Online Financial Tips

Archive for February, 2012

The word ‘funds’ in the phrase Exchange Traded Funds or ETFs, quite often confuses some investors who tend to identify them with mutual funds. More so, when people think that both the ETFs and the mutual funds spread the risk by the diversification of investments.

Confusion apart, the fact remains, that most people do not like the management and the investment policies and the high operating expenses associated with the actively managed mutual funds. The performance of mutual funds also does not offer the level of transparency that the investors would expect.

Another problem with the mutual funds is that the funds of the investors just lie in the portfolio for years. Though this may be a good investment policy as it brings in the benefits of long term investment, yet the investors cannot get the advantages of short term movements in the market.

For example, when Hurricane Katrina occurred in 2005, there was an upturn in crude oil prices. If the investors wanted to take advantage of this upsurge in crude oil prices, they would have to wait until the end of the business day when the net asset value -NAV- is calculated. The investor would again have to wait till the next day to buy the shares of the mutual fund with the oil company holdings and the value of the share would remain unchanged till it was again determined only at the end of the day. By this time the value could fall again before the investor was able to sell his shares.

It may be noted that the value of the oil stock might have risen during the trading period in course of the day, but the investor could not take the advantage of the price rise and sell his shares. Moreover the investor would also have to pay penalties and possibly the sales commissions if he sold his shares. Mutual funds do not provide any investment tools for those who wish to invest on short term price movements.

Exchange Traded Funds or ETFs were, therefore, devised to remedy the problems that are associated with the mutual funds. ETFs are index funds as they are designed to track the major indexes such as the S&P 500 or NASDAQ.

ETFs may not be actively managed, but their returns are in-line with the benchmarks that they are designed to mirror. ETFs also mirror other indexes and offer a number of significant benefits to the investors. So if some tech company promises a good earning, with an ETF that tracked the NASDAQ, an investor can buy shares early on and then sell them later for a profit, because ETFs trade like stocks.

ETFs trade like stocks. Investors have to pay commissions for their trades in the same way they have to do for stocks. But even these commissions can be reduced considerably by finding brokerages that charge very low or flat commissions.

ETFs give the investors a great amount of flexibility along with the added benefit of reduced risks due to diversification at minimal expense. Asset allocation forms an important part of sound investment strategy. It is against all cannons of sound investment to put all the eggs in one basket. This is the reason why investment experts advise the investors to split the portfolio among a variety of asset classes.

Another big reason for the popularity of the ETFs is that they are much cheaper than the actively managed mutual funds. Most investors love to invest in ETFs because they are not actively managed and their low expense ratios allow the investors to invest more money in them. An average expense ratio for an ETF is between 0.1-0.7 percent.

A great complaint about mutual funds is against their high management operating fees and commissions that are taken out even before any shares are purchased. These deductions may lower the turnover and also reduce the amount of capital actually used to invest.

ETFs cover all major indexes, asset classes that any niche investor can imagine and aspire to invest in. There are ETFs that are comprised exclusively of specialty industries in the tech and energy sectors besides the commodities such as gold and oil. Investors can add real estate investments to their portfolio and can thus create a portfolio consisting of diversified investments quickly and simply by using ETFs.

The businessmen in India have positive feeling regarding their financial position. As the economic position of India is mostly based on the government organisations, the speculation and financial criss have not shown much effect on Indian economy. If you study the present economic position of India, you can come to a conclusion that investing in a stock market or mutual funds will make you to face many problems. A lot of insecurity and confusions are faced by the investors, who want to invest in their money in public or private sectors. In these situations, they are searching for the best alternatives to save or invest their money.

Many of the economists in India say that going for fixed deposit is the right solution, when it compared to all the other sources where you can invest your money. This is the best source to rescue from the present liquidity crisis.

The fixed deposit is nothing but an account that allows the people to deposit their money for a period of some time. Depending on their convenience, people can choose the deposit period that say for a minimum period of 15 days to 5 years and more than that. When the deposit period comes to an end, the depositors will get high amount of interest on their deposited money. Depositing money in Indian banks is safer than other sources as the all the banks in India are under the control of Reserve Bank of India.

