I've often written and spoken publicly about having a healthy investment perspective. In my opinion, a healthy investment perspective stems from staying balanced, unemotional, and focused on the future while learning from the past; this can be a prudent approach to investing your money. Chasing hot trends can be productive in the short-term. However, it can leave you exposed to the downside in the long-term.

Let's look at some of the trends in the past few years that left people in the lurch:

1. The S&P 500 fad in 1995 - 1998. These funds skyrocketed in these years. The funds are fully invested. That means every investment dollar coming to the fund is fully invested in ever rising prices of stocks prescribed to the fund by very makeup of the S&P 500 Index. These funds were hit very hard during the bear market beginning in March 2000 because the managers were not able to take money off the table of the very highly over-valued stocks. As investors bailed out of these funds, the managers were then forced to sell these same stocks they had paid high prices to buy.

2. The dot.com bust. This one is obvious. Many people convinced that our economy had been reduced to technology companies spend so much money on dot.com stocks without a penny of earnings that many literally lost all, or nearly all, their money when the house of cards fell.

3. The NASDAQ fund bust was more or less the same as the dot.com bust. The difference here is that the NASDAQ only lost nearly 80% rather than 90% or 100% as was the case with many dot.com companies.

People tend to believe that investing is as much about being comfortable as it is being learned. I believe that most people wait too long looking to become comfortable. In doing so, many people have not taken advantage of the rebound rally we've seen in the financial markets the past 14 months. I wrote in my newsletter to look out for a strong rebound rally when the market and economy finally turned. Many people saw this and added to their accounts while the prices were low. Many dollar cost averaged investing a little at a time. Some went full steam ahead during the lows of July and October 2002. Either way, perspective took over and helped make good long term choices.

My advice is to look to the future, keep your long-term plans in mind, and make decisions based on solid unemotional thinking.

Happy holidays to you and your family!

All the best,

David Cryden

When you mail an additional $100 monthly to your lender, you miss the opportunity to invest the money into something that could provide you with a return greater than the cost of the mortgage interest. Have you heard of the stock market, for example?

Over the past two centuries, the U.S. stock market has produced an annual rate of return of close to 10 percent. Thus, if instead of prepaying your mortgage, you put that $100 into some good stocks and earned 10 percent per year, you will end up with more money over the long term than if you had prepaid your mortgage (assuming that your mortgage interest rate is below 10 percent).

This week's tip is an excerpt from "Mortgages For Dummies" by Ray Brown.

Ever actually take the time to plan a holiday budget? It's amazing how much money some people spend on the holidays.

If your net worth is $50,000,000 or $100,000,000 or more, I think it's fine to spend $5,000, $10,000, $15,000, $50,000, or even $1,000,000 on your friends and family for the holidays.

However, most of us don't have an eight or nine figure net worth. This means you, like anything else, are better served by having a list and a budget before you just go out and spend for the holidays. However, I believe many get caught up in the emotion of the moment between Thanksgiving Day and Christmas Day leaving a trail that on occasion can take a year, or years, to pay off.

Before you get too enthusiastic, consider where you stand financially this Holiday Season. Make a list of those you'd like to give a gift. If you've had a tough year financially, don't feel obligated to give putting yourself in deeper fiscal strain. Bite the bullet, be responsible to yourself and your family, and make the correct financial action.

Remember, there's always next year. Happy holidays to you and yours.

Here are a few assorted tips to help you head into the holidays:

1. Remember people, pension plans, and mutual funds do year end selling. Some of it relates to what they are to show in their portfolios for their fiscal year end. Other selling relates to taking gains to offset losses carried over from the bear market.

2. If you fall into one of these categories, don't miss the boat by not offsetting a carried over loss with a gain you could book this year since the financial markets are better.

3. When it comes to tax planning, make sure to pay your property taxes all in this ear if you can use the deduction.

4. The same applies to any California State tax you may owe for 2003. If you get them in the mail prior to January 1, 2004, you'll get to write them off on your federal return for tax year 2003.

5. When it comes to Christmas shopping, don't buy it and figure you can pay it over time. Do a little planning by setting a budget and allocating those dollars to the loved ones whom you'd like to give a gift. If it doesn't go far enough, then cut back on the amount per gift or the number of gifts you give.

Wishing you and yours a wonderful Thanksgiving and holiday season.

Tabulating you spending is only half the battle on the path to fiscal fitness and a financially successful home purchase. After all, many government know where they spend out tax dollars, but they still run up massive levels of debt! You must do something with the personal spending information that you collect.

When most Americans examine their spending, especially if it's the first time, they may be surprised and dismayed at the amount of their overall spending and how little they are saving. How much is enough to save? The answer depends upon your goals and how good your investing skills are. For most people to reach their financial goals, they must save at least 10 percent of their gross (pretax) income.

…not only do most people not know how much they are currently saving, even more don't know how much they should be saving. You should know these amounts before you buy your first home or trade up to a more costly property.

If you're like most people planning to buy a first home, you need to reduce your spending in order to accumulate enough money to pay for the down payment and closing cost and create enough slack in your budget to afford the extra costs of homeownership. Where you decide to make cuts in your budget is a matter of personal preference. Here are some ways to cut your spending now and in the future:

Purge consumer debt. Borrowing through consumer loans encourages you to live beyond your means.

Trim non-necessity spending. Most Americans spend a great deal of additional money on luxuries and nonessentials.

Buy in bulk. Most items are cheaper per unit when you buy them in larger sizes or volumes.

This week's tip is an excerpt from "Mortgages For Dummies" by Ray Brown.

