Taxpayers are advised to file their returns as soon as possible, in part to reduce their risk of taxpayer identity theft. But what happens if you file right away, and then discover you've left key information out of your return? A Credit.com reader recently asked, "I already filed my taxes and just got a 1099-C. What do I do?"
Here's what you shouldn't do: panic and just file a new return. Doing so can just muck things up and may delay the processing of your return.
Instead, if you discover you need to correct a return you filed, you typically must file a specific form: IRS Form 1040X. The form allows you to adjust information included in your original return. It is available through most tax preparation programs and on the IRS website as well. The completed form must be returned to the Internal Revenue Service by mail. E-filing is not an option here.)
"Whether you should amend or not depends a few key factors: whether your tax return was accepted or rejected by the IRS and whether you need to amend due to change in your filing status, income, deductions and credits," says Lisa Greene-Lewis, a certified public accountan and TurboTax tax expert. "If your questionable changes are related to a change in filing status, income, deductions and credits, then you should file an amended tax return," she says. But in the case of a rejected return, you can correct and resubmit it.
Maybe You Should Do Nothing
If you're expecting a refund, and realized you omitted some income, you may even be able to sit tight. "It's quite possible that, in the case of a 1099 or other third-party income reporting document that was overlooked, the IRS took note of the amount, thanks to the copy it receives of such documents," says Kay Bell, founder of the Don't Mess With Taxes blog. In those cases, the IRS may automatically adjust the refund. "When the amount of your refund is not what you expected based on your filing, the IRS usually sends you a notice, separate from the check or direct deposit, explaining the difference," she says.
But if you owe the IRS, then additional information from a 1099 or other income may mean you owe more. In that case it's important to file a 1040X as soon as possible and pay the amount due. "You want to stop any interest and possible underpayment penalties from accruing as quickly as possible," says Bell. "No need to pay Uncle Sam more if you can put on the brakes."
In the case of our readers who received a 1099-C after they already filed their returns, one thing to understand is that the amount of income reported on that form may or may not be taxable. (Here's a guide to understanding Form 1099-C.) The IRS will assume it is taxable, however, unless you tell them otherwise. So the first step is to determine whether the new information will change the amount of tax you owe, or the refund you get.
That means following the instructions in IRS Publication 4681 to determine whether you qualify for an exclusion such as the insolvency, bankruptcy, or Mortgage Forgiveness Debt Relief Act exclusion. If you do, you'll use IRS Form 982 to tell the IRS why you aren't including the amount of canceled debt in your taxable income.
1099-C, 104X, 982
If you've already filed, you will need to use IRS Form 1040X to transmit IRS Form 982 to the IRS. You can provide a brief explanation in Part III of the Form 1040X and attach Form 982. By doing this, you should be able to avoid having the IRS notify you in the future that you owe taxes because you failed to report this "income."
If you don't fully qualify for one of these exclusions, you will have to include part or all of the amount of canceled debt reported on the 1099-C as income. In that case, you will report that additional income with your gross income in Box 1 of Form 1040X and adjust your tax liability and amount you owe (or refund).
If all else fails, the IRS will likely let you know you made a mistake. "If you discover a math error or something similar, don't worry about filing an amended return. The IRS' calculators will catch your mistake and correct it for you, for better or worse," says Bell. A 1099 or 1099-C that wasn't accounted for can take longer to catch up to you, though. At Credit.com, we've heard from taxpayers who have just recently learned that they owe taxes as a result of one of these forms filed with the IRS last year or the year before.
Credit Unions are the underdog of financial institutions. With over 100 million members and $1.1 trillion in assets, credit unions are growing but still pale in comparison to the trillions of dollars in assets held by the big banks.
But sometimes, the underdog is the better option, which is often true in the case of credit unions. Credit unions often offer lower fees, lower interest rates, better customer service and are accountable to their members compared to deep-pocket stockholders.
Credit unions also differ from banks in their eligibility requirements. Laws created by the Federal Credit Union Act of 1934 dictate credit unions must have defined memberships. For example, members must have a common bond such as the same place of worship, employer, geographic location or relationship to an existing member.
Credit Unions Aren't Exclusive Clubs
These eligibility requirements may feel exclusive, but shouldn't deter potential customers from applying for membership. In fact, there are at least 60 credit unions anyone can join, including ones that sound exclusive to the military or government employees, like Pentagon Federal Credit Union.
People interested in a joining a credit union should first see if a community-based credit union fits their needs. It's often easy to be eligible for membership by simply living, working or worshipping within the credit union's boundaries.
Consumers who don't qualify for credit union membership based on employer affiliation, location or any other requirements can seek eligibility by joining an organization with membership benefits or, in some cases, simply depositing money into an account.
Even bank customers should consider membership with a credit union to diversify options for mortgages, balance transfers, car loans or a personal line of credit.
Credit Unions Aren't Nonprofits
It is important to keep in mind that credit unions aren't nonprofit organizations. Many still charge fees like overdraft charges at prices close to a bank's. However, credit union members have more control by being voters with a voice instead of one among millions of customers. Credit unions may also offer more competitive rates on a loan or personal line of credit than a big bank.
Many credit unions make it relatively simple and cost-effective to become a member. Some consumers may blanch at the idea of spending $15 or $50 to become a member, since a bank membership can be free if you manage to never need a loan or be charged a fee. But the money invested in a membership might save you money in the long term by not having to pay bank fees. Here's a sample of credit unions anyone can join:
American Heritage Federal Credit Union
Eligibility: Join by depositing $15 into a share savings account and maintaining this minimum balance.
Product worth joining for: Consumers dealing with credit card debt can get a 24-month, no-fee balance transfer with a 2.99 percent APR promotional rate.
Digital Federal Credit Union
Eligibility: To become a DCU member, you much first join one of the listed organizations that includes nonprofits like the Free Software Foundation. The organizations range in membership fees from $10 to $120. However, joining DCU results in a lifelong membership, so you could cancel a membership with the organization after joining.
Product worth joining for: Those building credit could join for the Visa (V) Platinum Secured Credit Card, which comes with a hefty minimum deposit of $500, but doesn't have an annual fee.
Pentagon Federal Credit Union
Eligibility: Members of the National Military Family Association and Voices for America's Troops are eligible for PenFed membership. PenFed makes it easy for anyone to join one of these associations, and subsequently join PenFed. Just pay dues to Voices for America's Troops for $14 a year or the National Military Family Association's one-time $15 fee.
Product worth joining for: PenFed Platinum Cash Rewards Visa Card offers unlimited 5 percent cash back on gas purchases. There is no fee for this card in year one and a $25 annual fee in subsequent years. Another product worth considering is the 30-year-fixed mortgage at 3.6 percent APR.
Fort Knox Federal Credit Union
Eligibility: It may seem like a small credit union, but anyone can join. All consumers are eligible for membership by just paying $5 to join the American Consumer Council or the $15 membership fee.
Product worth joining for: Fort Knox offers a Visa Platinum credit card with unlimited 5 percent cash back on gas purchases. It's a hard deal to beat for drivers who want to maximize cash back at the pump.
Leland Bobbe
Started building up your cash savings? Congratulations! You've already overcome the first obstacle to building wealth. It's important to have a savings fund that can help protect you against emergencies -- and to help you make big purchases like buying your first home.
However, many Americans never take the next step to begin investing. According to a recent study, over 57 percent of Americans keep their savings at the local bank. And 29 percent keep their savings in cash -- and more than half of those people keep their cash in a secret location at home. Stop putting money under your mattress or in your underwear drawer, people!
This is a problem, because inflation will eat away at your cash savings over time. You also subject your cash stash to human mistakes. Here's why you need to avoid saving large amounts of cash at home, what to do with it instead, and the importance of creating an investment plan for some of that cash.
Don't Sleep On Your Money
If you have more than a few hundred dollars sitting around the house, then you have too much cash on hand. Sure, it's nice to have a bit on hand if an enterprising kid offers to mow your lawn. Perhaps you're using an envelope budgeting system, each one filled with predetermined amounts of cash.
But if you're hiding cash because you don't feel like it's safe in the bank or invested in the stock market, that's a mistake.
You're putting your hard-earned money at risk in a variety of ways. It's highly likely that you won't be protected in the event of theft, fire or natural disaster. Renters and homeowners insurance typically cover only $200 in cash.
And what if you forget about where you stashed the cash? (It happens!) Your money will be safe in the bank. If you put your extra cash in a FDIC-insured account, you'll be protected for balances up to $250,000 even if your bank goes out of business.
At Least Earn a Little More On Your Money
Having your emergency savings in a high-yield money market is a great place to start. I like Ally bank (ALLY) and CapitalOne 360 (COF) because you'll at least earn close to 1 percent on your money. Most big banks are paying around 0.1 percent on savings, so if you have three to six months of your income set aside for emergencies, you could earn a few hundred dollars a year just by moving it to an online bank.
Once you have a solid emergency savings and you're still hoarding cash, you're ready for the next step.
You Need More Than a Savings Account
It's important to keep some of your savings liquid. If you're debt-free, aim for three to six months' worth of net pay in an savings account in case of an emergency. But beyond that? It's a better move to invest the money.
When you're earning a less than 3 percent interest rate on your money, your cash is losing purchasing power thanks to inflation. The cost of living increases by about 3 percent every year, but you earn less than that in even "high-yield" savings accounts at credit unions or online banks.
Historically, over the long haul, by investing a portion of your savings, you'll increase the value of your money over time because of compound interest. At least, that's the goal. There are no guarantees when it comes to the stock market.
Yes, investing carries risk. But you should be investing for the long term, which means you'll invest your money -- and keep it invested -- for 20 or 30 years. Remember, the stock market has historically returned an average of 8 percent to 10 percent a year, depending on who you're talking to. Investing early and diversifying your assets will help you ride out the highs and lows of the stock market.
Don't Let Fear Keep You Out of the Market
Don't let those market fluctuations scare you off and encourage you to leave your savings in cash. If you leave the money in an investment account, even when the market is down, it's a paper loss. It's not an actual loss until you sell.
If you sell your investments and move to cash, you're locking in your paper losses for a real loss with no hope of growth. As an investor, your accounts will change in value constantly. However, if you stick with investing through the ups and downs, you'll end up with more money over time.
Risk is real, but it comes with everything. Even cash savings. Remember, if you don't invest, you're guaranteed to be losing out to the power of inflation.
Create an Investing Plan and Start Now
Whether you're afraid of investing or you just aren't sure how to begin, it's time to start your investing education. Choose an asset allocation that makes sense for your situation and goals, and make sure your portfolio is diversified.
