Retirement Savings: What if My Money Doesn't Last as Long as I Do?"
By Saghir Aslam
Irvine , CA

Almost every working person in America is, in some way, planning for retirement. Most of us are aware that traditional sources of retirement income, such as Social Security or an employer-sponsored pension, probably will not fully fund our retirement as they did for past generations. More and more it is up to us to prepare financially for our retirement years. As we build our personal retirement assets, we generally estimate our needs based on the cost of our expected or desired retirement lifestyle, the current outlook for inflation, what we can currently afford to save and our estimated life expectancy.

This seems reasonable, but what if one or more of these factors prove to be other than anticipated and the money doesn't last? People are living longer today, and it's especially necessary to plan for the possibility of a longer life span. What if you run out of retirement savings at age 85 and live 10 more years …or 20?

Annuitization May Help.

Ensuring that retirement savings last long enough is where annuitization comes in. Annuitization, available through insurance contracts called annuities, guarantees the annuity owner income payments for a pre-defined period of time, typically ranging from as short as five years to as long as the lifetime of the owner and his or her spouse. Additionally, many financial advisers consider this an excellent method of building future income because annuities are tax-advantaged investments – that is, their assets grow on a tax-deferred basis during what is called the initial "accumulation phase."

How does an investor fund annuitization? First, assets are invested and built up for a number of years in an annuity, during the accumulation phase. As a hypothetical example, a man who is currently 55 years old places assets into an annuity to begin the accumulation phase. When he turns 75, he will decide for how long he wishes to receive payments and "annuities" his annuity contract. Thus, he will begin his "income phase" of the contract and start receiving a check every month. If he elects a lifetime payout, he will receive checks for the rest of his life, regardless of how long he lives.

How assets build during the accumulation please depends on which annuity you purchase. There are many types of annuities from which to choose. Some annuities (fixed annuities) guarantee a fixed rate of return, while others (variable annuities) offer professionally managed portfolios that usually invest in the stock market. Most variable annuities provide a range of features and benefits, including provisions for your heirs in the event of your death. All offer the advantage of tax deferral on investment earnings which, over the long term, can represent a significant increase in value over investments with earnings subject to annual taxes. As with other investments, diversifying assets can providing a desirable mix of liquidity, stability, life time income and opportunity for growth. It is best to talk with an investment professional to learn what choices might suit your individual circumstances.

In the end, one of the greatest advantages of annuitization is that you do not have to know in advance how long you will require income. Therefore, you can rest a little easier knowing that you'll have at least one resource of ongoing income throughout your retirement years.

Before you invest in an annuity I suggest that you do proper home work, go on internet or consult with different people and different type of annuities, advantages and disadvantages of each.

Let me share with you that there is wide variety of annuities to choose from. Study each one very carefully and select the best one to suit your needs. More time you will spend on investment now, happier you will be in your retirement years.

(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr. Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, or does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr. Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr. Aslam does not have anything for sale.)

How Useful Are Financial Rules of Thumb?
By Saghir Aslam
Irvine , CA

Financial rules of thumb are designed to give you quick guidelines for your finances. However, you shouldn’t follow them without giving some thought to your personal circumstances. Some of the more common financial rules of thumb include:

SAVE 10% OF YOUR GROSS INCOME. While this will give you good start, it’s typically the minimum, not the maximum, you should be saving. Analyze how much you’ll need for your financial goals, and then decide how much to save every year. Try to save as much as you can.

PLAN ON SPENDING 80% OF YOUR PRERETIREMENT INCOME DURING RETIREMENT. This may be true if you don’t plan to be very active during retirement, but more and more people expect retirement to include extensive travel and expensive hobbies. On the other hand, if you’ve paid off your mortgage and your children have finished college, you may need less than this. Review your individual situation and desires for retirement to determine how much you’ll need. It really is according to your needs.

SET THE PERCENTAGE OF STOCKS IN YOUR PORTFOLIO TO 100 MINUS YOUR AGE. With increased life expectancies, this can result in your portfolio being too heavily weighted in income investments. Set your asset allocation based on your risk tolerance and time horizon for investing. Even after retirement, stocks may comprise a significant portion of your portfolio. There are quite a few companies that pay substantial dividend and to make it even better their dividend have grown each year. In addition you will also get appreciation.