What could be more dreadful than sitting at home on a beautiful sunny day and cozying up to your calculator, checkbook register, credit and charge-card bills, pay stubs, and most recent tax return?

Examining where and how much you spend on various items is almost no one's definition of a good time. However, if you don't endure some pain and discomfort now, you could end up suffering long-term pain and discomfort when you get in over your head with too huge a mortgage.

What you're interested in here is capturing the bulk of your expenditures. Ideally, you should collect spending data for a three- to six- month period to determine how much you spend in a typical month for taxes, clothing, meals out and so forth. If your expenditures fluctuate greatly throughout the year, you may need to examine a full 12 months of you spending patterns to obtain an accurate monthly average.

If you would like a table to categorize your spending, please write to david@smartmoneytalks.com

Next weeks Weekly Tip will focus on acting on your spending analysis.

This week's tip is an excerpt from "Mortgages For Dummies" by Ray Brown.

After you buy your first home or trade-up, your total monthly expenditures will surely increase. Be forewarned that if you had trouble saving before the purchase, your finances are truly going to be squeezed after the purchase. This pinch will further handicap your ability to accomplish other important financial goals, such as saving for retirement, starting your own business, or helping to pay for your children's college education.

Because you can't manage the unknown, the first step in assessing your ability to afford a given mortgage amount is to collect and analyze your monthly spending. If you already track such data- whether by pencil and paper or on your lightening quick, six-gazillion-megahertz computer, you have a head start. But don't think you're finished. Having your spending data is only half the battle. You also need to know how to analyze your spending data to help decide how much you can afford to borrow.

Next weeks Weekly Tip will focus on collecting your spending data.

This week's tip is an excerpt from "Mortgages For Dummies" by Ray Brown.

Asset protection comes in many sizes, shapes, and forms. With fall here and winter around the corner, here are a few thoughts about protecting your home:
· Check your drains for clogs by running water through them.
· Check your roof for leaks.
· Clear debris away from the pathways where water runs through your property so it doesn't dam up during heavy storms.
· Clear debris and braches away from your roof. In heavy weather or winds, it can clog drains or actually damage the roof by falling on it or rubbing against it.
· Have your chimney inspected for dangerous deposits that could cause blockage of smoke leaving the house or even a chimney fire.
· Make sure your heater has a safety inspection and that its air filters are clean.
· Since real estate has had such an unusually strong run, I suggest you go over your policy with your agent to make sure it still covers the current value of your home and the costs of potential repairs or replacement.

Here's a money saving tip. Reduce the length of the time you water your garden. As the days shorten and the temperatures decline, you'll need to water your garden and lawn less.

One year ago yesterday, the financial markets appear to have bottomed. Here's where we were then and are now:

In the Summer 2002 edition of my SmartMoneyTalks.com newsletter, I wrote about rebound rallies in the financial markets and included a chart showing just how much the financial markets have historically moved off bottoms in the past. (You can see a copy of this article by going the "Newsletter" section of the website). I've also discussed, many times, the merits of buying low; it doesn't always feel good, but it can pay-off in the long-term.

I don't know if we are (technically) in a new bull market yet; time will tell us that answer. I do know that we going to see more corrections and bear markets over the long-term; either way, the message here is to keep your goals and game plan on task, during both good and bad times. Buy when you can, and buy often when the markets are off.

Remember: The financial markets are a fundamental component of the U.S. economy. They are a part of what makes it tick. It's not terribly likely they are going to disappear anytime soon.

History is a good place to learn valuable lessons, but there is no guarantee that history will repeat itself.

In order to truly plan for retirement, you need to have an idea what you will need for income during your retirement; in order to do that, you'll want a baseline or barometer to begin this planning.

A good way to get a feel for what income you might need in retirement is to truly study what it takes to live today. Here are a couple of steps to take to help reach this goal:

1. You'll need to have a very accurate accounting of today's living expenses as a starting point.

2. Next, review your current expenses with an eye for those costs which will not exist once you are in retirement. (A good example of this, for many families, would be the cost to raise and educate their children.)

3. The final step in this phase of planning is to add things that you know you will have as extra expenses in retirement. (Some people like to travel more. Others will have long term care insurance costs, etc.)

Remember to keep these expenses realistic; do not fool yourself by attempting to see what you can survive on during your golden years. Always aim high on expenses; that way, if you're off-base, the chances are that you will have estimated too high and have extra income - not extra expenses.

You may be surprised to hear us say that some people, in fact, may be better off selecting a mortgage with higher points. If you pay higher points on a mortgage, the lender should lower the ongoing interest rate. This reduction may be beneficial to you if you have the cash to pay more points and want to lower the interest rate that you'll be paying month after month and year after year. If you expect to hold onto the home and mortgage for many years, the lower the interest rate the better.

Conversely, if you want to (or need to) pay fewer points (perhaps because you're cash-constrained when you take out your loan), you can elect to pay a higher ongoing interest rate. The shorter the time that you expect to hold onto the mortgage, the more this strategy of paying less now (in points) and more later (in ongoing interest) makes sense.

This week's tip is an excerpt from "Mortgages For Dummies" by Ray Brown.

We'll have more on retirement planning next week!

Planning for retirement begins the day you enter the work force; after that point, it never really ends. Even in retirement, you have to do financial planning so you can survive economically.

How do you begin retirement planning?

· Pay yourself first by putting at least 10% of every paycheck into a retirement plan. These plans can include a SIMPLE IRA, Roth IRA, Traditional IRA, 401k, 403b or TSA, SEP-IRA, Profit Sharing Plan, or Defined Benefit Plan.