If you have a large amount of cash on hand, you can also tiptoe into the market by buying in consistently over time. This strategy is called dollar cost averaging, and it helps you buy into the market at a variety of prices.
If the idea of investing is overwhelming, get in touch with a financial planner. A great certified financial planner will walk you through all the steps of investing and help you stay the course emotionally through the ups and downs of the markets.
Want something for nothing? Go online, because Freecycle's got company. Free beauty products, children's items, restaurant meals, furniture, electronics or even cellphone service -- all you have to do is look.
Sometimes this means a one-time sign-up, but ongoing sources of goodies also exist, letting you browse whenever you have a minute. You might not even have to do the browsing, because reputable freebie bloggers will do the filtering for you.
Start Online
Depending on where you live The Freecycle Network can mean a constant stream of fabulous freebie opportunities or a sluggish trickle of "meh"-ness. After all, people in wealthy areas have more to give than folks in less affluent communities. Another variable: Freecycle groups are not always very well organized.
But, given that Freecycle is a volunteer organization, it's a little hard to complain. Besides, when it works it's fabulous. A relative has picked up furniture, children's clothing and other goodies. When I lived in Seattle, I received canning jars and tree fruit. I also used Freecycle to give away framed prints, a two-CD set of "The Nutcracker," a paraffin hand spa and an unopened pair of anti-embolism stockings, which saved car-free me from having to lug all this stuff to the thrift store by bus.
Similarly, the "free" section of Craigslist sometimes yields some real keepers, as do trading sites such Listia.com, Swapmamas (for kid-related needs), Swapstyle (clothing) and BookMooch. Sure, you have to pay for the gas to pick up Freecyle/Craigslist swag or pay for shipping from the trading sites, but do the math and balance the total against the cost of buying new items. It might be worth it.
There are some pitfalls, such as the "flake factor." Flakes are the folks who offer you a futon or bookcase but aren't home when they said they'd be, or who gave it to someone else and forgot to tell you. Get a phone number or at least an email address so you can remind them you're coming over.
And another word of caution: If you're going to the home of a total stranger/inviting a total stranger into yours, he or she might be sizing up your home for future burglary or intending to do you some sort of harm. Think about meeting in a public place (for smaller items) or bringing the couch or bookcase outdoors when the trader shows up. When I did business via Freecycle or Craigslist, I met the other party in the lobby of my apartment building. But I also made sure that my son-in-law, who has studied martial arts, was taking a cigarette break outdoors each time.
Consumer Loyalty Encouraged
Looking for an ongoing source of gratis goodies? One thing you should not do: a general online search for "free stuff" or "freebies." You're likely to find websites with viruses or malware that will infect your computer, or "free" offers that ask you to provide a credit card. Guess why.
Instead, sign up with freebie bloggers such as HeyItsFree.net, Hunt4Freebies, The Freebie Blogger and Absurdly Cool Freebie Finder, who uncover an amazing variety of free stuff, from housewares to snack foods to beauty products. (Tip: Start sending away for nonperishable freebies now, and you might not have to buy a single stocking stuffer next Christmas.)
You can also go the social media route. Companies anxious to promote products, encourage brand loyalty and woo additional customers have turned social media into a nonstop giveaway. A super-simple method is to follow "freebie tweeters," such as @freestuffrocks and @heyitsfree. Or follow your favorite brands on Twitter (TWTR), or click "like" on their Facebook (FB) pages.
Social media contests abound, too, some of them as easy as hitting "like" or re-tweeting an offer. Then again, you might actually have to do a little work: write something, post a photograph or even make a video. However, the prizes can be primo, e.g., trips, jewelry, high-value gift cards and electronics. A few best practices for social media freebie-finding:
Focus on local businesses. The contestant pool is generally smaller.
Watch local franchisees. Your local Chick-fil-A may give out freebies independent of the national office.
Start a separate email account. Use it for all giveaways/freebies/contests, not just the ones on social media.
If you're willing to put some time into this, check out "tweet chats" and "Twitter parties." The former is a chance to talk about a specific topic (personal finance, parenting, education), and the latter is an online promo party that includes the sharing of ideas. Prizes are awarded randomly to participants; one that I attend regularly has been offering several high-value Amazon (AMZN) gift cards each week.
Tweeparties maintains a calendar of upcoming Twitter parties, as do some deal and mom bloggers. For a list of chats, check Tweetreports or Tweetchat. Note: You'll have to spend up to an hour at each event, so be sure you choose a topic that actually interests you.
If you have opinions to share, you might get paid for them by joining Amazon Vine. Writing helpful reviews on Amazon can lead to an invitation to try out new and early-release products. Yay, free stuff!
Big-Ticket Savings
Want to make your next big trip a lot more affordable? Get your lodgings for free through organizations like:
Servas. This international peace association has matched travelers to hosts for more than 50 years; today it operates in more than 100 countries. There's an annual membership fee of $25 to $85, but that's less than the cost of one night in a hotel in many places. For info on joining, click on the Web page for your country.
To stay in touch while you're traveling, or while you're driving to work, check out the option of free cellphone service through companies such as FreedomPop and Scratch Wireless. You need to have a specific type of phone, but how are you gonna argue with free? For details, see "How to Get Free Cellphone Service."
Free meals, movie tickets, beauty products, gift cards, ice cream and more are available to you every year in honor of your birthday. Since some of these are good for the week or even the month of your birthday, you can stretch out the celebration and pocket the savings. For more info, see "How to Find Hundreds of Birthday Freebies."
All Free Stuff, All the Time
Some additional avenues for free stuff:
Join rewards sites. Get gift cards or cash for doing online searches via InboxDollars, Qmee.com, the Bing search engine and Swagbucks. You won't get rich, but why not make your searches pay?
Send away for rebates. But only if you're organized enough to do the paperwork/online form immediately after getting the product. Plenty of rebates just never get filled out. I'm pretty diligent because I like those free-after-rebate items, whether they be toiletries or office supplies.
Use rewards credit cards. If you're going to charge something, why not get a little payback? Points from several cards paid for almost all of my holiday gifting this year. For the best rewards, use the Money Talks News credit card search.
Be a loyal customer. Retailers and restaurants let you rack up points to trade in for free food or store credit (Hi there, all you CVS (CVS) ExtraCare fans!). Sign up for any rewards programs offered. Tip: If you're making a coffee or lunch run to any rewards retailer, ask if any co-workers want to put in an order. They'll pay for their drinks or Danish, but you get to keep the points.
Stop buying books. Millions of public domain classics are available for free at such sites as ManyBooks.net, Open Library, Google (GOOG) Play (formerly Google Books) and Project Gutenberg. Gizmo's Freeware lists 913 sites for free e-books and 224 for free audio books. Or go to the Kindle or Barnes & Noble (BKS) bookstores sites and type "0.00" in the search bar; that day's list of free books will pop up.
Get creative with eBay (EBAY). If an item you like went unsold after being listed for less than $1, email the seller to see if he's willing to part with the item in return for postage. This article on eHow.com notes that folks sometimes just want to get rid of a bunch of clutter. Or try this: If the person has similar interests, let him know what you've got and propose a trade.
Write a letter. Drop an email to your favorite company, and you may get a free product, or at least some high-value coupons. Give a concrete example of how a product improved your life, e.g., "ZapStains removed all the blueberry stains from my son's shirt after a pie-eating contest." Sometimes all you get is a "Thanks -- we love hearing from our customers," but nothing ventured, nothing gained.
Put it out in the universe. Another blogger I know is crazy about coin collecting. When I found an old buffalo head nickel whose date had been worn clean off, I figured it wasn't worth more than 5 cents to me. So I mailed it to the blogger, who was delighted with the coin (and I racked up a bit of karma). If there's something you want, let it be known.
Do you have other tried-and-true ways to find free stuff? Share in the comments below or on the Money Talks News Facebook page.
Like this article? Sign up for our newsletter and we'll send you a regular digest of our newest stories, full of money saving tips and advice, free! We'll also email you a pdf of Stacy Johnson's "205 Ways to Save Money" as soon as you've subscribed. It's full of great tips that'll help you save a ton of extra cash.
Frank Augstein/APA customer smiles while leaving an Apple store in Germany with a bag of iPhones last fall.
As the entire tech and investing worlds know by now, Apple (AAPL) had a record-smashing Q1. The company notched an all-time high for quarterly net profit ($18 billion) not only for itself, but for any publicly traded company in history.
A big part of this success was the company's iconic iPhone: With a pair of new models recently released, Apple sold over 74 million units of its popular product -- a nearly 50 percent rise from the same quarter the previous year.
So market observers can be forgiven for thinking that smartphones as a category are continuing their long upward trajectory of increasing sales. But according to a prominent industry researcher, that's not the case.
Smart Slowdown
That researcher, IDC, predicts that the momentum of sales growth will not only drop this year, but will do so considerably. After what it estimates to have been a 26 percent year-over-year increase in smartphone shipments in 2014 (to a total of roughly 1.3 billion), the increase for this year is projected to end up at less than half that rate -- 12 percent.
Zooming out to a five-year period, IDC believes that the compound annual growth rate for shipments will barely hit 10 percent for the years 2014 to 2018.
The chief culprit is that old tech market bugaboo, saturation. At the end of the previous decade, smartphones were the aspirational, gotta-have device for a great many people. But consumer wallets quickly caught up to the technology, even in economically disadvantaged countries. According to a survey conducted late last year by market researcher GlobalWebIndex, 80 percent of the world's Internet users ages 16 to 64 now owns a smartphone.
Of the seven tech devices covered in the survey (PCs/laptops, smartphones, tablets, gaming consoles, smart TVs, smart watches, and smart wristbands), smartphones had the second-highest tally behind PCs/laptops, which came in at 91 percent.
Top-Line Plateau
For manufacturers, lower shipment growth might not be the biggest challenge they'll face in the immediate future -- revenues look set to be the No. 1 worry. According to IDC's estimate, they're expected to creep up by only around 4 percent in that 2014 to 2018 time span.
That's because up-and-coming smartphone makers are edging their way into the market, and their wares are significantly cheaper. For example, ambitious Chinese firm Xiaomi -- founded in 2010, in sharp contrast to decades-old titans Apple and Samsung -- became its home country's top smartphone manufacturer in Q2 2014.
It did this largely through pricing: Its flagship model, the Mi4, lists for around half as much ($320 or so) as current-generation offerings from Apple and Samsung... and that's cutting the latter two some slack, as their products often cost much more than list price when sold on the Chinese market.