KEEP THREE TO SIX MONTHS OF INCOME IN AN EMERGENCY FUND. While an emergency fund is a good idea, how much to keep in that fund will depend on your circumstances. You may need a larger reserve if you are the sole wage earning in the family, work at a seasonal job, own your own company, or rely on commissions or bonuses. A smaller reserve may be required if you have more than one source of income, can borrow significant sums quickly, or carry insurance to cover many emergencies. It also depend if you have rental or other incomes.

PAY NO MORE THAN 20% OF YOUR TAKE-HOME PAY TOWARD SHORT-TERM DEBT. Once considered a firm rule by lenders, you can obtain loans even if you exceed this amount. However, don’t become complacent if you meet his rule of thumb, since a large percentage of your income is still going to pay debt. Try to reduce your debt, or at least reduce the interest rates on the debt.

KEEP YOUR MORTGAGE OR RENT PAYMENT TO NO MORE THAN 30% OF YOUR GROSS INCOME. While you can obtain a mortgage for more than that, staying within this rule will help ensure you have money to devote to other financial goals.

OBTAIN LIFE INSURANCE EQUAL TO SIX TIMES YOUR ANNUAL INCOME. Different individuals require vastly different amounts of insurance, depending on whether one or both spouse work, whether minor children are part of the family, or whether insurance is being obtained for other needs, such as to fund a buy/sell agreement or to help pay estate taxes. Thus, you should determine your precise needs before purchasing insurance.

Most financial rules of thumb should not be followed without first considering your individual circumstances. In case of insurance if you are a disciplined person you may want to invest the most and buy some term insurance.

Take Time to Prepare for Your Future
By Saghir Aslam
Irvine, CA

Did you wake up this morning and say to yourself, “Today is the day to start investing for my future.” If so, that’s an excellent decision. But, it is a wise decision only if you have considered the following questions: “Do you know which financial matters you should square away before you begin investing? Have you set your investment goals? With these questions in mind, let’s discuss ways to ensure you are prepared to invest for your future.

Before You Invest, Set Aside An Emergency Fund

What is an “emergency fund”? An emergency fund is exactly what it says; a fund to be used specifically in the event of emergencies, such as loss of one’s job or an unexpected car repair. Many financial experts say an emergency fund should consist of the equivalent of three to six month’ living expenses. However, the amount you set aside depends on your personal situation and comfort level. For example, you may need less in your fund if you have adequate insurance to cover a medical emergency.

Your emergency fund should be kept “liquid”, meaning in the form of cash or instruments that can easily be converted to cash, such as passbook savings accounts, short-term certificates of deposit, or money market accounts. By setting aside an emergency fund before you begin investing, you may avoid being forced to cash in your investments when an emergency arises.

Maintain Adequate Insurance Coverage

Unexpected illnesses and accidents do occur, and medical bills can be devastating. Health insurance with major medical and catastrophic coverage, as well as disability coverage, life insurance, property and vehicle insurance and liability coverage are all important to have in place prior to investing for your future. Securing adequate insurance coverage could help you avoid having to spend investment dollars on illnesses and medical bills.

Contribute Regularly To A Retirement Plan

Many employers offer retirement plans to their employees. Whether you are employed by a company or run your own business, contributing to a retirement plan on a regular basis is a good idea. Your investment professional can explain your retirement plan options and help you set up an account that is most suited to your individual or company needs.

Determine Your Investment Goals

Before investing, it is wise to consider the reason(s) you want to invest. What do you hope to achieve with your investment? What type of investment goals should you set? What level of risk are you willing to assume to try to achieve those goals? There are three broad categories of investment goals: present income, capital growth, and capital preservation.

Present Income – When an investor wants to receive current income from investments, they have set a “present income” goal. Many retired individuals and those with children in college may have this investment objective in mind and will seek income levels based on their risk tolerance.