· Run your cash flow the way a business does (in other words, understand where you spend every dollar). This can eventually become the basis for how much money you might need to spend per month, once you are in retirement.

· Increase your portfolio investments at every opportunity and stay diversified.

These first steps in retirement planning will go a long way towards making your retirement successful. They may seem overly simple suggestions to you in many ways, but that's really OK; many things having to do with financial success are simple.

I'll have more on retirement planning in next week's tip.

Is it time to invest the cash that you've had sitting at interest rates of less than one-percent?

In this writer's opinion, it seems reasonable to think that we may have passed the bottom of this bear market last October. When considering this fact, and reflecting on the slow and steady progress of the economy, I am of the belief that more improvement should lie ahead, as opposed to continued tougher times. As corporate earnings rise, so should the value of their stocks. (As long term investors, this is what you should focus on for signs of improvement.)

Many of you may still feel more comfortable sitting in cash, rather than being invested; however, I strongly suggest that you try not to wait until you feel totally comfortable about investing, which can often be after the financial markets have seen a large amount of the potential gain in their run, or when they are at (or near) their tops. This behavior can typically lead to buying high and selling low. If you do this a few times, you can ultimately erode your confidence and lock up your ability to make decisions. By doing so, the only one who loses might be you.

Don't hesitate to call to discuss this or any other investment or financial planning ideas. It doesn't cost anything to talk. Also, keep in mind that there are going to be ups and downs in long-term investing of any kind. The markets, albeit real estate, bonds, or stocks, are not predictable.

Never take an Adjustable Rate Mortgage without understanding and being comfortable with the highest payment allowed.

· If you are stretching to borrow near the maximum the lender allows or an amount that will test the limits of your budget, are your job and income stable? If you expect to have children in the future, consider now the fact that your household expenses will rise and your income may fall with the arrival of those little bundles of joy.

· Can you handle the psychological stress of changing interest rates and mortgage payments?

This week's tip is an excerpt from "Home Buying For Dummies" by Ray Brown.

Do the stock markets have seasons? Well, as you know, I do not totally believe they do; if I did, I might try to time those seasons. There are, however, a couple of trends to be aware of so you won't be surprised if, or when, they occur.

Summer: Summer tends to be slow. People travel and don't think much about investing. That proved to be false last year, as July was terribly difficult for people, but this summer has been true to form, with lower than average volume on the financial markets and not much happening.

Fall: Many fall months have been volatile. Michael Johnston, Senior VP of the American Funds, says, "Fall can be rough. No one knows quite why this happens." Last year, I wrote a Weekly Tip saying to watch out for the volatility of the financial markets in the fall. It turned out that early October was a very volatile stock market and may also have been the absolute bottom of the long bear market that started in March of 2000. As a side note, according to Michael Murphy, editor and publisher of the Technology Investing Newsletter, October is historically one of the four best months of the year, even though we've seen market bottoms and crashes during October over the past 20 years.

Winter: This season is usually pretty good, as the best months of the year tend to fall in winter. Historically, the four best months in the financial markets are October, November, December and January.

Spring: With tax season in full bloom, it's typical to see some stability in the markets. The spring months don't tend to be barn burners, but they do tend to hold their own.

As I've said before, markets and people aren't predictable, and I don't believe you can time them; however, as a long term investor, it's a good idea to be able to tolerate and appreciate their behavior while staying the course.

Do you remember the Y2K scare? Remember how people were afraid that computers all over the world were going to fail, taking industries and economies with them? Remember how that never happened?

There really was a Y2K Bug, you know; it came in the form of a technology stock bubble and a huge level of technology purchases in 1999. Those purchases, along with the collapse of the technology stock bubble, led to a huge recession in the technology industry.

During 2000, 2001 and 2002, people and companies were not buying much technology. In 1999, they had made huge purchases of technology in preparation for Y2K, or the New Millennium. You could say the industry was living on borrowed time during 1999. The hangover from it has lasted over three long years.

The good news is that the technology purchases made in 1999 are no longer state of the art and are no longer able to handle the advancements and needs of today; therefore, a new cycle of technology purchases is coming. You can already see some of the signs in the economy with computer-chip and laptop sales.

Technology is more important to the world's economies than ever before. It is fundamental. It is not going away. I wouldn't be surprised if the next couple of years are much better for many technology companies around the world.

Many people have old homeowner's insurance policies which they haven't reviewed in years. The trouble with this is that the policies may not adequately cover their needs any longer.

Homes values have risen dramatically in the past few years. Along with the rise in value has come an increase in the cost of construction. I strongly suggest that you call your insurance agent to make sure your policy will cover the cost of replacing your existing home, including any improvements that might be needed to meet current building standards.

Since many people's net worth continues to increase, I also suggest you look over the liability coverage on both your homeowner's and automobile policies. Many people today now need what's called an "umbrella liability policy" to properly protect their net worth. Umbrella policies work in tandem with your other liability coverage and are not terribly expensive.

If you would like, I can review this with you. I also suggest an overall insurance review with your agent.

What's the one thing I remind clients to do over and over again?

I am always reminding clients to make a current inventory of their belongings. The reasons for this are pretty simple: if you have a fire, theft, or different type of disaster, you will want to be able to prove to the insurance company what was in your home, mobile home, condo, or apartment.

I've always said that a person going through a traumatic experience will not be at the height of their intellectual and mental capabilities. Imagine trying to remember everything in your home so you can make a complete claim to your insurance company when your home has just been gutted by fire.