Meanwhile, there is a host of other Asian brands, such as Coolpad and Smartfren, very ready and extremely willing to sell budget-priced smartphones to the world.
The rise of such bargain manufacturers will be a key factor driving down average selling prices. IDC's data puts the global ASP of smartphones at $297 for 2014, projecting that this will fall to $241 by 2018. That's a drop of nearly 20 percent.
Sticky Status Quo
Another factor slowing down sales is the lack of novelty. In 2007, when the iPhone was released to great hoopla, the "computer in your pocket" concept of smartphones was still quite fresh.
But now that they're the standard rather than the push-the-envelope technology of yesteryear, they haven't leaped too far ahead in terms of functionality. Yes, the iPhone 6 and 6 Plus have bigger screens, a wider feature set for their cameras, and a built-in app that monitors your health. But they're essentially just beefed-up versions of their predecessors.
So the need to buy the latest and greatest smartphone has diminished. Models dating from several years ago -- eons, in tech gadget time -- are good enough for many users. After all, they make phone calls, send texts, surf the Web, and provide driving directions just like their newer, snazzier brethren. What's the rush to upgrade?
Winners and Losers
With saturation, the market will likely segment more sharply into high- and low-end layers, with the price differences between the two widening. Apple, which has distinctly and effectively positioned itself as a maker of premium phones, will likely continue to dominate the former.
The lower end is anybody's game; we should expect a scramble of numerous budget handset manufacturers jockeying for share.
They'd better hurry, though. Before long, there will be almost no growth to speak of at all, and the world will move on to the next hot new gadget.
Motley Fool contributor Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. Check out our free report on the Apple Watch to learn where the real money is to be made for early investors.
As the leader of the free world -- and one of the most influential men on the globe -- many issues weigh on President Obama's shoulders daily. Is he also a leader in his personal wealth?
No, according to Kathy Kristof of Kiplinger. "A review of the financial disclosures [the Obamas] filed in May [of 2012] uncovered what many of us see in our own financial lives -- neglect, inertia, poor diversification and spotty investment choices."
The 2012 Stop Trading on Congressional Knowledge Acts makes public the personal finance moves of Congress members, executive branch officials, federal judges and their staffs, with ranges in various categories. Let's take a look.
Good: Writing His Memoirs
The Obamas' tax liability was larger than the president's salary in 2010, and that's because of significant royalties from his books -- much of the $1.7 million he made that year. In 2012, "Dreams From My Father" generated $100,001 to $1 million, as did "Of Thee I Sing: A Letter to My Daughters," from which the after-tax proceeds were donated to scholarship funds for children of fallen and disabled soldiers. "Audacity of Hope" earned the president $50,001 to $100,000 that same year.
Additionally, the writing of a children's version of "Dreams From My Father" earned the president a $225,000 advance; he also got to collect between $1,000 and $2,500 in royalties for "Surviving Against the Odds: Village Industry in Indonesia," his late mother's book.
The president's earnings from his day job are greatly dwarfed by what he's collected from book deals, at just $395,188 in 2010. Obama's income placed him in the 26.3 percent federal tax rate in 2010, although the Obamas qualified for a refund of $12,334, due to $373,289 in itemized deductions, having given $245,075 to charity that year -- 14.2 percent of their income.
Good: Sasha and Malia's 529 Savings Plans
Kiplinger estimates that Sasha and Malia's 529 college savings plans have between $100,000 and $200,000 each. MyBankTracker estimates they're worth between $200,004 and $400,000. The president might be doing a lot to help American students deal with their college debt, and he clearly doesn't want his daughters to be in a position where they need to borrow.
The president opted for Illinois' Bright Directions 529 plan for his daughters, with the deposited funds divided equally between two investment options: one based in stocks and the other in bonds.
Good: $250,000 to $500,000 Emergency Fund
If the rule of thumb is to have six months of income (his presidential salary is $400,000) saved for an emergency fund, then the Obamas are set. With an estimated 28 percent of Americans having no emergency savings to speak of, the Obamas are being responsible with their money should an unexpected event occur. The president declared $50,001 to $100,000 in a JPMorgan Chase (JPM) Private Client Asset Management checking account, between $1,000 and $15,000 in a JPMorgan Chase Private Client savings account, as well as an additional $100,001 to $250,000 in a Northern Trust checking account, according to his 2013 executive branch personnel public financial disclosure report.
Good: No Reported Debts or Liabilities
The Obamas weren't always debt-free, and struggled early on with financial burdens. The president spoke of this in April of 2012, stating: "I went to law school and college with the help of scholarships; so did my wife. We were still paying off student loans nine years after we graduated. I bought my first car for about $900. It had a big hole in the floor that allowed you to see the road, so I knew my wife wasn't marrying me for my money. We had credit card debt we hadn't paid off. [In fact] our personal finances ... weren't stable until fairly recently."
The president has no liabilities listed on his 2013 executive branch personnel public financial disclosure report, save for his 30-year mortgage, taken out in 2005, with a value of between $500,001 and $1 million. Liabilities of $10,000 or less are not required in the report.
The Obamas are incredibly conservative about their money in the market, with 92 percent of their portfolios held in cash. The couple's $4.7 million in cash investments is divided between Treasury bills and notes, as well as checking and savings accounts, according to Kiplinger.
The couple held only $325,000 in stocks as of 2012. By keeping a whopping $1 to $5 million in Treasuries, the Obamas are missing out on more impressive investment returns, both due to the amount they place in the market, as well as how aggressive their investments are. Those millions in Treasuries only generated a return of between $5,001 and $15,000 for the Obama family that year.
Bad: Taking Too Long to Pay Off Student Debt
The president took a reported 13 years to pay off his Harvard Law School debt. According to U.S. News & World Report, Obama paid off his law school debt in 2004; however, he could have put at least $100,000 away in savings each year by living frugally, with Chicago-area housing costs factored in along with inflation rates. With income over $200,000 annually between 2000 and 2004, frugal living habits could have saved the president significant loan interest if he'd paid down more each year and had limited his annual budget to $75,000.
Bad: Weak Retirement Savings
Fidelity Investments suggests that people save eight times their ending salary for retirement, with one year's salary saved by the age of 35, three year's salary by 45 and five year's salary by 55. At 53 years old, the president should have almost eight years' salary saved up; and yet, the president only has between $600,004 and $1.35 million saved, according to his 2013 financial disclosure report.
The president cataloged three Vanguard 500 index retirement funds, each with $100,001 to $250,000 deposited. Additionally, the president noted a pension plan for the Illinois General Assembly, valued between $50,001 and $100,000, as well as a former 403(b) retirement plan with the University of Chicago. However, if Obama ends up anything like Bill Clinton, he's likely to make even more money after leaving the White House.
Bad: Neglected to Refinance His Home
Obama's mortgage is held with Northern Trust in Chicago. It's a 30-year loan at an interest rate of 5.625 percent -- and the president never capitalized on still-low mortgage rates to refinance the loan.
With the prime rate still at 3.25 percent, the Obamas could save tens of thousands of dollars in interest paid on their 9-year-old loan, especially since the loan amount itself is estimated between $500,001 and $1 million in value. According to MortgageCalculator.com, the president spent over $1.5 million for his home in 2005. What's more, Illinois has the second-highest property taxes in the nation, meaning the Chicago home is blowing through even more money.
tacobell.com
Taco Bell on Thursday is adding a couple of items to its menu, and the one addition generating the most buzz at the country's largest restaurant chain specializing in Mexican food is the Sriracha Quesarito.
It's been eight months since Taco Bell introduced the Quesarito, a burrito wrapped in a quesadilla. It's as decadent as it sounds, and last year's rollout drew some negative attention given the at least 620 calories and 30 grams of fat that the item packs.
Thursday's spin on the Quesarito adds Sriracha -- the popular Asian chili-pepper hot sauce -- to the double-rolled concoction.
Keep Spinning the Flavor Wheel
Taco Bell's been busy rolling out new creations and menu tweaks in recent years. It started with Doritos Locos Tacos in 2012, serving up tacos in shells dusted as if they were nacho cheese Doritos. More than a billion of them have been sold in less than three years.
The fast-food chain was particularly busy on the innovation front last year, starting with the Waffle Taco that kicked off the national rollout of Taco Bell's breakfast menu 11 months ago. The Quesarito followed a few months later.
All of the new products have helped keep customers coming. Taco Bell is holding up better than its Yum Brands (YUM) siblings Pizza Hut and KFC in terms of year-over-year growth in comparable-restaurant sales.
Comps for domestic Yum Brands locations during the fourth quarter rose 7 percent at Taco Bell, 4 percent at KFC and 2 percent at Pizza Hut over the prior year's holiday quarter.
It isn't a surprise to see Taco Bell leading the way in terms of growth. The national rollout of the breakfast menu in March of last year should provide incremental growth until we lap the late March debut in a few weeks.
Yum Is Hoping to Live Up to Its Name
Yum Brands can use the boost if the Sriracha Quesarito is a winner. It has fallen short of Wall Street's profit targets in its last three quarters, including a sharp decline in adjusted earnings in its most recent report.
The biggest challenge at Yum Brands remains softness in China after a supplier scare, but things could certainly be better after posting a mere 3 percent uptick in global systemwide sales over the past year.
Taco Bell's success will help, even if it's the smallest of the three chains. There were 6,199 Taco Bells worldwide when the year began, less than half of the 13,602 Pizza Hut or 14,197 KFC locations out in the wild. Thursday's new menu items -- which also include a Snapple-branded lemonade freeze -- should find Taco Bell continuing to lead the way in sales growth at Yum Brands. It does move the needle, and come Thursday it will be a spicy needle at that.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check outour free report.
Five years into a bull market in stocks that has brought predictable, double-digit returns to tens of millions of investors probably seems like a bad time to bring this topic up. But now is actually the perfect time to explore ways to invest that don't involve the stock market. After all, sooner or later stocks will head into a bear cycle, and investors will be scrambling for reliable alternatives. So here is a list of 10 of those alternatives:
1. Peer-to-Peer Lending
I'm listing this one first, because it's one of my all-time favorite alternative investments. And not only that, but it's a type of investment that benefits both the investor and the borrower.
Peer-to-peer lending takes the middleman -- aka the banker -- out of the lending equation. Generally, that means a higher rate of return to you as the investor and a lower rate and fees to the borrower. It just strikes me that this type of arrangement makes repayment of the loan more likely, since it is less expensive for the borrower.