The main advantage of going for these deposits is that the depositors get high interest rates than the saving bank account holders. They will get lump-sum of money at a time, after the completion of maturity period of the deposit. Moreover, people do not get any insecure feeling on their deposits. The fixed deposits have been playing a prominent role, since the banking system has been introduced in the Indian economy market. They are one of the beneficial saving methods. Some years ago, people showed great interest for going long term deposits. But, now-a-days, due to the drastic changes that are occurred in the economic position of India, most of the investors want to go for short term fixed deposits.

The interest rates of the fixed deposits vary from one bank to another bank. To extend their services as well as to attract all segments of the investors, most of the banks in India offer many facilities to their customers, who want to deposit money in their banks. One of the main facilities is that the over draft facility which allows the depositors to draw money on the deposited amount, before the completion of the maturity period of deposit. On the request of depositors, some of the banks can transfer the interest amount on fixed money to the current or saving account of the depositor.

Virginia’s legislature adopted a new disclosure requirement for motor vehicle insurers that requires an insurer disclose the limits of liability of any motor vehicle liability or personal injury liability insurance policy to a claimant prior to the filing of a civil action. The trigger for this disclosure is a request by any claimant. The requesting party must meet a number of requirements detailed in the Code. The new law provides that the disclosure of the policy limits doesn’t constitute an admission of liability nor does it make information concerning the insurance policy admissible as evidence at trial. The amended Code will take effect on July 1, 2008. The amended Code is as follows:

8.01-417 Copies of written statements or transcriptions of verbal statements by injured person to be delivered to him; copies of subpoenaed documents to be provided to other party.

A. Any person who takes from a person who has sustained a personal injury a signed written statement or voice recording of any statement relative to such injury shall deliver to such injured person a copy of such written statement forthwith or a verified typed transcription of such recording within 30 days from the date such statement was given or recording made, when and if the statement or recording is transcribed or in all cases when requested by the injured person or his attorney.

B. Unless otherwise ordered for good cause shown, when one party to a civil proceeding subpoenas documents, the subpoenaing party, upon receipt of the subpoenaed documents, shall, if requested in writing, provide true and full copies of the same to any other party or to the attorney for any other party, provided the other party or attorney for the other party pays the reasonable cost of copying or reproducing the subpoenaed documents. This provision does not apply where the subpoenaed documents are returnable to and maintained by the clerk of court in which the action is pending.

C. After he gives written notice that he represents an injured person, an attorney, or an individual injured in a motor vehicle accident if he is not represented by counsel, may, prior to the filing of a civil action for personal injuries sustained as a result of a motor vehicle accident, request in writing that the insurer disclose the limits of liability of any motor vehicle liability or any personal injury liability insurance policy that may be applicable to the claim. The requesting party shall provide the insurer with the date of the motor vehicle accident, the name and last known address of the alleged tortfeasor, a copy of the accident report, if any, and the claim number, if available. The requesting party shall also submit to the insurer the injured person’s medical records, medical bills, and wage-loss documentation, if applicable, pertaining to the claimed injury. If the total of all such medical bills and wage losses equals or exceeds $12,500, the insurer shall respond in writing within 30 days of receipt of the request and shall disclose the limits of liability at the time of the accident of all such policies, regardless of whether the insurer contests the applicability of the policy to the injured person’s claim. Disclosure of the policy limits under this section shall not constitute an admission that alleged injury or damage is subject to the policy. Information concerning the insurance policy is not by reason of disclosure pursuant to this subsection admissible as evidence at trial.

If you need more information on this amended Code, please contact John Butler or one of our Risk Management attorneys.

Liability insurance is very important and most state auto insurance laws require that an individual maintain at least liability insurance on their automobile. What it does is protect you against costs that are associated with the damage and injury of another in an automobile accident in which you may be deemed at fault.

There are two parts to the policy. There is property damage liability and bodily injury liability. It is pretty easy to guess that property damage liability is going to protect you against any cost and damage that is associated with damaging another person’s physical property and that bodily injury liability is going to protect you against the personal injury inflicted on someone else as a result of the accident.

Usually, there are some numbers that a person may see on their policy. These numbers usually look like this: 50/100/25. Now what this means is that the policy is split up into three different amounts each policy can be different depending on what the individual chose when they opened the policy. In this case, 50/100/25 means that the insurance will pay for the bodily injury of an individual in an amount up to $50,000, will pay for the bodily injury costs on everyone in a vehicle in an amount up to $100,000, and will pay property damage costs up to $25,000.