Do yourself, and your family, a favor. Get out your video or digital camera today. Make a motion picture of everything in your home, including what's in the drawers. Talk to the camera the entire time about what you're documenting, then put a copy of the video in a safe place (i.e., a safe deposit box or with another family member in their home).

Have fun movie making!

With the stock market improving, the real estate markets still strong, cash accumulating in people's pockets, and Baby Boomers continuing to inherit their parents' assets, the net worth of many Americans is continuing to rise.

The Baby Boom generation is the wealthiest generation our nation has seen. As a result, it's important for all of us to make sure we do what we can to preserve that wealth.

Here are a couple things to do when it comes to preserving wealth:

· Have adequate insurance coverage to protect your assets and yourself against any liability claims.

· Keep an accurate and current record of all your assets. This can help protect you if you have an insurance claim, or in case you need it for any number of varying types of financial planning issues.

· Make sure your estate plan is up-to-date with respect to changes in your net worth, tax laws, or any potential changes to distribute your wealth after you are gone.

· Good estate plans may also mean that you are distributing your wealth while you are still alive. Consulting with your attorney, tax advisor, and financial planner is important before you make any gift of cash, securities, or real property.

Wealth preservation is a life-long activity. It's in your interest to do the best job you can to preserve and cultivate your wealth because the results of that hard work can greatly benefit you, your family, and your community or country.

During the past year or so, I have written a couple of articles about bonds. The focus of these past articles was on high-yield (or junk) bonds, and some on government bonds. In writing today, I wanted to give you my sense of the bond markets as of July, 2003.

As if on cue, the high-yield bond market has been sizzling this year. The total return for 2003 on many high yield bond funds is somewhere between 15% - 20%. I think high-yield bond funds may have already seen the better part of their term price appreciation for this cycle. I also do not think there is an immediate a risk to their share prices. Perhaps we'll see some price stability, with continued higher income than most bonds; however, I do not feel this is true for the long-term government bond market.

Long-term government bonds have essentially been in a 20-year bull market. Long-term interest rates on government bonds have gone from the very high levels of the early 1980's to the 45-year lows of recent weeks. (The rule of thumb is that, as interest rates drop, bond values rise). There are several economic drivers that could move long-term rates higher relatively soon. These could include:

· Increasing U.S. Government debt as the deficit rises
(This increasing debt means more government bonds being issued or sold)

· Continuing slow improvement in the economy

· Investors continuing to pull money out of government bonds and placing it in the stock market

The three concepts above could easily raise the interest rate on long-term government bonds, a likely result of which could be depreciation in their values. There used to be a rule of thumb that, for every one percent increase in long-term interest rates of government bonds, we'd see a ten-percent decrease in their value. We have already seen a sizeable increase in those interest rates over the past few weeks so, in my mind, it's not a matter of "if," it's a matter of "when." True to form, as interest rates have increased, the value of long-term government bonds has decreased.

Clearly, no one can predict the future. We also know that past performance and results don't guarantee the same in the future. However, it is fair to say that, history does teach lessons. It teaches us things to be aware of and things to try and avoid. If you own long-term government bond funds, I think you should be aware of the potential reduction in value, if long-term interest rates continue to increase over time.

There's a funny thing about the stock market, you don't know if you are in a correction, bull market or a bear market until you are well into them.

A correction is typically defined as a ten percent (10%) decline in any of the stock market indexes.

A bear market is typically defined as a twenty percent (20%) decline in any of the market indexes.

However, the definition of a new bull market is less clear. If you read the pundits and columnist these days, you'll see that they're all struggling a little trying to define when a new bull market is in place. There doesn't seem to be a clear definition.

Frankly, I am not sure it matters in the long term. It may help investor psychology to be able to say, "we're in a new bull market." One day, there will be no doubt that the bear market which started in March 2000 will be officially declared dead. (Who officially makes that declaration is anyone's guess.) Is it today? Who knows for sure? Could it be dead already? Yes, the indexes have been in an upward trend for roughly five months.

As I write this tip, we are in the midst of the typical slow summer for the financial markets. Investors are taking their summer holidays, and some are waiting to see if the market continues to slow relative stability and improvement. The key to better returns in the financial markets in the long term should be the growth of the economy and corporate profits. The recession we experienced recently wasn't deep. Therefore, the recovery hasn't been wildly strong. However, there are good things happening in the economy.

I am of the mind that those who invested during the tough times should be nicely rewarded for buying low. I am also of the mind that many investors could very well get back into the markets well into the recovery and miss a fair amount of the opportunity while sitting in money market and cash accounts at less than one percent (1%) awaiting for a time when they feel better about investing again. Remember, buying low doesn't typically feel good.

Clearly nothing is guaranteed in life or investing. We all have to make choices and take different types of risks. If history proves itself true, we'll see a new bull market declared one day and better times in the financial markets for all involved.

Ever go on a trip and found a need to drive a friend's car? Have you needed to go to the store and ended up driving someone else's car? Ever let someone else drive your car?

Here's a simple tip that could save you a lot of money or hassle: Before you ever drive another person's car again, call your insurance agent to find out how your coverage would work should you have an accident. Make sure you are covered. Make sure that your coverage is understood. See if there is anything special you need to know about a friend's coverage before you drive their car.

Happy motoring!

What would you say is the biggest financial enemy to retirement for most people?

Many people would say its inflation. It's safe to say that inflation has been, and likely will be, a financial danger to many for years to come. Inflation, no matter how low, will erode the value of your dollar over time. Being aware of this, and fighting it, will probably be a life-long challenge for most of us.