One of the great things about peer-to-peer lending is that it provides diversification of the loan portfolio that you're invested in. If you invest $10,000 through Lending Club (LC), the loans may be spread out over dozens -- or even hundreds -- of individual loans. With that type of diversification, should one or two of the loans go sour, your portfolio won't get clobbered. And the interest rate you're receiving is high enough to compensate for the risk of loss.
"By diversifying in 200+ notes, your portfolio starts to represent peer to peer lending as a whole, and the portion of your investment that is lost to defaults begins to mirror the aggregate loss rate of past years," says Simon Cunningham from LendingMemo.com. "In short, things become more predictable. It is by spreading your money across hundreds of borrowers at a time that this becomes such a consistent and rewarding way to put excess cash to work."
You can invest in a peer-to-peer lending platform, like Lending Club or Prosper, with no more than $25. But be aware that peer-to-peer lending is not available in all states.
2. Precious Metals
Precious metals, gold in particular, are controversial assets. Some people have near-religious faith in them as a foolproof investment. Others see them as a speculative nightmare. As usual, the truth is somewhere in the middle.
The problem with precious metals -- and why they seem to be so speculative -- is that they only respond in a positive way in certain market conditions. It would be a no-brainer if precious metals would reliably rise when the stock market falls, but that's not the case.
In truth, precious metals are more closely correlated to movements in the dollar. Precious metals gain when the dollar is weak and fall when the dollar is strong. Since we can never know exactly when those transitions will occur, it's a good idea to have a least some precious metals at all times.
One of the real benefits of precious metals, whether gold or silver, is that it is one of the few assets that you can take possession of. You can buy gold or silver coins or bullion bars and keep them at home or some other safe place. And in the event of a complete economic or financial collapse, they can then be used as barter.
3. An Investment With a Guaranteed Return: Pay Down Debt
This one sounds almost too simple. Maybe you've heard it before, but whatever you've heard, it's absolutely true. If you pay off a credit card where you are paying a 10 percent interest, that will be the equivalent of earning a 10 percent rate of return on the same amount of money invested in another asset.
But it's even better. The return that you will earn on paying off debt will not have income tax consequences. Therefore, paying off debt can produce superior returns to most other investments. And that return is guaranteed and completely risk-free. If you have debt, this should be your first "alternative investment."
4. The Ultimate Tangible Investment: Real Estate
Real estate is an investment topic that is worthy of its own article, but I'll just summarize the main points here. There are several characteristics of real estate that make it a desirable investment:
Just as the name implies, real estate is a "real asset"; it's a physical commodity that has value in and of itself.
It is needed for shelter and for economic purposes, such as housing a business, warehouse or manufacturing plant.
It can produce income either through rents or capital appreciation or both.
It is a tax favored investment, with generous depreciation write-offs, as well as favorable capital gains treatment if held for more than one year.
There are times when real estate booms, and you can earn a fortune investing in it.
There are times when the market collapses, and investment-worthy bargains are everywhere.
It's an investment, but it's also a hands-on skill. By managing your own property investment, you become more skilled in real estate investing.
There are several ways that you can invest in real estate:
Buying property direct. You purchase a piece of property, either to produce rent income, capital appreciation upon eventual sale, or to rehabilitate and flip for a quick profit.
Real estate limited partnerships. This is where you invest money in a real estate partnership that typically invests in commercial property, such as a shopping center, office complex or apartment building. You are a limited partner, so you can lose no more than the amount of money invested. There are typically tax advantages to this type of investment, primarily concerning depreciation.
Real estate investment trusts. These are something like real estate mutual funds that invest in real estate or real estate mortgages. You buy shares in the REIT, then collect income through dividends and/or capital appreciation. There are also significant tax advantages to REITs. It can be a perfect investment if you don't want to get your hands dirty and want to limit your risk.
There are other ways to invest in real estate, such as buying and selling mortgage notes, which is more for the sophisticated investor who has a nose for buying debt securities at a discount and collecting a full face value.
There is also crowd funding that involves investing directly in real estate deals through websites such as Fundrise and RealtyMogul. But this is a new concept and not for the faint of heart.
5. A CD Ladder
You're undoubtedly aware that the returns on money market funds these days are microscopic. You can use certificates of deposit to improve the returns, and by building a CD ladder, you can effectively create your own money market fund. You won't get rich doing this, but you will improve the returns on the fixed income portion of your portfolio.
CDs are completely safe because they are held by banks and insured by the FDIC up to $250,000 per depositor. They can be the perfect place to park your money during times of high volatility in stocks.
A CD ladder is a portfolio of CDs with staggered maturity dates. For example, you can build a portfolio today by buying CDs that mature in one, two, three, four and five years. Each year year, you will have the ability to buy a CDs at higher rates, should interest rates increase.
6. U.S. Treasury Securities
U.S. treasury securities are an alternative to certificates of deposit, and you can also build a ladder with them. Typically, the interest rates are slightly lower than on CDs, because the U.S. Treasury is considered to be the highest-rated debtor in the world. There are four basic types of treasury securities:
Bills. These securities that have a maturity date of one year or less.
Notes. These have a maturity of two to 10 years.
Bonds. These have a maturity of 10 to 30 years.
Treasury Inflation-Protected Securities. In addition to paying interest, the government will increase the principal value of these security, based on the increase in the consumer price index.
Generally speaking, bills carry the lowest interest rates, while bonds pay the highest, and notes are somewhere in between. You can buy them through the Treasury's portal, Treasury Direct, and hold them there as well. They come in denominations as low as $100. Bills sell at a discount. For example, a one-year treasury bill with a 2 percent interest rate will sell for about $980, but pay you $1,000 upon maturity. Notes and bonds, on the other hand, pay interest every six months.
You won't get rich investing in treasury securities, but it is an excellent place to protect your money during times of market turmoil.
7. Collectibles -- an Alternative to Penny Stocks
Collectibles -- artwork, antiques, numismatic coins and other treasures -- are a lot like penny stocks. Sometimes they pay off, sometimes they pay off big, but most times you just lose money on them.
This is an area where you really have to know what you're buying and its potential resale value. Ideally, you should be sufficiently aware of values that you can buy a collectible for less than it is worth and sell it for more in a relatively short space of time. This is because collectibles don't appreciate with time the way other investments do. The entire market is based on what a buyer is willing to pay for a given collectible at a certain point.
The best strategy is to buy a collectible because you truly want to own it and will enjoy having it. This will guarantee that it will have some utility in your life, and you will pay a reasonable price based on your circumstances. If the item happens to fetch more money at a future date, then you'll be ahead of the game -- as a result of both your enjoyment of the collectible and the financial gain that you collect at the end.
Collectibles can often be profitable investments during times of dollar weakness. The same factors that draw people to precious metals when paper assets are weak often also draw them to collectibles as a form of diversification.
8. Wine -- Bet You Never Thought About This One
Wine is one of the few consumable commodities that can increase in value with age. But that is exactly what can happen with the right vintages, those that are the most sought after.
You have to have a strong understanding of wine in general, and you also need a temperature-controlled room to store them in. This is because you need to store a significant quantity to reap substantial profits. And you will need to keep accurate records of the type of wine, as well as when and where you purchased it. Wine connoisseurs will want that information before buying wine from you in the future.
It can be well worth the investment and the effort. You can earn as much as 15 percent per year if you can identify and store the right wines.
9. Becoming a Silent Partner in a Small Business
Starting your own business from scratch is a risky venture, maybe even too risky be considered an investment. But you can make a bona fide investment in an existing business. This is possible because small business owners often find it very difficult to get bank financing to start or expand the business.
As a small investor, you can provide the investment capital that will enable an existing and successful business to expand. Rather than simply making a loan to the business, you can come in as a silent owner, which will entitle you to percentage ownership of both the business and its income stream.
Best of all, your equity stake in the business can payoff handsomely if and when the business is ever sold. Small businesses that become large businesses represent some of the very best capital appreciation opportunities available.
10. Hedge Funds
When you think of a hedge fund, your initial thought is probably, "There's no way I have enough money to invest in one of those." Several years ago, that was the case with many of them having very high barriers of entry. But a lot has changed. First, the number of accredited investors has increased (accredited investors are defined by the SEC as someone who makes $200,000 per year or has a net worth of over $1 million). Second, the appetite to find alternative investments to the stock market has also grown.
Even still, being able to wade through all the hedge fund options proved to be a bear until recently. Sliced Investing allows interested parties access to hedge fund managers that was previously difficult to access. Now, for as little as $20,000, an investor can invest in hedge funds and use Sliced Investing's platform to make the process super simple.
11. Yourself -- Your Best Investment
This is actually the simplest, the lowest-risk and quite possibly the most profitable investment you can make. Best of all, it usually doesn't require a whole lot of money. What you want to do is invest in yourself in such a way that you can improve your income earning ability and your investment performance. Here are some ways that you can invest in yourself:
Take a course or two that will improve your productivity and/or job performance and will ultimately result in increasing your pay or even land you a promotion.
Acquire certain certifications or designations that will enable you to get a promotion or start a business. For example, I became a certified financial planner so that I could start a business, help my clients more fully and increase my income.
Take on responsibilities at work that will expand your knowledge of your employer's business and increase your value as an employee.
Work with a career coach who can help you move your career forward. One of the best decisions I made for myself was investing into the Strategic Coaching program.
Learn more about investing so that you can improve your investment returns.
There are more ways to invest than we commonly think. A five year bull market can make us lose sight of what the alternatives are. But now is the perfect time to be getting ready for the days when the stock market may not be performing so reliably. You may even find that your best investment returns come after the bull market ends.
Robert F. Bukaty/APA Target customer walks past a bank of flat screen televisions while shopping on Black Friday.By ANNE D'INNOCENZIO
NEW YORK -- Target (TGT) delivered a cautious profit outlook for the first quarter and reported a loss in its fourth quarter, dragged down by costs to end its money-losing foray in Canada.
But the discount retailer recorded stronger-than-expected sales during the holiday period as shoppers bought more clothing and other items.
The results, which included the second consecutive increase in a key sales measure in a year, come a little more than a month after the discounter announced it was giving up on Canada and focusing on revving up its U.S. business.
The closing was the first major move by CEO Brian Cornell, who took over last August and who is charged with reclaiming the retailer's image as a purveyor of cheap chic fashions.
The results also show how the Minneapolis-based company is successfully moving past a massive data breach disclosed a week before Christmas 2013 that compromised millions of credit and debit cards. That caused shoppers to flee for months and hurt sales and profits. It was one of the major reasons behind the abrupt departure of CEO Gregg Steinhafel, who resigned last May.