Every vehicle requires its own level of liability insurance depending on what state you are located in. It is important to know what your state’s auto insurance requirements are so that you have an idea of what you would have to pay in your insurance premium.

The cost

Liability insurance is cheaper than full coverage insurance that also includes damages from theft, natural disaster, and vandalism. Liability only covers costs associated with an accident so that you do not lose your hard earned assets in a lawsuit. There are have been cases in which a person has been sued for more that what they have in coverage, but the liability insurance does lessen the blow. However, a person can pay for different levels of liability insurance to ensure that they will not be “taken for everything they’ve got.” Not having enough insurance can still have a heavy impact on a person’s life when an accident occurs.

No one intends on hurting another and they usually do not purposely engage in an auto accident because there is so much trouble involved, including the possible loss of the vehicle. That is why it is important to carefully assess how much car insurance you think you will need. Liability insurance is rather affordable. Some states have a minimum requirement of 20/40/10, but you could carry something such as a 50/100/50 if you think you need it. The cost is still not going to be much.

Just remember…

Don’t forget that if you set your limits too low you could be setting yourself up for financial disaster even though you have insurance. This is to be considered carefully. It is easy to make the decision to save money by paying the lowest premium possible, but paying the lowest premium possible could later result in the loss of your assets. It is also important to remember that liability just covers bodily injury and property damage. If a tree falls on your home during a wind storm, it is then time to assess your options. However, liability insurance will protect you from those nasty lawsuits that may come your way as a result of an accident. That in itself makes it more than worth the money because you have the peace of mind that most or all your assets are protected.

Even the most minor accidents can put your business at risk, so if you own a business or work site, getting some sort of liability coverage for it may be a good idea. Usually, these two very different kinds of insurance coverage are offered as bundled packages for business owners. Having both of them can protect the things you own or prevent you from incurring any legal difficulties as well. Here are some information on property and liability insurance coverage and what to look out for when purchasing them.

Protect your stuff with property liability

Property liability covers all the physical things you own within the property you define as covered by the insurance policy. Naturally, the more objects you own within the property, the higher your premium will be. Particularly expensive pieces of equipment such as payloaders, backhoes, and high-end computers can all drive up your premium as well, but you may be grateful for your coverage if your building is hit by a fire, for example. Also, most property liability insurance policies not only cover the cost of the items themselves, but may also provide money during the time you are rebuilding your company.

Protect your business with liability insurance

In case anyone incurs an injury at your place of business, you should be safe as long as your business has liability insurance. This sort of insurance is designed to protect your business in case someone incurs injury or damage to property in situations where your business is clearly at fault (and sometimes, even if your business is not at fault). For example, if you own a Web site and are being sued by another similar Web site for copyright infringement, your liability insurance will defray the cost of legal expenses.

On the whole, both kinds of insurance are important for keeping your business safe and sound. Just be sure to declare your assets honestly and faithfully. If you overvalue your assets, it will mean a very expensive premium. If you undervalue them however, you may not get enough coverage. Remember, insurance fraud is a crime punishable by federal law.

Have you reached your limit on your credit card and have found that you can no longer afford to make the monthly payments because of the outstanding interest? This problem is common for many who have been lured into using up their credit card limits on unrestrained shopping sprees and spending on a whim. Sometimes you feel that you are on the brink of bankruptcy and everything is hopeless.

But there is still hope because of credit card debt reduction. This program, which is also known as a debt management program, can deal with a case like yours. Banks don’t want you to file for bankruptcy because both bank and client will end up losers in the end. Instead they will give you an option to pay the outstanding amount that you have on your credit card for a certain period of time, with little or no added interest. This allows the bank to collect on money owed them while at the same time letting customers save a little and pay off debts accordingly.

The advantages of card credit reduction are, first, the savings that you will have due to suspended interest charges on what you owe. Second, you don’t have to file for bankruptcy and entirely devastate your credit history and score. And third, you can finally get your peace of mind. The only caveat is that availing of this program will still put you in the red zone in terms of your credit score, but this is something that you can rebuild once you are back on your feet.