Capital Growth – Those who want to see their investments increase in value over time set a goal toward “capital growth”. For instance, if retirement is several years away or children are young, an investor has more time to weather market fluctuations or overcome investment loss. Therefore, capital growth may be the preferred investment goal.

Capital preservation – An investor with the goal of “capital preservation” is more interested in sustaining the value of investment holdings. It is the most conservative goal, since the investor usually only wants to try to control the eroding effects that inflation can have on investments.

With the help of your investment professional, you can decide what goals are best suited to you and your family’s needs. Preparing to invest can help you feel more comfortable with your decisions, as well as help keep you on the track toward achieving the investment goals you set for your future.

Undoing a Roth Conversion
By Saghir Aslam
Irvine, CA

(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
When converting a traditional individual retirement account (IRA) to a Roth IRA, transferred amounts must included in income if taxable when withdrawn (e.g., contributions and earnings in traditional IRAs and earnings in nondeductible IRAs), but are exempt from the 10% federal income tax penalty.
Your adjusted gross income can not exceed $100,000 in the conversion year, excluding any converted amounts.
To use this strategy effectively, you need to decide when to convert. Taxes are paid based on your investments' values on the conversion date. If those values decline after you convert, you end up paying taxes on more than the current market value.
If you're in that situation, consider re-characterizing your conversion. For conversions made in 2009 you can re-characterize until October 15, 2010, meaning you can convert back to your original traditional IRA. Just make sure not to take possession of the funds.
The transfer from the Roth IRA to the traditional IRA should be trustee-to-trustee transfer. After the re-characterization, it is as if you did not convert, so you owe no taxes. If you already filed your 2009 tax return and paid the taxes, you can file an amended return to get a refund. You can then reconvert at a later date, provided your
AGI does not exceed $100,000 in the conversion year. (Keep in mind that starting in 2010 there will be no income limitation for Roth IRA
conversions). The re-conversion can be completed at the later of 30 days after the re-characterization or the beginning of the tax year following the first conversion.
You can re-characterize just a portion of the conversion. However, if you have several investments in the IRA, you can't simply choose the ones with the largest losses. In that situation, a pro-rataportion of all the investments in the account will be considered in the
re-characterization. You can bypass this rule by setting up separate Roth IRAs for each investment. The, if one declines substantially, you can re-characterize that one Roth IRA account, leaving the other accounts intact.
There are other situations in which you might want to re-characterize. You might have converted to a Roth IRA, thinking your income for the year would be less than $100,000. If you later find out that your income is over that threshold you can re-characterize the conversion.
Otherwise, in addition to the income taxes due, you would also have to pay a 10% federal income tax penalty and a 6% excise tax.
You can also re-characterize annual IRA contributions. Perhaps you contributed to a traditional IRA but find your income is over the thresholds. You could re-characterize to a Roth or nondeductible IRA contribution.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr. Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, or does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr. Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr. Aslam does not have anything for sale.)

Developing an Investment Strategy
By Saghir Aslam
Irvine , CA

Many people approach investing in a haphazard manner, purchasing individual stocks and bonds, but never really deciding how to structure their overall investment portfolio. With no strategy to guide purchases, these portfolios can contain investments that are inappropriate for the individual's circumstances. Thus, to help guide your investment decisions take time to develop an investment strategy by following these steps:

1. Identify Your Financial Goals. This will help you determine how much money you need to accumulate and how long you have to do so. Your need for liquidity, desired return, current income needs, portfolio size, tax situation, age and investment period can all have a significant impact on which investments are appropriate. For instance, funds that will be needed in a couple of years should be invested differently than funds that won't be needed for 20 or 30 years.

2. Reviesw Investment Alternatives. Don't confine yourself to currently owned investments. Investigate all options, including cash equivalents, bonds, stocks, real estate, and other choices. Make sure you understand the basic aspects of each, examining the types of risk they are subject to as well as their historical rates of return.

3. Assess Your Tolerance For Risk. Everyone has a different risk tolerance-some people can't stand the thought of losing any of their principal while others are comfortable with this concept if it means they can possibly increase their rate of return. Make sure you understand the potential downside as well as the upside to any investment.