Target's business is benefiting as middle-income shoppers are feeling some relief from lower gas prices and from an improving economy. But Target says that its moves to bring in trendier merchandise and cater to shoppers who are increasingly going online have been the bigger factors behind stronger sales.
The discounter has been playing catch-up online and revamping its apps. It also reduced its minimum online purchase to qualify for free shipping in half to $25. Target had a successful shopper reception to its free shipping offer with no strings attached over the holiday season.
During a media call, Chief Financial Officer John Mulligan emphasized that Target shoppers who buy online and in stores spend more and are more engaged. Digital sales increased 30 percent during the quarter. He noted that Target's online sales account for about 2.5 percent to 3 percent of the company's total sales.
Focus on Unique Products
Even before Cornell took the helm, Target had begun to reassess its operations, sprucing up its baby departments and adding mannequins to its fashion areas. Cornell wants to double down on a handful of areas like children's products and furniture. It is also re-imagining its grocery area and wants to focus on products unique to Target.
Target is set to unveil more details of its strategy to investors March 3. That will include cost-cutting moves, but Mulligan didn't elaborate during the media call Wednesday.
The company said that it lost $2.6 billion, or $4.14 per share, in the three months ended Jan. 31. That compares with a profit of $520 million, or 82 cents per share a year earlier.
Excluding costs to exit Canada and other one-time items, Target's adjusted earnings were $1.50 per share. Analysts polled by FactSet expected $1.46 per share. Target is now liquidating all 133 stores after entering Canada just two years ago.
Revenue rose 4.1 percent to $21.7 billion. Revenue at stores opened at least a year rose 3.8 percent. The measure is considered a key indicator of a retailer's health.
Joe Raedle/Getty Images
On March 6, $44 million worth of Radio Shack (RSHCQ) gift cards are going to lose their value. So, what do you do if you have a Radio Shack gift card -- or one for any retailer that's going bankrupt, for that matter?
Normally, there's a marketplace for unwanted gift cards. So big of a market that after Christmas,Walmart (WMT) partnered with CardCash.com, a gift card exchange, to let consumers who received cards they didn't want to convert them to Walmart cards or cash.
Normally, a desirable gift card could get a seller 90 percent of its value. A less desirable card could be acquired at up to 35 percent off face value. But a Radio Shack card, at this point, has no trade value. In other words, you can buy one -- but no one will buy yours.
Ways to Spend Them
Shelley Hunter, spokeswoman for GiftCards.com, says when you have a gift card for an outlet you know is going to close, you have to act immediately. Here are her tips for how to make good use of what you've got before it's too late:
Get what you need. Hunter says it might appear obvious, but if you need batteries, a cord for your cellphone or some other gadget in its inventory, that's where you should go and quickly.
Get gifts. Whomever you give the gift to won't be able to return it, but there's a good chance you'll get a deal on stuff that could make a nice present.
Buy to donate. Rather than lose the value on the card, pick up a few things -- a coffee maker or microwave, for instance -- that you could donate to a school, church or any other group you'd care to.
Flip that purchase. Use your card to purchase something -- or toward the purchase of something -- you can turn around and easily sell "new in box" like an Xbox gaming system.
Make a bankruptcy claim. If you want to wait a long time and potentially get nothing, or next to nothing in return, you can file a claim with the bankruptcy court and get in line behind everyone else the company owes.
See if a competitor makes an offer. Sometimes, competitors looking to draw customers who shopped at a rival that is failing will offer a discount in exchange for a gift card.
WASHINGTON -- Sales of new U.S. homes were basically flat in January, evidence that recent job gains and relatively low mortgage rates have yet to spur the real estate market.
The Commerce Department said Wednesday that new home sales slipped 0.2 percent last month to a seasonally adjusted annual rate of 481,000. This marks a slight decrease from sales of 482,000 homes in December, but represents a solid 5.3 percent gain from a year ago when harsh winter weather caused home-buying to stall.
Despite the increasingly favorable economy, home sales have been sluggish at the start of the year. Still, many analysts expect that the housing market will gather momentum with the start of the spring buying season.
Activity for the rest of the year is likely to improve at a modest, albeit choppy, pace.
Revisions made to sales in previous months indicate that sales should continue to make progress as the recovery from the housing bust and Great Recession is entering its sixth year.
"Activity for the rest of the year is likely to improve at a modest, albeit choppy, pace," said Blerina Uruçi, an analyst at the bank Barclays.
Yet January proved to be a rocky month for real estate.
Snow has buried parts of the Northeast, cutting into open house visits. Too few homes are being listed for sale, and those that are on the market still seem to be out of reach for many prospective buyers even with the recent hiring surge and historically low interest rates.
"The weather may make it difficult to determine the underlying strength in construction activity in the near-term," said Michelle Girard, an analyst at RBS Securities. "However, anecdotal reports from areas not affected by weather have indicated healthy activity."
Sales of existing homes last month sank 4.9 percent to a seasonally adjusted annual rate of 4.82 million. Contributing to that nine-month low was a tight inventory of homes on the market that sent prices higher. That may be pushing some home shoppers to wait for more choices at more inviting prices.
But builders have yet to significantly increase construction.
Rising Home Prices
Many firms are focused on selling to wealthier buyers, instead of competing on volume by constructing more houses at more affordable levels. The median sales price rose 9.1 percent since January 2014 to $294,300.
Toll Brothers (TOL), which specializes in higher-end homes, reported Monday that its quarterly profits shot up 78 percent as the average price of a home sold by the Pennsylvania builder climbed to $821,500 from $766,100.
And instead of upgrading to new houses, some homeowners are renovating their current properties, said Nino Sitchinava, principal economist at Houzz, the online resource for remodeling and home design.
In many instances, baby boomers are putting in new kitchens and bathrooms, in addition to adapting their houses in order to age in place, Sitchinava said.
The winter weather caused sales of new homes to halve in the Northeast, while the West experienced a slight drop and the South and Midwest each reported gains, according to the Commerce Department report.
Home values are appreciating at a slower rate since 2014, yet they continue to outpace wage gains.
Average hourly wages grew 2.2 percent over the past 12 months, which is roughly half of the increase in home values, according to the Standard & Poor's/Case-Shiller 20-city home price index released Tuesday.
Economists do see reasons why home sales should improve this spring.
Mortgage rates remain near historic lows. The average 30-year fixed mortgage rate was 3.76 percent last week, according to the mortgage giant Freddie Mac. That has ticked up in recent weeks, but is far below the 4.33 percent average from a year ago.
And employers have hired at an accelerated clip over the past year. In the past three months alone, the U.S. economy has added more than 1 million jobs, the fastest three-month pace in 17 years. More Americans earning paychecks should eventually push home sales higher.
A class action lawsuit filed in California claims that Beneful dry kibble dog food -- a popular brand from Nestle Purina PetCare (NSRGY) promoted as "wholesome" with "quality nutrition" -- contains toxins that injured and killed thousands of dogs, according to NBC News.
Pet owner Frank Lucido alleged that his family began feeding their three dogs exclusively on Beneful in late December or early January and that the animals were kept in separate houses because of some home construction. By the end of January, all three dogs had become seriously ill and one died. Two of the dogs showed bleeding in the stomach and liver lesions. The dead dog, an 8-year-old English bulldog, showed signs "consistent with poisoning," according to a veterinarian quoted in the lawsuit.
Jeff Cereghino, an attorney representing Lucido, emphasized to the Daily Beast that all three dogs ate the same food and were in different buildings. "So you take away the automatic assumption that the neighbor didn't like the dogs or whatever," he said. "He was feeding them Beneful at the start of this, and one got sick and died, the other two were very ill. And then he started doing a little research, and he realized the causal link, at least in his mind, was the food."
Liver, Kidney Issues
The website ConsumerAffairs shows close to 800 one-star ratings of Beneful out of a possible five stars. Many posted stories allege that dog owners saw their pets become ill and often die from what appeared to be liver and kidney failure.
"We believe the lawsuit is baseless, and we intend to vigorously defend ourselves and our brand," a company representative said in a statement sent Wednesday to DailyFinance. "Beneful had two previous class action suits filed in recent years with similar baseless allegations, and both were dismissed by the courts."
The suit claims that propylene glycol and mycotoxins are potentially harmful substances that are in Beneful. Propylene glycol is "clear, colorless liquid with the consistency of syrup," according to manufacturer Dow Chemical. It is used in a wide variety of applications, including hydraulic fluids, automobile antifreeze and cosmetics, but is also approved by the Food and Drug Administration as a food additive.
Propylene Glycol and Mycotoxins
To put the combination of uses into some perspective, water is used in food preparation and in antifreeze as well. Still, the site DogFoodAdvisor said that propylene glycol has a "proven ability to cause a serious type of blood disease" in cats and that the FDA banned its use in cat food. Norway, Sweden and Finland last fall recalled cinnamon-flavored Fireball Whiskey over levels of propylene glycol, according to the Huffington Post.
Mycotoxins are substances produced by some types of fungi, according to the National Institutes of Health. They can be poisonous, but they are also used in a variety of drugs, including antibiotics. Some types of mycotoxins are associated with damage to liver and kidneys.
The Association for Truth in Pet Food said that it tested some popular dog foods and found that Beneful Original had a significant enough mycotoxins level to pose a "high risk" to animal health.
Last year, Nestle Purina PetCare was one of two companies that settled a class action lawsuit by creating a $6.5 million pet owner compensation fund, according to NBC News. The suit claimed that jerky treats caused illness and death in thousands of dogs.
A small village on the outskirts of northern Albuquerque, Placitas is a portrait of why New Mexico is called the Land of Enchantment. Vistas are as wide as the land is old, and peaks and plateaus graze the skyline. The wildlife has been the soundtrack for centuries, with wolves howling at the sky, owls with things to say, and critters rustling in the arroyos. And there is vegetation that breathes life into, well, just about everything, and the southwest cedar layers the land with its distinct scent. Up here, in Placitas, 6,000 feet above sea level, you can certainly see, you can definitely hear, and you can certainly smell.
The southwest cedar has been a focal point of life for the Hopi Indians of this region. They've long used it for the health and purification properties they claim it possesses, and when Joshua Peine, a former actor, by chance settled in the area and learned about cedar from the tribe, he knew this was where he belonged.