However, there is a greater danger to your retirement than inflation…you! If you don't take care while in retirement, the greatest danger to your financial well-being is you. Why? Increasing your lifestyle beyond your means will outstrip your financial resources quicker and easier than will inflation over time.

The moral of today's story is to learn how to keep your lifestyle within your means; that way, it will never jeopardize your financial health.

I wish you and yours a happy and healthy 2003 Independence Day!

Summer vacation season is here, and many Americans will be traveling outside the country. Did you know there is a non-profit organization that can provide you with a directory of reputable doctors outside the United States for free? The forty-three year-old organization is called International Association for Medical Assistance to Travelers (IAMAT).

IAMAT has a 72-page list of reputable English-speaking doctors in places all over the world. They have agreed to accept reasonable fees for their services to IAMAT members. The only catch is that you need to sign-up for a free membership, and IAMAT will request that you make a tax-deductible donation.

Here are two ways to contact IAMAT:

IAMAT
417 Center Street
Lewiston, NY 14092

Website: www.iamat.org

I wish you all happy - and safe - summer travels.

Soon after moving into your new home or refinancing your mortgage, you'll get several million junk mail solicitations for optional mortgage life insurance policies, ghoulishly offering to pay off your loan if you kick the bucket.

We strongly urge you not to purchase either mortgage life insurance or mortgage disability insurance. There's no correlation between your loan amount and how much life or disability insurance you need to protect your dependents. What's more, these policies tend to be grossly overpriced for the amount of insurance they offer.

This week's tip is an excerpt from "Home Buying For Dummies" by Ray Brown.

If you're an employee, retired, or self employed, you should make sure to adjust your 2003 taxes to reflect the new lower tax rates just passed within the new tax law.

Under the new law, we'll all be paying lower taxes for 2003. Make sure you see your payroll department or tax preparer relatively soon to make the appropriate changes so you can keep more of what is already yours.

As of this writing, I have not actually seen the new tax schedule, including rates and the marginal brackets; however, I have already adjusted my June 15, 2003, estimated tax payment to reflect my educated guess of what I believe I'll owe under the new laws.

Make sure you do the same soon. There's no point in loaning the government money that they'll only return in 2004.

I always try to ask for referrals. As you know, referrals are the lifeblood of any business. Earlier this week, a client said he had friends he'd like to refer but they had been bitten by the difficult stock market of the last three years and they were hesitant to ever invest in common stocks or common stock mutual funds again. I wrote a note back to him, suggesting he might convey my message to his friends.

When I was done, I realized the ideas would make a good Tip of the Week.

Here is what I wrote:

"I was thinking about the remarks your friends made relating to not wanting any more stocks. I don't know what they had in terms of the stocks they owned when they had the bad experience; however, common stocks are a fundamental part of the economy. For the long-term investor, there are lots of viable ways to invest in them. When a person off-handedly eliminates such a basic investment category because of a bad experience, they are running away from everything in that area; generally, that's not the best choice. I believe common stocks will be a place to invest for decades to come, as they have for many decades preceding this one.

"Real estate in the early- to mid-1990s didn't look good; now, everybody has forgotten how bad it got. When everyone thinks real estate, or any asset class, is the 'only' place to invest, it's generally not a good sign.

"Maybe your friends could reconsider a more fundamental approach to investing in common stock mutual funds by getting a second opinion? I'd be happy to speak with them."

As always, your referrals are greatly appreciated. Please use my new direct referral line (805) 544-PLAN when referring your family or friends to me.

Well, we've got a new tax law…and there's a lot to it. Seemingly, there is something in it for everyone. Whenever a new tax law is passed, you get the quick overview. After a while, more of the details begin to emerge.

This new tax law is designed to stimulate the economy. Thankfully, it isn't absolutely huge. There is a fine line between adding to the deficit to stimulate the economy and over borrowing, which could end up costing too much in the future. We have the Baby Boomers nearing retirement. The demands on the economy and government during their (our) retirement could be staggering; therefore, we need to have a sense of balance between today and tomorrow.

This tax law could help the financial markets in many ways. Here are a couple thoughts to consider:

· It will put more money in the economy, which should be stimulating and could help further corporate earnings.

· Small businesses will be able to deduct more of their capital expenses, immediately reducing their taxes for the current year. This should motivate some businesses to make additional capital expenditures. Again, this should put more money into the economy.

· Dividend-paying stocks should benefit from the new favorable taxation on dividends. This could increase their value, as people look for the benefits of very favorable tax rates on the dividends. (As a result, it may hurt the value of some bonds.)

· Lowered capital gains rates should favor investors putting more money in the markets. They would receive growth with a fairly small tax bite, as opposed to today. (The lower capital gains rates apply to sales on or after May 6, 2003.)

These are just a few initial thoughts on this new tax law. There will undoubtedly be more details and analysis over the weeks and months ahead. Stay posted for more in the future.

In June, I'll be interviewing Kevin Doyle, Ombudsman for the Condé Nast travel magazine, on my Smart Money Talks.com radio program. This will be our third interview, and all of the previous shows have focused on problems people have experienced when traveling and how they can be avoided or resolved.

One recurring suggestion Kevin has made is to protect your investment in a cruise vacation by purchasing the insurance that is offered to cover things like illness, a death in the family, and a host of other things. Kevin points out that, for a small fraction of the cost of a trip, you can protect yourself from losing all your money due to any number of unforeseen reasons.

The suggestion here is to purchase the insurance from an independent agency, not the cruise carrier itself. In fact, one of the protections you should have is against the carrier going out of business. (If the carrier is providing the coverage and they have no money, they will not have any way to protect you.)