4. Decide On An Appropriate Asset Allocation Mix. Decide what percentage of your portfolio should be allocated to stocks, bonds, cash equivalents, and other alternatives. Within these broad categories, make allocation decisions for each category. For instance, within the stock category, you can select large capitalization stocks, small capitalization stocks, and/or international stocks. (International investing has additional risks associated with it and may not be for everyone.) Each individual's asset allocation strategy will vary based on individual circumstances. In addition, your strategy is likely to change over time as your personal situation changes.

5. Compare Your Current Investment Portfolio To Your Desired Asset Allocation. Calculate how much of your current investment portfolio is invested in each category. Take a fresh look at each investment you own, making sure the reasons you initially chose to invest still remain valid. At this point, determine what changes need to be made to your portfolio to bring it in line with your desired asset allocation. If major changes are required, you may want to make them over a period of time.

6. Monitor Your Portfolio Periodically. To ensure that your investment strategy stays on track, review your portfolio at least annually, making adjustments as needed.

Developing an investment strategy requires evaluating many factors, but can give you a well-thought-out strategy to help achieve your long-term goals. Hopefully, it will also allow you to maintain your commitment to your strategy during your periods of market volatility. If market volatility starts to make you nervous, review your written reasons for investing as you did. That reminder should help keep you focused on the long term.

Understanding Stock Exchanges
By Saghir Aslam
Irvine, CA

Mention the words “Wall Street” and images of the bustling New York or American Stock Exchanges come to mind.

While these are the two largest U.S exchanges, they certainly aren’t the only ones. In fact, there are dozen national and regional stock exchanges conducting business daily in the United States, and that doesn’t include the enormous number of shares traded over the counter (OTC) on Nasdaq.

Basically, an exchange is a place where buyers and sellers get together, either in person or electronically, to trade stocks, bonds, commodities, options, futures contracts and other securities. Exchanges provide liquidity; that is, they offer investors the opportunity to buy and sell shares, at their fair market value.

The market for shares and other securities is virtually identical in concept to the traditional public market where growers display produce on counters and consumers come to buy; only the products are different.

The New York Stock Exchange, sometimes called the “big Board,” is the dominant market for stocks in this country. More than 80 percent of the shares handled by exchange, including many of the oldest and largest corporations, traded there. Founded in 1792 as the New York Stock & Exchange Board, the NYSE lists more than 1,700 companies whose securities are traded under its rules and regulations.

Member firms, brokerages and securities dealers own the NYSE. Memberships, or seats, on the exchange trade at auction like the share of other corporations. These seats, which can cost hundreds of thousands of dollars permit their owners to buy or sell shares on the trading floor, either for themselves or for their clients.

The only other national exchange is the American Stock Exchange. About 900 companies, mostly smaller than those on the NYSE, are listed on the AMEX, but the number changes as companies move up to the NYSE or are “delisted” for failing to meet qualifications. Options are traded heavily on the AMEX; options are contracts that may entitle or obligate holders to buy or sell a fixed number of shares of a security at a stated price on or before a designated date. Options trading is considered speculative and risky.

The remaining exchanges are regional. They are smaller and may trade the stocks of companies located in their regions, plus commodities, futures or options unique to them. Some of them participate in the Intermarket Trading Systems (ITS), which enables brokers and specialists to represent clients and interact with other markets to obtain the best prices available.

Varying widely in trading volume, technology and investment philosophy, the regional exchanges contribute to the overall liquidity of the marketplace. In addition, they sometimes provide investors with promising opportunities that may not be found on the NYSE or AMEX. The regional exchanges are bounded by the Boston Stock Exchange in the East and the Pacific Stock Exchange in the West. The others include the Midwest Stock Exchange, the result of two mergers; the Philadelphia Stock Exchange, the nation’s oldest; the Cincinnati Stock Exchange, the first automated auction market for listed securities; and the Spokane Stock Exchange, which specializes in small company stocks.

If you want to know more about these and other exchanges and what role, if any, they may have in your investment plans, ask your financial advisor.