What followed for Peine and Placitas has been nearly 40 years of business success as Clear Light, The Cedar Co. -- housed in a pair of small buildings off State Road 165 -- brought the joy and essence of cedar to all corners of the globe in the form of sachets, lotions and candles. Peine is still the primary influence on operations at Clear Light, which is run by the company's small and dedicated staff, and Peine's sister Penny, who took over ownership and operations following his 2006 death.
Man Made ContentChapter 1: Harvesting a Business
Clear Light began modestly, as a one-man business out of Peine's home. He began packaging cedar needles from the nearby trees in sachets, as gifts for close friends and family. In 1971 the demand for his small gifts grew into a business that he called Clear Light, an homage to his love for religious readings, and specifically, a state of being outlined in ancient Tibetan texts.
Cedar needles have long been used by Native Americans who believe it possesses therapeutic and healing properties. Cedar -- a natural insect repellent and possessing a distinct fragrance -- has become widely used in homes across the American Southwest.
Man Made Content
In 1984, through customer testimonials about Clear Light's sachets, the company received publicity in The New York Times (NYT) and Apartment Life magazine, which accelerated Clear Light's growth. The newfound exposure led to contracts with L.L. Bean and Orvis, and a need to produce his sachets in bulk. It became an important benchmark in Clear Light's history, enabling Peine and his company to expand. They also began exploring new products, and Peine began incorporating the needles in a moisturizer lotion, one of the company's most popular products. Clear Light has since expanded to incense, hand cream, shampoo, candles and soaps.
The current location, which he built in 1985, houses the six-person staff, and the barn and silo where the cedar needles are cured. Clear Light doesn't disclose details of its proprietary curation process, something Peine meticulously developed over his 37 years in Placitas. To maximize the properties of the cedar, the staff at Clear Light only harvest when the trees aren't pollinating, primarily in the summer. They make the short trip into the hills just up the road from the company's home office in a rusty pickup truck that picks and chooses when it wants to start.
The trees grow on government land, which the company is authorized to use. Once the cedar boughs are pruned from the trees and complete the curating process, they're run through a large shaker, which removes any pollen, leaving the needles in their most pure and aromatic form. One of Clear Light's flagship products is its incense, formed out of a daylong cooked cedar tea and then mixed with cedar oil and a proprietary gum. The clay-like substance is then run through a mold and dried for four days before it's packaged.
Man Made ContentMany elements of Clear Light's process are low-tech.Chapter 2: Loyal Staffers Make the Business Flourish
In the 1990s and early 2000s, when the e-commerce wave began to crest, Clear Light and its 10 full-time employees crested with it. They made the catalog available online, opening a largely untapped customer base, and providing a boost to solid sales figures.
"When I first started here, the business was booming," says Veronica Skojec, Clear Light's production manager. "We had regular accounts, placed regular orders." Following Peine's passing and the start of the Great Recession, Clear Light was forced to downsize staff from 10 to six, and those who remained were forced to pivot to other positions to keep the business moving forward with Peine's vision.
"That was difficult enough," Skojec says of Peine's passing. Skojec is one of Clear Light's longest-tenured employees. "But then the economy went sour, and yeah, we had to make some adjustments over time. We all had to roll up our sleeves and figure out how we're going to make it work without our founder." So the staff, determined to keep the company going, began to cross-train, and the all-hands approach allowed the company to make it through to the other side, relatively unscathed.
Man Made Content
"For all of us, the goal was how to go about keeping the doors open, and being creative and all of us doing jobs that we had not done before," Skojec said. "Until this day, we are willing to make a sale, do whatever it takes to keep the doors open and keep Josh's dream alive, ultimately."
To have such commitment to Peine's vision requires a strong belief in the product. Maddie Lewis came to Clear Light first by becoming a fan of its product. Lewis is a Minnesota native with a distinct Midwestern accent, and with her husband, bought a house in Placitas 12 years ago after a move from Florida. When they moved into the house, which sat empty for six years, Lewis found a Clear Light sachet in a bathroom drawer, still packing that strong cedar scent.
"There was a sachet, and it said rub it between your hands to freshen, and I did, and it smelled wonderful," Lewis said. "I got the address, drove down the street and saw the place, and went home and called. And I was going to be looking for a job pretty soon, so I called and talked to Joshua, and he says come on in for an interview." Lewis, now Clear Light's office manager, oversees inside sales, bookkeeping and most of the company's administration work. And while working in an office that always smells good with beautiful landscape in all directions, Lewis was attracted to the family atmosphere, both in the office and with their customers.
"Some of them have been with us for many years," she says of Clear Light's loyal base. "I know these people, and some of them we are on a first-name basis with. They're like family, and they get to know you."
Man Made ContentIncense is one of Clear Light's flagship products.Chapter 3: The Legacy of a Man Who Found His Spiritual Home
The story of Clear Light's long-term success is truly the story of Peine's legacy, journey and the land that surrounded him. "He entered New Mexico and absolutely fell in love with it. He liked the open spaces, the freedom, the fact it wasn't a built up area, he just kind of liked that," says his sister Penny. "He happened on the property, and fell in love with the little house, and that's where he ended up."
Making cedar products was never part of Peine's plan. After building a successful acting career in Hollywood throughout the 1960s and armed with a handful of film and television credits, Peine grew tired of auditions, rejections and head shots. So, he did what thousands of actors did before and after him, and in 1970 he left it all behind. Peine, an avid biker, climbed on his Harley Davidson (HOG) and headed north, looking for opportunity or chance, not sure which would show its face first. He rode through California and into southern Canada, before looping around and making his way south to Placitas.
A dynamic people person with a knack for making friends, Peine forged a relationship with members of the Navajo and Hopi tribes nearby and by chance, it provided the opportunity he was looking for when he left Hollywood. He learned from the Native Americans the properties and uses of cedar, something that piqued his interest from the very start. Peine had found exactly the place that he didn't know he was even looking for. An adventurer with a love for all things outdoors, Peine soon felt at home.
Man Made ContentThe needles are cured with a proprietary process.
"When he got on that motorcycle, I don't think he had any idea. He wanted to take a break, and see where it took him," his sister says. "It was by chance he wound up with the lore, and a fluke that he wound up with the information. It captured his interest, and that's how it started."
A tireless worker, Peine would labor over product development for months. His office still sits largely unused, with his nameplate still on the front of his large desk. The vision of what he built when he left Hollywood is still alive and well.
"He was a very rare person. You could love him and hate him within the space of five minutes," Penny says. "But at the heart of it, was that sweet nature that came through. He believed in it, he really believed in its positive properties."
The staff at Clear Light is very aware of the legacy that Peine began building when he got off his Harley Davidson 44 years ago. And at the root of that legacy is the passion and belief that cedar -- in any form -- brings joy to others. "He put his whole heart and soul into Clear Light, and he was a real cedar person," Lewis said. "That's what he would call people. People that would come in and love cedar, they're definitely cedar people."
"He loved the whole concept. He really believed in cedar," his sister Penny says. "He could sell it to anyone, and that's how he started it. And he was better at that than anyone I have ever known."
Andrew Iden is an Atlanta-based freelance writer and producer. He spent eight years as a writer/producer for HLN's Nancy Grace, and he now works as a freelance news editor/producer with CNN and Mixed Bag Media. He's written for CNN, The Bluegrass Situation, and he was a newspaper reporter for six years in northern Virginia before moving south. Follow Andrew on Twitter at @AJIden and www.andrewiden.com.
Matt Staver/Bloomberg via Getty Images
Things just don't get any easier for the cable television providers. Folks continue to cut the cord, trading in fat cable bills for cheaper alternatives or settling for streaming solutions. We saw that happen again in 2014.
Comcast (CMCSK) and Cablevision (CVC) reported quarterly results this week. Some aspects of the financial announcements were encouraging, but the news wasn't pretty when it comes to video.
Comcast kicked things off on Tuesday by announcing that it closed out the year with 22.383 million video customers, 194,000 fewer cable TV accounts than it had a year earlier. Yes, Comcast did add 6,000 video customers since the end of the third quarter. This is only the third time in the past 31 quarters that Comcast has come through with a sequential increase. However, there's little reason to think that a turnaround is in the works.
That's Comcastic
Things are so bad at Comcast that it even bragged that closing out the year with a decrease of 194,000 video customers is its best showing in seven years. Yes, saying goodbye to the equivalent of three football stadiums' worth of subscribers is considered a success story. Comcast's cable television accounts peaked at nearly 25 million in 2007, and it's been mostly downhill ever since.
Investors may be in a forgiving mood. After all, despite these past seven years of defecting cable TV customers, we've seen Comcast come through with dividend increases in each of those years. Comcast is also helping its own luck by growing its broadband and Internet phone businesses. Customers may be kissing their fat cable bills goodbye, but apparently they still to cling to Comcast as an Internet provider to deliver the digital video.
There's also its NBCUniversal subsidiary that's now generating more revenue than Comcast's flagship cable TV service. The success of the Universal theme parks helped offset a decline in its film division and a flat performance for its cable networks. That's nice, but how excited can one get about Comcast with its cable television -- and cable networks -- meandering?
Cutting the Cord
Time Warner Cable (TWC) fared worse than Comcast when it reported a few weeks earlier. It closed out the fourth quarter with 10.789 million cable TV accounts, 38,000 fewer than it had three months earlier and 408,000 fewer than were paying Time Warner Cable when the year began.
Comcast is in the process of trying to merge with Time Warner Cable. There's been plenty of resistance in letting the two pair up, but the ugly truth is that since plans for the merger were announced last February, the combined company has shed 602,000 video customers.
It's just not easy to be a cable TV provider these days. Charter Communications (CHTR) reported earlier this month, and it wrapped up 2014 with 4.16 million cable television subscribers. That's a gain of 3,000 accounts for the quarter but a decline of 17,000 for the year. That makes it the relative victor in this slow race to zero.
Cablevision was the last of the the major players to report, and Wednesday morning's report was also uninspiring. It closed out 2014 with 2.681 million video customers, shedding 34,000 during the quarter and 132,000 during the year. The four leading cable TV providers combined to lose 63,000 net subscribers during the final three months of 2014 and a whopping 751,000 for all of 2014.
Yes, it's pretty grim out there. The cable guy's becoming an endangered species.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.
Lisa Poole/AP
The owner of T.J. Maxx, Marshalls and Home Goods stores said Wednesday that it will boost pay for its U.S. workers to at least $9 per hour.
The announcement by TJX (TJX) comes a week after Walmart (WMT) said it would increase wages for its employees and is a sign that more competitors may follow suit. Low-paying retailers are having a harder time retaining workers as the job market improves.