Also, make sure to pay for the cruise with a credit card. The bulk of the charges on the card should be made within 60-days of your travel date. By doing this, you'll have another layer of protection, as the credit card company will go after the money for you if there is a financial problem with the cruise company.

For smart travel tips, tune to SmartMoneyTalks.com on Saturday, June 21st at 9:05am.

Good real estate agents are an excellent source of advice about readying your house for sale. Because agents see your house with fresh eyes, they can spot flaws you no longer notice. Furthermore, agents look at your house the way buyers do. They know how to prepare houses so that they're appealing for marketing - a process sometimes referred to as staging. And, last but not least, because agents work on commission, good agents don't want to waste your time or theirs trying to sell a house that's not up to snuff.

This week's tip is an excerpt from "Home Buying For Dummies" by Ray Brown.

The title of my Tip of the Week from November 5, 2002, was "Time to Bring Out the Junk?" In that article, I wrote about the concept of investing in junk bonds (or discount corporate bonds) as the economy improves, for increased income and appreciation.

Here are a couple of excerpts from that article:

"Why would you invest in discount corporate bonds? Generally, discount corporate bonds perform poorly when the economy is not doing well. As such, they are essentially the only part of the bond market that has not done reasonably well during the past couple of years. In fact, they have lost value while many other types of bonds, particularly government bonds, have gained in value. In many cases, they also represent an opportunity to get a double-digit yield. Right now, the difference (or spread) between the yield you can get with a junk bond fund and a government fund is at historic levels.

"As the economy improves, the junk bond market should see price appreciation. In addition, you're getting a high dividend payout. The combination of the two is called total return. In this case, it could be quite attractive going forward. "

In reviewing how junk bond funds have done year-to-date, you'll find many have a total return well above ten percent (10%). This not only confirms the essential role of junk bonds in the economy, it also confirms that many investors think the economy is on the mend.

I believe junk bonds/discount corporate bonds have a place in a portfolio for income right now. They are far more competitive than U.S. Government bonds may seem, with respect to yield in a climate where interest rates could be rising in the not-too-distant future; however, they are not without credit or interest rate risks. In addition, I also believe a fair amount of the initial bounce in share price appreciation may very well be behind us already. This means junk bonds may likely offer a more competitive yield with some potential price appreciation.

Many people are without a current estate plan. Some people don't have one because they have no children or heirs, other people don't have an estate plan because they are young and don't feel the need, while others have old estate plans that are not up to date with the current laws.

One thing everyone should keep in mind is that estate plans do provide benefits while you are alive. Among the papers you'll have in your estate plan, there are two primary documents that handle these current living issues:

Power of Attorney: This is a document providing someone the legal authority to conduct financial transactions for you, if you are unable to do so.

Durable Power of Attorney for Healthcare: This provides someone the legal authority to make medical decisions on your behalf. There are guidelines written into this power of attorney which state your desires relating to prolonging your life at any cost, etc.

In both cases, your spouse is generally the person who has the power of attorney. If you do not have a spouse, your attorney can help guide you to an appropriate person.

If your estate plan is several years old, or you don't have one, I would suggest that you see a qualified estate planning attorney for a review or to establish a plan. You can never tell when you might need one. Life is, without a doubt, unpredictable.

The major military phase of the war in Iraq has been pronounced complete, leaving behind it a period of roughly six months of uncertainty; therefore, the next logical thing for the financial markets to do is to shift their attention from Iraq back to the economy.

We are already seeing this shift in focus from the uncertainties of the politics of going to war in Iraq, and the war itself, to the status and progress of the economy and corporate profits. In my opinion, this is a natural and healthy realignment of focus to the usual areas of financial activity. That, in and of itself, is a move in the right direction.

My sense, and that of many others, is that the hesitation in the economy and financial markets is a result of the Iraqi situation. This was mostly borne out of uncertainty. In the short-term, I believe this will lead to a slower first quarter than otherwise may have happened, excepting the Iraqi war. However, I also think this will be a short-term economic slowdown.

The good news is that the price of oil is coming down, the markets have raised off their March lows, and corporate profits seem to be coming in reasonably well. As this slow first quarter works its way through the system, we may find that the second half of 2003 is better for the financial markets and the economy.

As always, stick to your long term plans without focusing too much on short-term news.

So often, clients will miss out on the many benefits that professionals offer them. Another way to put this is that many clients tend to be reactive about their finances or other needs, rather than proactive. I've always believed the best way to live is to be proactive.

In the case of working with professionals, many will have a system by which they work with their clients. These systems open doors for continued work together, but cannot anticipate every need of a client.

I have several methods or systems that I use to work with my clients:

· Review invitations mailed once a year to clients

· E-mailed "Tip of the Week" service

· SmartMoneyTalks.com website, offering many services and ways to communicate with each other

· E-mailed "Radio Show Reminders" with guest/topic listings for the upcoming show

· Quarterly newsletter

· No-charge account servicing

· Additional consultations upon client request

· Miscellaneous communications over time

The only way a client can fully benefit from all of these offered services is to request them. I can't do the actual requesting on the client's behalf; however, I (and my team) can be there to provide the services.

It's up to you, the client, to take advantage of the services that a professional might offer you. It's up to you to call when something has arisen and you need advice. The more proactive and participatory you are with the professionals with whom you work, the better the results will be.

It may be cliché, but it's true that "It Takes Two to Tango."

One of the easiest ways to lose money is to buy a new car; in fact, you are losing money the moment you drive it out the door. For this reason, I've never been a huge fan of buying new cars. My last four cars have all been pre-owned (used). They've served me very well and have saved me thousands of dollars in depreciation.