New Winners Grow out of Market Bottoms
By Saghir Aslam
Irvine , CA

The recent sell-off has sunk a lot of investors. Don’t let that stop you from missing the next boat.

Perhaps you didn’t get off margin in time and held onto stocks too long. Massive gains turned into slim profits, or even losses.

You may not want to look at the market. But this is the time to prepare for the next rally. Don’t compound a past mistake of ignoring the top by ignoring the bottom. You must be selective and do your homework thoroughly.

A sell-off, like the one we just had, might be an opportunity to pick new winners. Before leaping, you must plan and comply with the company’s fundamentals. Partial positions or cost averaging as previously stand might be the ones to buy.

The economy is getting better slow but sure this time as I wrote earlier the sell off was really steep and it was world wide. Once again it was the worst ever and with every cycle there are better hopes and this time I am sure history will repeat. The new technologies keep springing up. Decade ago the internet was a playing for geeks, not an investment gold mine.

What will be next?

The market is in a continuing cycle of rebirth and renewal. After every correction, stocks eventually rally and go on to new heights.

IBM was one of the first stocks to take off after the long 1981-82 bear market. The Dow industrials loss 25.3% from its May 1981 peak to its Aug 9, 1982 low. This has been the toughest ever that I have known but it seems to me we are out of the roads. On Aug 17, 2000 the blue chip average staged a follow through day, confirming the new rally. IBM had held up better than most stocks during the market slide. It was ready to move.

Three days later, IBM broke out of a base on top of a base in heavy volume to a 52 week closing high. The stock rose another 97% over the next 11 months.

1999, Oracle formed a bullish base in September and October on top of a seven month cup with handle formation. In earlier articles it stated how to spot a base, watch it grow and profit from it. The database software giant blew out of its base on Oct 29, 1999; just one day after the Nasdaq confirmed its new rally. The stock surged 277% to its March 24 peak. Just this kind of opportunity could happen again and I am sure it will be different stocks even different categories.

Each rally is different. Sometimes it takes several weeks for leaders to come to the fore.

In 1998 correction, the market bott omed on Oct, 8. The Nasdaq confirmed its rally on Oct 15. But most stocks were still well off their highs. Yahoo was one of the first to move, clearing its base on November 2. The internet blue chip went on to climb another 235% over the next five months. This is history. This time it may be different and I am sure it will be different. Will we see this larger percentage increases. I am sure we won’t but increases will be there. They may be much small percentages.

To catch these leaders, first you have to find them. During a correction, look for stocks that are holding up better than most. Usually they come from the best-performing industry groups. Focus on companies with top-notch earnings and sales growth. You want stocks that enjoy strong institutional support.

Meanwhile, follow the major market average. When the market rallies and leading stocks start breaking out of bases, that’s when you make your move. The key is to do thorough research and find the best leading companies. Once you have done your homework and follow a plan, Insha Allah you will be successful.

As I wrote above you must have a plan, you must study the sector and the company’s you want to invest in thoroughly and you must be very patient in investing. You will be rewarded according the time you have spent on research, your home work in proper times.

Is Economic Inequality Increasing?
By Saghir Aslam
Irvine , CA

For the past two decades, the economy has experienced moderate inflation and fewer, less severe recessions. Technological advancements have helped raise productivity. Yet, these advances have mostly helped upper income workers.

For instance from 1973 to 2005, real hourly wages for individuals in the 90 th percentile of income, typically those with college or advanced degrees, rose by 30% or more. For individuals in the 50 th perce ntile or below, typically those with at most a high school diploma, real wages increased by only 5% to 10%.

In large part, this increasing wage inequality is caused by a widening gap in wages between college graduates and those with a high school education or less. In spite of increased college enrollment, it appears that the demand for college graduates has been stronger than the supply. This increased demand is a result of increasing usage of technology, such as computers, which has changed the nature of work and the skills needed for that work. There is greater demand and higher wages for workers who have the skills to use these technologies effectively.

The new technology has changed everyone’s life completely. It’s a different world what it used to be poor to this technology era. Now everything involves in and around the technology. The individuals and the companies that have moved along with the technology are the success stories and this will continue to be the case for the future as well. That means all the jobs, businesses everything depends on technology.

