story does point out another very important reason why women in particular should be financially literate. You live longer than us men do and given that difference in life expectancy, as the piece says, 90% of women will be alone at some point in their lives. So by all means teach away about the timeless tenets of personal finance – how to make money, spend less than you make and put the difference someplace safe – but include sons too. It’s knowledge they won’t get at school so you are the only, or at least the best source. And it’s knowledge that will pay dividends over their lifetime. If you know it's important to discuss but don't know where to begin send Jim or I an email; we have some ideas about how to get the conversation started.

Thursday, November 6, 2008

President-elect Obama

So we now have settled on who will be the next president. Congratulations Mr. Obama! He certainly will have a full plate when he assumes the presidency on January 20th.

But what does this mean for our clients. In two words, not much. Please don’t take this to imply that we are oblivious to the fact there will be changes under an Obama administration. Of course we know there will be winners and losers. What we do mean is that we will continue to search for high quality companies that pay a dividend and are inexpensively valued.

Some investors may respond to the election of Barack Obama and sell off certain stocks or sectors. We hope to take advantage of some of these overreactions and add new names to the portfolio. We believe the type of companies that we like and the managements we want to partner with can operate effectively in any political environment. We also are confident that strong balance sheets have no political allegiance. The new president and his policies may have some impact on how we value a company, but even that will be relatively minor.

Bottom line, the agenda of President Obama will be one of many factors that may have a modest influence on how we construct a portfolio, but it will not lead to a fundamental change in our approach.