Frankly, the explanation of why a car loses such a disproportionate amount of money through depreciation in its first year of service eludes me; however, all you have to do to prove it is to look through a Kelly Blue Book or a few classified ads.

One of the best deals around can be a car that's one- to two-years old. You get a great price, a car that's almost always barely broken in, and sometimes still have a warranty to boot. (Note: some hot models will hold their values better than others.)

There are lots of choices out there for you, especially through the returned leased vehicles markets. I've even taken it a step further by using a local auto broker who will go to car auctions to buy the specific car you want (this includes, model, color, options, and price).

Do yourself a favor the next time you need a car: make sure to compare the automobile you want by looking at the new version versus the pre-owned ones available. I bet you'll be surprised by what you find.

Finally, make sure to have a trusted mechanic check out the car before you buy it. I suggest you make that a part of the purchase agreement.

Happy shopping!

One of the most common issues I consistently remind my clients about is to have a current inventory of their belongings and valuables.

Its remarkable how many people do not have an inventory of their belongings, which may leave them hard pressed in the event of an emergency.

An inventory of your belongings and valuables can be invaluable if you have a fire, theft, or other emergency. Your inventory will also help you to conclusively show your insurance company what you have and what they need to cover.

Without an inventory, you are left to rely upon your memory, which is usually going to fall short (this can be especially true under the pressure of a personal crisis).

I encourage you to borrow a video camera and make a complete inventory of everything in your home. Do not leave the video inventory in your home; put it in a savings deposit box at the bank, or give it to a relative for safe-keeping.

Also, I suggest that you review all valuable items (i.e. jewelry, collectibles, art, etc.) and make sure they are covered by your current insurance policy. If you have any doubts about your coverage, review your inventory with your insurance agent to insure you are properly covered.

It seems that many people are sitting on the sidelines, watching and wondering what's going to happen in Operation Iraqi Freedom. In the meantime, the clock is ticking towards the tax-filing deadline.

If you're planning on waiting until the last minute to make your 2002 IRA contributions, I suggest that you make a telephone call to find out the contribution deadline for the company who handles your account. The reason is simple: many companies will have different deadlines for accepting IRA contributions. For example, The American Funds Group (whom I use a great deal with my clients) will accept contributions which are post-marked on April 15, 2003. Other companies want the contributions in their offices by April 15, 2002.

Sometimes, waiting until the last minute can cost more than you might think, so plan ahead. Make a call and find out the contribution deadline for your IRA sponsor.

As I discussed in this column on January 15th and January 29th, until the Iraqi situation plays out, uncertainty will not likely be welcomed by the financial markets. As we near the conclusion of the end game, the markets have shot up in anticipation of a successful military campaign (as a result of 'less uncertainty' about what will happen next in Iraq.)

Despite this upward movement over the past week or so, it's likely that the next few hours, days and weeks may be - or feel - very challenging. Stay with your long-term plans, just as you have during the three-year Bear market. Try not to be swept up in any short-term situations. Look for opportunity if there is a market dislocation, and try not to panic and sell off if everything isn't "just right".

Keeping the proper perspective and a long-term view is the most likely way to steer through this tough time.

Some people are seduced by the seemingly better attributes of other houses on the market. If your house is small, larger ones seem more appealing. If you don't like your carpeting, houses that have hardwood floors may attract you. However, as with a long-term friend or spouse, you know your current home's defects all too well because you've probably lived with them for years. Unless you're incredibly observant, you surely didn't know half your home's faults and short comings before you moved in. The same is true of the new homes you may be lusting after.

Some problems and defects are more easily fixed, and some are more worth fixing, than others. When deciding whether to fix problems or to move away from them, consider these important issues:

· What's the payback? Some home remodeling projects may actually pay for themselves, by increasing your home's value enough to make up for the cost of the improvement.

· How intrusive will the work be? Six months into a remodeling project that moves you out of your bedroom (and has you wanting to flee the country) will make the "payback" seem far less important.

Some problems and shortcomings of your current house simply can't be fixed. If your situation is unbearable, moving might be the only solution. Before you make a move to sell your home, do lots of thinking and make sure to consult a real estate and financial professional.

This week's tip is an excerpt from "Home Buying For Dummies" by Ray Brown.

It has been predicted that the price of oil would increase in anticipation of a conflict in Iraq. True to form, oil prices are at their highest levels in quite some time. What does this mean?

· The cost of gas has risen.

· Inflation is likely to see a tick up.

· The cost of producing goods is increasing.

The issues above are not terribly good, economically. Realistically, the increase is likely to be short lived. Once the situation in Iraq becomes clearer, I think the price of oil will decline; in fact, it could decline pretty quickly.

Many people believe there will be a favorable outcome to the Iraqi situation (meaning, we still need to be patient). The only exception to this would be an unforeseen problem rearing its head; barring that, these higher oil prices are not likely to last.

While war is not ever a good thing or a first choice, freeing up the world's second largest oil reserves would keep inflation - and the cost of energy - down for a long time. (This may be one direct benefit of any potential positive political changes in Iraq.)

The real thing here is that both the stock markets and the oil market perform poorly during a period of uncertainty. Just as with common stocks, when the uncertainty is gone, I think oil prices will bounce back.

· Prioritize your needs
· Talk to people who live in the neighborhoods
· Get days-on-market (DOM) statistics from your real estate agent. DOM statistics indicate how long the average house in an area takes to sell. This will help you gauge the pricing and position of the homes you are considering.
· Get help from a professional. Home buying is a team sport; don't hesitate to ask a real estate agent, lender, or appraiser to compare the upside potential of home values in each neighborhood.