Another major factor in this inequality is increasing globalization of labor markets. The United States tends to export goods that use skilled labor and import goods that use less skilled labor. That places more demand in the United States for skilled labor and less demand for less skilled labor.

The technology have changed our world so much that a doctor sitting half way around the world can dictates his notes for a particular patient for his file in20complete detail. As much detail as possible and more. The same can be submitted half way around the world in countries like Pakistan & India, typed and submit back to doctor’s office for their permanent files. The beauty of the technology is, look at the creation of website. You can view the company history with a click of a mouse and it can be updated as often as one desires. We all know many business people in the website business sitting in America , getting the work done in any other country for fraction of the price. That’s the beauty of this technology.

Job instability has also increased, which can affect a family’s income. Approximately one in three workers change jobs every year, with approximately half doing so on a voluntary basis. Involuntary job loss results in unemployment for approximately four months, and new jobs typically pay 17% less than the former job.

Assessing Stock Returns
By Saghir Aslam
Irvine , CA

When designing an investment program, your expected rate of return is a critical element in determining how much to periodically invest to help reach a future goal. Since no one can predict future returns, the expected rate of return is typically estimated based on an analysis of past returns for various investments.&nbs p; So what return can you expect in the future for stock investments? The average annual return for the Standard & Poor’s 500 (S&P) for the period from 1926 to 2006 was 10.4% but you don’t want to simply use this return without determining whether it is reasonable for the future.

What one must decide is what kind of risk are you willing to take. Are you conservative, do you want higher returns in the middle of the road or you want to be aggressive which means higher returns, naturally higher losses. If you are in this last category, be prepared to loose good part of your capital as well. This 3 rd choice is only for the young and prosperous that have many years ahead of them, in case if they do have a set back which has happened in the past and I assure you it will happen in the future again.

A starting point for making that assessm ent is to review the equity risk premium. Since stocks are generally considered more volatile than bonds, investors typically expect a higher return. This excess return is called the equity risk premium. Although there are many complicated methods to calculate this premium, a simplified approach calculates the difference between total returns for large-company stocks and long term government bonds.

For the period from 1926 to 2006, that difference was 4.5% however, the annual equity risk premium fluctuated significantly during this period. For the near future is this a reasonable expectation? It may not be for a couple of reasons. First, even though price/earnings (P/E) ratios have declined, they still remain at high levels.

Since the great melt down worldwide in the stock and real stock market I personally believe the profit w ill increase naturally so will the P/E. No one knows for sure but my belief is in one of the worst stock market drop I believe we have hit the bottom and from now on the values should increase.

Evaluating Stock Investments
By Saghir Aslam
Irvine, CA

You should thoroughly analyze a stock before purchase. But pick up a company’s annual report and you can quickly become overwhelmed by all the numbers. What figures should you concentrate on when evaluating a stock? At a minim, look for answers to these question:

* What are the company’s earnings? Earnings per share (EPS) is the company’s net income after taxes and preferred stock dividends divided by the average number of shares outstanding. Look for steadily increasing EPS, which shows a pattern of consistent growth.

* How does the company’s price relate to earnings? The price/earnings (P/E) ratio is calculated by dividing the company’s stock price by EPS. It basically indicates how much investors are willing to pay for a dollar of company’s earnings. P/E ratios can be calculated using different earnings numbers. Trailing P/E ratios use earnings per share for the most recent four quarters, while forward P/E ratios use forecasts of future earnings per share. To get a feel for the reasonableness of a company’s P/E ratio, review its historical P/E ratio, the P/E ratio of other companies in similar industries, and the P/E ratio of the market as a whole.

* How does the company’s book value relate to its price? A company’s book value equals its assets less its liabilities, commonly referred to as stock holders’ equity. Dividing the stock’s price by its book value per share will give you the price to book value. Companies with low price to book values are often considered value stocks.

* What is the company’s return on equity? Return on equity (ROE) is calculated by dividing the company’s income by its shareholders’ equity. It is used to measure how well a company is utilizing capital retained in the company.

