Recordkeeping guidelines from the IRS

This is an excerpt from the IRS website.  I would suggest checking out the entire article on their website:

Why Keep Records?

There are many reasons to keep records. In addition to tax purposes, you may need to keep records for insurance purposes or for getting a loan. Good records will help you:

• Identify sources of income. You may receive money or property from a variety of sources. Your records can identify the sources of your income. You need this information to separate business from nonbusiness income and taxable from nontaxable income.
  
• Keep track of expenses. You may forget an expense unless you record it when it occurs. You can use your records to identify expenses for which you can claim a deduction. This will help you determine if you can itemize deductions on your tax return.
  
• Keep track of the basis of property. You need to keep records that show the basis of your property. This includes the original cost or other basis of the property and any improvements you made.
  
• Prepare tax returns. You need records to prepare your tax return. Good records help you to file quickly and accurately.
  
• Support items reported on tax returns. You must keep records in case the IRS has a question about an item on your return. If the IRS examines your tax return, you may be asked to explain the items reported. Good records will help you explain any item and arrive at the correct tax with a minimum of effort. If you do not have records, you may have to spend time getting statements and receipts from various sources. If you cannot produce the correct documents, you may have to pay additional tax and be subject to penalties.
  
  
  The entire publication can be found at this link:
  http://www.irs.gov/publications/p552/ar02.html#en_US_publink10008576

Universal fiduciary standard shot down

The financial-reform package recently introduced by Senate Banking Committee Chairman Christopher Dodd, D-Conn., dropped an earlier provision that would have imposed a fiduciary duty on anyone offering advice on investments.  Th Financial Planning Coalition has lobbied for months to include a requirement of fiduciary duty to all those who hold themselves out as a financial planner.  Apparently Wall Street special interest groups, with their huge political contributions, got their way.  And the investing public remains at a disadvantage.  Rest assured that I have always been and will remain a fiduciary, which means in short, that my clients' interests come before the interests of my firm or me.  For any new readers, this is a good question to ask your current advisor.  You need to know if you can trust your advisor and whether he/she has your best interests at heart.

Fortune article: relationship between client & planner

I came across this article from Fortune magazine.  I encourage you to read it for yourself.  Here is the link:
fortune

The most important thing I read was the last two paragraphs, "Finally, the yes-man problem can't just be pinned on advisers. A 2007 survey from the Employee Benefit Research Institute found that two-thirds of the people interested in meeting with a financial planner were likely to implement advice only if it conformed to their own ideas.
So if you want to improve the input you get, perhaps the first step is to look for someone who challenges your ideas, rather than echoing them."

Something to think about.....

One year later

Last week marked the one year anniversary of the bear market low.  Money invested last year at this time grew by an amazing amount.  According to Morningstar's indexes, large cap was up 65%, mid caps were up 74% and small caps were up 87% with value stocks beating growth stocks.  Small cap value returned the best results with an increase of 109%.  So what have we learned (if anything).  First, don't panic sell--as that usually happens at the low point in the market.  Second, have a diversified portfolio with plenty of liquidity, by liquidity I mean, money you can get your hands on instantly without having to sell in a lousy market.  Only those with ample liquidity can withstand the claws of a bear market.  There are other lessons but these are the most important--lessons we keep having to learn over and over again.

In case you were wondering.....

The number of U.S. households with a net worth of $1 million or more, not including primary residence, increased 16% to 7.8 million last year, according to a report released Tuesday by Spectrem Group, a Chicago research company. The increase last year follows a 27% decline in millionaires from 2007 to 2008.


Similarly, the number of ultra-wealthy households, which have a net worth of $5 million or more, rose 17% to 980,000 last year.

February Results & ROTH Conversions

The market made a nice comeback during February.  There has been much volatility, wide swings from day to day--which is why looking at your nest egg every day can be stressful!  So don't do it!  There is no reason to be looking at your portfolio that much--all it really does is make you much more emotional about your money when we want to be rational.  Probably the biggest news last month was the Federal Reserve Board raising the discount rate (the rate at which banks can lend from the Fed) to .25%.  That's right, .25%.  The market was a little rattled by this action as it symbolized the beginning of higher rates to come.  We still have a long way to go it seems to me.
There has been much talk about the ROTH conversions which are now unrestricted by the amount of income you have in any one year.  Generally speaking, the conversions are optimal for those who really don't need their IRA assets and who have the money to pay the tax on the conversion outside of the IRA.  Though many of the articles out there seem to support the idea that young investors in particular should be utilizing this conversion tactic, I am still on the fence about it.  I think there is some reasonable risk that 30 or 40 years from now when you start using the money in the ROTH that it will be taxed in some way.  That's the problem with the tax advantaged vehicles--the tax code could always change...especially if there ends up being huge amounts of money in these ROTH accounts.  If you want me to look at your specific situation to see if it makes sense for you to convert, please send me an email.  There are may variables that come into play.

Here are the February results:
The Monthly Index Report for February 2010

Index	Feb-10		YTD	Description
S&P 500 Index*	2.9%		-1.0%	Large-cap stocks
DJIA*	2.6%		-1.0%	Large-cap stocks
Nasdaq Comp.*	4.2%		-1.4%	Large-cap tech stocks
Russell 1000 Growth	3.4%		-1.1%	Large-cap growth stocks
Russell 1000 Value	3.2%		0.3%	Large-cap value stocks
Russell 2000 Growth	4.4%		-0.3%	Small-cap growth stocks
Russell 2000 Value	4.6%		1.6%	Small-cap value stocks
EAFE	-0.7%		-5.1%	Europe, Australasia & Far East Index
Lehman Aggregate	0.4%		1.9%	U.S. Government Bonds
Lehman High Yield	0.2%		1.4%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	1.1%		-0.8%	Managed Futures
3-mo. Treasury Bill	0.0%		0.0%
All returns are estimates as of February 26, 2010. *Return numbers do not include dividends.** Returns are estimates as of February 25, 2010.