"This pay initiative is an important part of our strategies to continue attracting and retaining the best talent," CEO Carol Meyrowitz said in a statement.
How Much of Raise?
TJX spokeswoman Doreen Thompson declined to say what workers currently earn. A recent Credit Suisse report estimates TJX's current hourly pay at about $8.24. The federal minimum wage is $7.25 per hour. TJX said hourly workers will start to receive the pay increase in June. In 2016, the company plans to pay all associates who have worked at its stores for more than six months at least $10 per hour. The company's 191,000 associates around the world restock shelves, greet customers and ring up purchases at the cash register.
Walmart, the world's largest retailer, is raising entry level wages to at least $9 an hour in April and to at least $10 an hour by February of next year. Walmart said the change will affect about 500,000 workers. Also this year, Swedish furniture seller Ikea gave workers at its U.S. division a 17 percent average raise to $10.76 an hour. And clothing chain Gap (GPS) raised its minimum hourly wage to $9 last year and to $10 this year.
TJX, based in Framingham, Massachusetts, operates 3,395 stores, including six of its outdoor goods chain Sierra Trading Post. Its shares rose 53 cents to $68.27 in morning trading Wednesday.
Shutterstock
Sometimes the best investing ideas are lying right under your feet. Shares of Trex (TREX) hit an all-time high on Tuesday after posting better-than-expected results. The leading maker of wood-alternative decking materials saw its shares move higher after net sales in its latest quarter rose 16 percent to $74.2 million. Analysts were only holding out for an 11 percent advance.
Trex's adjusted profit doubled to 16 cents a share, just ahead of the 15 cents a share that Wall Street pros were targeting. That isn't really much of a surprise. Trex has now beaten analyst profit estimates for three consecutive quarters.
The improving economy paired up with attractive mortgage and refinancing rates is apparently leading to folks hoping to extend their living space by building out weather-resistant decks and patios.
Historically speaking, the holiday quarter is the seasonally softest reporting period for Trex. There aren't a lot of people who are thinking of cookouts on a new deck when autumn hands the baton to winter. However, the good news is that the favorable momentum should continue for Trex as it heads into peak deck-buying season.
Trex sees net sales clocking in at roughly $120 million for the seasonally potent current quarter, 19 percent ahead of the prior year's quarter. Wall Street was only holding out for $115.8 million in net sales.
It's the Wood That Makes It Good
Lumber Liquidators (LL) followed with its report on Wednesday morning. Expectations weren't as high for the leading retailer of discounted hardwood flooring as they were for Trex. Lumber Liquidators had missed Wall Street's income forecasts in each of the three previous quarters, and analysts were only holding out for top- and bottom-line growth in the low single digits.
Unfortunately, the streak of disappointment now stretches to four quarters. Net sales increased just 5.2 percent to $272 million, short of the 8 percent growth that the pros were hoping to see. Comparable-store sales were negative, and making matters worse, profitability declined when the market was holding out for a slight gain.
The silver lining is that things are starting to turn around. Store-level sales turned sharply positive in December, and that trend has continued so far in 2015. Lumber Liquidators sees $1.14 billion to $1.21 billion in net sales for all of 2015, fueled by comps growth in the single digits and the opening of 30 to 35 new stores. It sees a profit of $2.50 a share to $3 a share. The midpoint there is less than what Wall Street is forecasting, but it does represent healthy growth from the $2.31 a share that it just rang up for all of 2014.
Trex and Lumber Liquidators aren't the only flooring specialists stepping up with fresh financials. Floor-tile retailer Tile Shop (TTS) and carpet-tile distributor Interface (TILE) rose a week earlier after posting strong quarterly results. Sales growth at Tile Shop and Interface rose 9.5 percent and 8.1 percent, respectively, when pitted against the prior year's holiday quarter. Outside of another mixed showing out of Lumber Liquidators, the publicly traded companies responsible for putting a floor underneath your feet are raising the roof.
There may come a time for investors to bail on the flooring specialists, but for now momentum clearly appears to be on the side of the home improvement stocks.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Interface, Lumber Liquidators, Tile Shop Holdings, and Trex. Try any of our Foolish newsletter services free for 30 days. Looking for a winner for your portfolio? Check out The Motley Fool's one great stock to buy for 2015 and beyond.
NEW YORK -- The S&P 500 closed lower and the Nasdaq snapped a 10-session winning streak Wednesday as investors took profits in Apple shares, while the Dow eked out another record high close.
Boosting the Dow were consumer discretionary shares including McDonald's (MCD), up 3.9 percent at 98.66, which also helped to limit losses on the S&P 500.
The S&P 500 consumer discretionary index added 0.8 percent, with shares of TJX (TJX) up 3.3 percent at $69.38 after results. Target (TGT) edged up 0.3 percent to $77.15 after a stronger-than-expected jump in same-store sales and profits for the fourth quarter.
Federal Reserve Chair Janet Yellen's testimony to a House of Representatives committee provided few new clues for investors on the timing of an interest rate hike.
Apple (AAPL) shares dropped 2.6 percent to $128.79, retracing recent gains. The stock is still up 16.6 percent for the year so far.
"It's a big hedge fund stock, and there's always the potential for some profit-taking among some shorter-term players," especially after the stock's big run-up, said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
The Dow Jones industrial average (^DJI) rose 15.38 points, or 0.08 percent, to 18,224.57, a record close. The Standard & Poor's 500 index (^GSPC) lost 1.62 points, or 0.08 percent, to 2,113.86 and the Nasdaq composite (^IXIC) dropped 0.99 points, or 0.02 percent, to 4,967.14.
Energy shares climbed with sharp gains in oil prices. The S&P energy index was up 0.4 percent, while U.S. crude oil prices rose 3.5 percent to $50.99.
Hewlett-Packard (HPQ) shares tumbled 9.9 percent to $34.67 as the worst performer on the S&P 500. The world's No. 2 PC-maker reported flat or lower quarterly revenue in all of its operating units and forecast full-year earnings well below analyst expectations.
About 6.2 billion shares changed hands on U.S. exchanges, below the 6.8 billion average for the month to date, according to BATS Global Markets.
Advancing issues outnumbered declining ones on the NYSE by 1,697 to 1,359, for a 1.25-to-1 ratio on the upside; on the Nasdaq, 1,473 issues rose and 1,233 fell, for a 1.19-to-1 ratio favoring advancers.
The S&P 500 posted 59 new 52-week highs and no new lows; the Nasdaq composite recorded 120 new highs and 23 new lows.
What to watch Thursday:
At 8:30 a.m. Eastern time, the Commerce Department releases durable goods for January, and the Labor Department releases weekly jobless claims and the Consumer Price Index for January.
Freddie Mac releases weekly mortgage rates at 10 a.m.
Earnings Calendar
These selected companies are scheduled to release quarterly financial results:
netflix.com
Friday will be a bit unusual. If you find coworkers calling in sick or friends canceling plans for social outings that day, don't blame a phantom bug that's going around. It will probably be Netflix (NFLX) to blame as it makes the entire third season of "House of Cards" available.
The serialized political drama starring Kevin Spacey and Robin Wright is going to be a big draw, fueling more of the binge viewing that Netflix has made popular as subscribers consume several episodes if not entire seasons in a single sitting.
Netflix has come a long way, and not just because the stock has nearly tripled -- up 186 percent -- since the first "House of Cards" season premiered exclusively on the site two years ago. Its subscriber base has more than doubled in that time, going from 27.2 million worldwide subscribers at the end of 2012 to 57.6 million accounts two years later.
"House of Cards" has probably played a major role in the service's attraction of new members and retention of existing viewers, but Netflix is also about so much more than a single show now.
Life Beyond the First Couple
The great thing about Netflix adding millions of new subscribers with every passing quarter and last year's gutsy move to increase its monthly rate from $7.99 to $8.99 is that it now has more money to invest in incremental content.
We'll be seeing that play out in the coming weeks as Netflix rolls out several new shows that members will only be able to initially catch on the premium streaming platform. If "House of Cards" is too gritty, the debut of "Unbreakable Kimmy Schmidt" begins streaming a week later. The Tina Fey-backed sitcom stars Ellie Kemper from "The Office" in the namesake role that was originally being developed at NBC. Two Fridays after that, it will be "Bloodline" -- another serialized drama from the creators of "Damages" -- diving into Netflix's growing catalog of proprietary content. Marvel's new "Daredevil" show will woo superhero buffs in April, followed by the return of Jane Fonda and Lily Tomlin as a comic pairing in "Grace and Frankie" a month later.
Netflix isn't just spending on original programming, of course. It's loading up on movies and existing TV shows, and now has a record $9.5 billion committed to future content streaming obligations. Netflix no longer needs a single hit show in its arsenal, but it certainly doesn't hurt.
We Are the World
Netflix is still growing domestically, but its biggest growth spurt these days is coming from its overseas expansion. Of the 4.33 million net additions that it secured in the final three months of 2014, just 1.89 million were U.S. accounts. The other 2.44 million incoming accounts are international.
More than two-thirds of Netflix's audience remains stateside subscribers, but we've seen the constitution of the platform's user base go from 75 percent American to 68 percent over the past year. That trend will continue.
The bad news for impatient investors is that Netflix is currently losing money outside of its U.S. stronghold. It's not cheap to ramp up a digital platform in a growing number of overseas markets. Netflix does not expect to post an overall profit in its international operations until 2017.
That's not a bad thing. It's important for Netflix to throw its net as far as possible before local alternatives have a chance to gain traction.
It wouldn't be a surprise if "House of Cards" doesn't have the same appeal in overseas markets as it does closer to home. It is a serialized drama about U.S. politics, after all. It will be quite the achievement when Netflix's global audience grows to the point where it's able to justify investing in country-specific original programming, outside the U.S. For now, it's just comforting to know that Netflix has more in its arsenal once Friday's binge viewers surface to go back to work next Monday.
Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. Check out our free report on high-yielding dividend stocks.
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Everyone wants to invest just like the legendary Warren Buffett. Unfortunately, few understand the secret to his incredible success. A recent paper, authored by Andrea Frazzini and David Kabiller at AQR Capital Management and Lasse Pedersen of New York University, sheds some light on Buffett's stock-picking skill by applying a level of empirical analysis lacking in the previous evaluations of his investment performance. While the paper is technically dense, the good news is every investor can implement the same core principles.
Here's the key conclusion: "We find the secret about [Buffett's] success is his preference for cheap, safe, high-quality stocks." That's the part you can implement, as I will discuss below.
