BCGS Newsletter 4/2013

Download Full Version here: BCG Securities Newsletter April 2013

March Market Commentary

February and early March saw markets continue to reach new recovery highs as investor confidence stayed strong. This occurred despite concerns with the payroll tax increase, the sequester, and the Federal Reserve Open Market Committee meeting minutes (the minutes hinted that the Fed might indeed stop easing by the end of 2013.) While consumer woes did hit low-end retailers and restaurateurs hard, home and auto sales continued to move ahead despite less-than-optimal weather. The manufacturing sector took a surprise turn for the better with some of the best data in a couple of years, and housing continued to improve. Although housing contribution currently represents only about 2% of GDP, the historical long-term average has been closer to 5%, which means there’s still a lot of room for improvement…

Don’t Pay Tax Twice

Reinvestment can be a crucial component of the wealth accumulation process, as the reinvested amount compounds and grows over time. Yet if you are reinvesting dividends and capital gains (“distributions”) in funds you hold in your taxable account, it can be important to ensure that you’re not paying more tax than necessary. You pay tax on those distributions in the year in which you receive them. But if you don’t keep good records, you could end up paying tax on those distributions again when you sell. For example, say you bought 1,000 shares of a fund for your taxable account at the end of 2011; you paid $18 per share for a total of $18,000. In 2012, with the share price still at $18, the fund made a dividend distribution of $0.50 per share, or $500 for your 1,000 shares. You’d owe tax on the $500 on your 2012 taxes, whether you reinvested the money or took the cash in hand. (The taxes would be deferred if you held the fund in a tax-sheltered account). If you reinvested the money in the fund, you’d now own 1,027.78 shares: your original 1,000 plus the nearly 28 additional shares that you were able to buy (at $18) with the $500 dividend distribution. If you sell now, with the fund’s net asset value at $20, you’d think you’d owe taxes on your $2,555.56 profit ($20,555.56 minus $18,000), right? Wrong. You would only owe taxes on $2,055.56 ($20,555.56 minus $18,000 minus $500). Otherwise, the $500 dividends would be taxed twice…

The Best Ways to Give a Financial Gift to Children

Here are some of the key strategies to consider when giving children and grandchildren a financial boost. There’s no one-size-fits-all answer: The right choice for your situation will depend on how much you intend to give as well as on your grandchild’s life stage and the goal of financial assistance…

Download Full Version here: BCG Securities Newsletter April 2013

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