This week's tip is an excerpt from Home Buying For Dummies by Ray Brown.

They say the worst thing you can do is nothing. How about that for a cliché? Life is full of clichés; however, many of them contain some truth.

I've noticed that many clients, who want to put their money to work now, are again focused on short-term events; in this case, it's Iraq. While I don't mean to discount this very difficult issue, I don't believe it will be something that will affect the financial markets and economy over the long-term. In focusing on Iraq, people are forgetting to keep their eyes set on our economy, which is plodding along and slowly improving. As corporate profits improve, so should the financial markets. Iraq may simply be providing us another buying opportunity.

If you want your money to go to work, and you don't know how to get it invested, dollar-cost averaging is a good way to do something. You can put the amount you want to invest in a money market fund and slowly have it invested in long-term mutual funds on a month-by-month basis. This is called dollar-cost-averaging, and it can be an effective way to deploy your long-term money into investments.

If you're looking for a better alternative to the low rates you may be earning in banks or money market funds, give me a call to discuss this strategy.

Many of you register your assets and investments in joint tenancy. While this has been a common way to hold title to assets for decades, it may not be the best or most effective choice.

If you hold assets in joint tenancy, you could lose income tax benefits, miss estate tax planning benefits, or even put your assets at undue risk.

If you have a trust, should your holdings be held in the trust?

If you are married, should they be held in a new iteration of community property called community property with rights of survivorship?

My suggestion is to consult with your estate planning attorney and ask how your assets should be titled. These are legal questions, and they require legal advice.

Interest rates at forty-year lows are not the norm. As we move on this year, I (and many other financial advisors) expect the economy to continue to improve, not withstanding any unexpected events. Since interest rates are at forty-year lows, due to the slower economy, it would make sense that they should increase with further economic recovery and improvements in the financial markets.

The improvements in the economy and financial markets mentioned above should also lead to higher mortgage rates, which tend to move pretty closely to the long-term government bond.
The closing window, mentioned in the title of today's tip, makes reference to this remarkable opportunity to get mortgages at such low rates. (During this cycle, some people have secured financing on their property at rates lower than six percent).
I encourage anyone who has not taken advantage of these extraordinarily low mortgage rates to look into refinancing, or buying property, before they are higher. My opinion is that they are more likely to move up than down, at this point in the economic cycle.

This week's tip is brief. It's a follow-up to the tip of January 15, 2003. In that week's tip, I wrote about the market's dislike of the unexpected.

We've seen a fair amount of volatility in the past 10 days or so. I believe it's based on the country's anxiety over the Iraqi situation and the fact that we are likely in the end-game there, not necessarily economics. The outcome of that end-game is still not entirely sure.

My hunch is that the markets will be better behaved when we see the conclusion to the end-game. Until then, the unexpected and unknown will likely rule the financial markets short-term.

As always, look for buying opportunities and be patient. The unknown doesn't usually last forever.

Do you ever read the endorsements that your insurance company sends you? Have you ever considered that these endorsements could actually change your coverage in a way that you don't like or want?

Many people get mail from their insurance company or companies containing important and material changes to their insurance coverage(s) only to put it right into some kind of file. Insurance policies and the coverage they provide are ever evolving. You might be surprised to find that the policy you originally bought has changed so much that it's no longer what you want or need.

Do yourself a favor by reading everything that your insurance company mails you. This is an era of changing coverage. If you have any questions at all, you can call or E-mail me, or contact your agent.

This week's tip is simple. The financial markets generally react to the unknown, not the known; therefore, the market will tend to move up or down based on the knowledge it has (collectively) and what it expects could happen as a result of that knowledge.

In the case of a potential war with Iraq, the known is that it might occur. The expectation is that it will be executed successfully and swiftly. The unknown could be a surprise in the length, outcome, or happenings in the war that would be negative. Another unknown, or an unexpected possibility relating to the Iraqi situation, is that the war might not occur at all. This should, most likely, move the financial markets up.

In the last two years, we've had two unknowns that have negatively affected the markets. The first was 9/11, and the second is the very aggressive war on terror. Both instances led to a further decline in the financial markets.

There are, and will be, unexpected things in life that are both good and not so good; these are the actions that can positively or negatively affect the financial markets. They generally have a short-term impact. My suggestion, as always, is to stay with your long- term plans while taking advantage of any short-term opportunities that may arise.

We all know there is truly no way to predict the financial markets' performance; in fact, trying to do so is futile, at best. Having said as much, I am going to review a couple of ways some people gauge the month of January and the financial markets.

Traditionally, the month of January has been a good month for the financial markets. Conversely, the month of September has been the worst.

Financial gurus say that the first five trading days of January can tell you how the month of January will perform. If you have a good first five trading days in January, you tend to have good performance for the month. A good January tends to be a positive sign for the whole year in the financial markets. This is called the "January Barometer."

If you look at the performance of the financial markets for the first five trading days of 2003, you'll see that the S&P 500, the Dow Jones 30 Industrials and the NASDAQ averages are all up; so, if there's anything to the January Barometer, we're off to a good start for 2003.

Economically speaking, I like the fact that we are looking at low inflation, low interest rates, a tax reduction package, a recovering economy, the third year in the presidential term/election cycle (which have all shown positive returns post-World War II), and stock valuations that we haven't seen in a while. Barring any unforeseen incidents, I am hopeful for better times ahead for the financial markets and our investment portfolios.