But first, the study also concludes that Buffett benefits from his ability to use leverage from the float of his insurance holdings, at a low financing rate, to magnify returns. While individual investors could use leverage by buying on margin and using option contracts or leveraged exchange-traded funds, many are understandably reluctant to do so because of the increased risk. As a result, Buffett still has an advantage due to, the study found, his "unique access to stable and cheap financing."
Contrary to much of what you may read about Buffett's stock-picking success, his genius was in recognizing (before it was generally understood) that exposure to equities with certain characteristics has historically produced high returns.
The ramifications of this study are profound. Buffett (unlike many individual investors) does not look for stocks that are likely to "beat the market." Instead, he picks equities that are safe, high-quality, value stocks. If you want to invest like Buffett, you need to look for stocks with exposure to the same factors.
That is precisely what the authors of the study did. They applied leverage to a portfolio of safe, high-quality, value stocks and earned simulated returns comparable to Buffett. Here's how you can do the same.
Consider Buying Stocks With Exposure to the 'Buffett Factors'
Buffett looks for stocks that are less volatile than most. Examples of low-volatility stocks include Procter & Gamble (PG) and Coca-Cola (KO). Low-volatility stocks tend to be large, well-established companies that generally track the performance of the overall market.
He also screens for low price-to-book ratios. You can learn how to calculate price-to-book ratios. Stocks with low price-to-book ratios may be undervalued, but there can be other reasons for a low ratio, unrelated to value. These stocks are known as "value stocks."
Finally, he looks for stocks that are high quality, meaning stocks that are profitable, stable, growing and with "high payout ratios." These stocks pay out a meaningful percentage of their earnings as dividends.
Mark Hulbert offers some suggestions for stocks that meet these characteristics.
Consider Buying Mutual Funds that Screen for These Factors
As a practical matter, it would be a daunting task for most individual investors to put together a risk-adjusted portfolio consisting of stocks appropriately screened for the "Buffett factors." Hulbert recommends the following mutual funds, which come close, and do the screening for you.
Most investors would benefit from using an evidence-based adviser, who can put together a globally diversified portfolio of low-cost index funds, exchange traded funds or passively managed funds with appropriate screening for each of these factors. Weighting the portfolio to be sure it is appropriately tilted (and not overweighted) toward these factors is a complex task. A well-qualified adviser can add significant value by doing so correctly.
Daniel Solin is the director of investor advocacy for theBAM Allianceand a wealth adviser with Buckingham. He is a New York Times best-selling author of the Smartest series of books. His latest book is "The Smartest Sales Book You'll Ever Read."
Medicare can be so complicated. These are some common mistakes that people should watch out for when signing up for coverage or picking plans to fill in the gaps.
1. Keeping Your Part D Plan Choice on Autopilot
Open enrollment for Medicare Part D and Medicare Advantage plans runs from Oct. 15 to Dec. 7 every year, and it's a good time to review all of your options. The cost and coverage can vary a lot from year to year-some plans boost premiums more than others, increase your share of the cost of your drugs, add new hurdles before covering your medications, or require you to go to certain pharmacies to get the best rates. And if you've been prescribed new medications or your drugs have gone generic over the past year, a different plan may now be a better deal for you.
It's easy to compare all of the plans available in your area during open enrollment. Go to the Medicare Plan Finder and type in your drugs and dosages to see how much you'd pay for premiums plus co-payments for plans in your area. See It's Time for Medicare Open Enrollment for more information about picking a plan.
2. Automatically Buying the Same Part D Plan as Your Spouse
There are no spousal discounts for Medicare Part D prescription-drug plans, and most spouses don't take the same medications-one plan may have much better coverage for your drugs while another may be better for your spouse's situation. "You need to look at the coverage for your specific drugs," says Tricia Blazier, of Allsup Medicare Advisor, which helps people with their Medicare decisions. You can each type in your drugs and dosages at the Medicare Plan Finder to estimate out-of-pocket costs for each of you under the plans in your area. Just be careful if you and your spouse sign up for plans with different preferred pharmacies-some plans only give you the best rates if you use certain pharmacies, so you could end up paying a lot more if you get your drugs somewhere else.
3. Not Checking That Your Providers Are Still Covered
If you choose to get your coverage through a private Medicare Advantage plan, which covers both medical expenses and prescription drugs, you usually need to use the plan's network of doctors and hospitals to get the lowest co-payments (and some plans won't cover out-of-network providers at all, except in an emergency). As with any PPO or HMO, it's important to make sure your doctors, hospitals and other providers are covered in your plan from year to year. You can switch Medicare Advantage plans during open enrollment each year from Oct. 15 to Dec. 7, and you can compare out-of-pocket costs for your medications and general health condition under the plans available in your area by using the Medicare Plan Finder. After you've narrowed the list to a few plans, contact both the insurer and your doctor to make sure they'll be included in the network for the coming plan year.
4. Not Realizing You May Be Able to Switch Outside Open Enrollment
Even though open enrollment for Medicare Advantage plans runs from Oct. 15 to Dec. 7, you may still be able to change plans during the year. For example, you can switch plans outside of open enrollment if you have certain life changes, such as moving to an address that isn't in your plan's service area (see Special Enrollment Periods for more information). And if you have a Medicare Advantage plan in your area with a five-star quality rating, you can switch into that plan anytime during the year (you can use the Medicare Plan Finder to see whether a five-star plan is available in your area). Also, you can switch from a Medicare Advantage plan to traditional Medicare plus a Part D prescription-drug plan from Jan. 1 to Feb. 15 (although you could be denied medigap coverage or charged more for it). See How to Switch Medicare Advantage Plans for more information about your options.
5. Not Picking the Right Medigap Plan When You First Enroll
If you buy a Medicare supplement plan within six months of enrolling in Medicare Part B, you can get any plan in your area even if you have a pre-existing medical condition. But if you try to switch plans after that, insurers in most states can reject you or charge more because of your health. It's important to pick your plan carefully. See The ABCs of Picking a Medigap Policy for more information on choosing a plan. Some states let you switch into certain plans regardless of your health, and some insurers let you switch to another one of their plans without a new medical exam. Find out about your state's rules and the plans available at your state insurance department website. You can also find more information about medigap policies in your area at Medicare.gov.
6. Forgetting That You Can Sign Up for Medicare at 65
If you're already receiving Social Security benefits, you'll automatically be enrolled in Medicare Part A and Part B when you turn 65 (although you can turn down Part B coverage and sign up for it later). But if you aren't receiving Social Security benefits, you'll need to take action to sign up for Medicare. If you're at least 64 years and 9 months old, you can sign up online. You have a seven-month window to sign up-from three months before your 65th birthday month to three months afterward (you can enroll in Social Security later).
You may want to delay signing up for Part B if you or your spouse has coverage through your current employer. Most people sign up for Part A at 65, though, since it's usually free-although you may want to delay signing up if you plan to continue contributing to a health savings account. See the Social Security Administration's Applying for Medicare Only for more information. If you work for an employer with fewer than 20 employees, you must sign up for Part A, which will become your primary insurance (ask your employer whether you can delaying signing up for Part B).
7. Not Signing Up for Part B at 65 If You Have Other Coverage
When you turn 65, Medicare is generally considered to be your primary insurance, and any other coverage you have is secondary, unless you or your spouse has insurance through a current employer with 20 or more employees. But the coverage must be with a current employer. Other employer-related coverage, such as retiree coverage, COBRA coverage, or severance benefits, isn't considered to be primary coverage after you turn 65. That means if you don't sign up for Medicare, you may have gaps in coverage and be subject to a lifetime late-enrollment penalty of 10% of the current Part B premium for every year you should have been enrolled in Part B but were not. You may also have to wait to get coverage: If you miss the window for enrolling when you turn 65 or eight months after you leave your job, you can only sign up for Medicare between January and March each year, with coverage starting on July 1. For more information, see the Medicare Rights Center's Medicare Interactive page about enrolling in Part B.
8. Forgetting About the Deadline to Sign Up for Part B
If you have coverage through an employer with 20 or more employees, you don't have to sign up for Medicare at 65. Instead, you may choose to keep coverage through your employer so you don't have to pay the Part B premiums. But you need to sign up within eight months after you leave your job or you may have to wait until the next enrollment period (January through March, for coverage to begin on July 1). That means you could go for several months without coverage. You may also get hit with the 10 percent lifetime late-enrollment penalty.
9. Making Financial Moves That Boost Your Medicare Premiums
Most people pay $104.90 per month for Medicare Part B premiums. But if you're single and your adjusted gross income is more than $85,000 (or more than $170,000 for joint filers), you'll have to pay from $146.92 to $335.70 per month. And you'll have to pay a high-income surcharge for your Part D prescription-drug coverage, too, which can boost your premiums by $12.10 to $69.30 per month.
If you're near the income cutoff, be careful about financial moves that could increase your adjusted gross income and make you subject to the surcharge, such as rolling over a traditional IRA to a Roth or making big withdrawals from tax-deferred retirement accounts. To stay below the limits, you may want to spread your Roth conversions over several years or withdraw money from Roths rather than just from tax-deferred accounts.
10. Not Contesting the High-Income Surcharge When You Retire
Your Part B and Part D premiums are higher if you earned more than $85,000 if single or $170,000 if married filing jointly. The Social Security Administration uses your most recent tax return on file (generally 2013 for 2015 premiums) to determine whether you're subject to the surcharge. But you may be able to get the surcharge reduced if your income has dropped since then because of certain life-changing events, such as marriage, divorce, death of a spouse, retirement or a reduction in work hours. In that case, you can ask Social Security to use your 2014 income instead (you'll need to provide evidence of the life-changing event, such as a signed statement from your employer that you retired). See How to Avoid the Medicare Surcharge and the Social Security Administration's Medicare Premiums: Rules for Higher-Income Beneficiaries for more information.
11. Signing Up for Medicare Part A If You Want to Fund an HSA
You can't contribute to a health savings account after you sign up for Medicare, but that doesn't necessarily mean that you have to stop making HSA contributions at age 65. If you or your spouse has health insurance through your current job, you can delay signing up for Part A and Part B and keep contributing to an HSA. This isn't an option if you have already signed up for Social Security or your employer has fewer than 20 employees-in that case, you can't delay signing up for Part A. Be careful about your contributions in the year you leave your job and sign up for Medicare-you must prorate your HSA contributions based on the number of months before you were covered by Medicare, says Todd Berkley, who runs the AskMrHSA.com service. See FAQs About Health Savings Accounts for more information.