* What is the stock’s total return? Total return equals dividends plus or minus changes in stock price divided by your purchase price. This is the overall measure of the stock’s performance and is useful when comparing one investment with other investments.

* What is the company’s debt level? The debt ratio is the company’s outstanding debt divided by shareholders’ equity, which measures how leveraged a company is. High levels of debt can make a company more vulnerable during economic down turns. Also take a look at the current ratio, which is calculated by diving current assets by current liabilities. It is measure of a company’s ability to pay its current obligations.

* What is the company’s growth rate? A company’s growth prospects can be evaluated using the price/earnings growth, or PEG ratio, which is calculated by dividing the P/E ratio by the company’s projected earnings growth rate. A PEG ratio of one is considered standard, meaning the growth rate is incorporated in the stock’s price. A PEG ratio higher than one means the stock is trading at a premium to its growth rate, while a ratio of less than one may mean the stock is undervalued.

* How volatile is the stock? Beta is a statistical measure of how stock market movements have historically impacted a stock’s price. By comparing the movements of t he Standard & Poor’s 500 ( S&P 500) to the movements of a particular stock, a pattern develops that gauges the stock’s exposure to stock market risk. The S&P 500 is an unmanaged index generally considered representative of the US stock market and has a beta of one. A stock with a beta of one means that on average it moves parallel with the S&P 500. A beta greater than one means the stock should rise or fall to a greater extent than movements in the S&P 500 while a beta less than one means it should rise or fall to a lesser extent than the S&P 500. since beta measures movements on average, you can not expect an exact correlation with each market movement. Investors cannot invest directly in an index.

The decision to purchase a stock can’t be made solely from a review of financial ratios. You’ll also need to evaluate subjective factors, such as=2 0the quality of management prospects for the company’s industry, and where the company stands in relation to its competitors.

The Path to Your Financial Goals
By Saghir Aslam
Irvine , CA

By definition, achieving your financial goals require the accumulation of financial assets. How quickly you accumulate the needed assets depends on three things—how much you earn, how much you save, and how well you invest:

HOW MUCH YOU EARN. Sure, we all want to enjoy our work. But within that parameter, why not choose a job that will pay more? Your income is going to drive all your other financial decisions, so investigate your options.

Are you sure you’re being paid a competitive wage with competitive benefits? Even if you aren’t interest in changing jobs now, pay attention at what is going on in y our field.
Do you have an outside interest or hobby that can be turned into a paying job? This could be a good way to supplement your current salary. It may also turn into a part-time job or business after retirement.
Can you get some additional education or training to help secure a promotion or qualify for another job? Read up on which jobs are expected to have the highest growth rates and/or highest salaries over the next few years. If you don’t enjoy your current job, you have even more incentive to implement these suggestions.

HOW MUCH YOU SAVE. You should be saving a minimum of 10% of your gross income. But don’t just rely on that rule of thumb. Calculate how much you need to meet your financial goals and then determine how much you should be saving on an annual basis. If you can’t seem to save that much, consider these tips:

INVEST ALL UNEXPECTED INCOME. Instead of spending money from tax refunds, bonuses, and inheritances, invest the money immediately. You may also want to put any salary increases into savings, possibly in your 401(k) plan.
SAVE REGULARLY SO IT BECOMES A HABIT. One of the best ways to save regularly is to make saving automatic. If you have to remember to write a check every month, it’s easy to forget or not get around to doing it. It’s usually easier to have the money automatically deducted from your bank account and deposited directly in an investment account. Another good alternative is to sign up for a company’s 401(k) plan, having funds withdrawn every paycheck. (Keep in mind that an automatic investing plan, such as dollar cost averaging, does not assure a profit or protect against a loss in declining market because such a strategy involves periodic investment, you should consider your financial ability and willingness to continue purchases through periods of low price levels.)

HOW WELL YOU INVEST. To ensure that your savings grow, you need to invest them wisely. Consider these tips:

SET AN ASSET ALLOCATION STARTEGY FOR THE LONG TERM. The most basic investment decision you’ll make is how to allocate your portfolio among the various investment categories, such as cash, bonds, and stocks. You want to ensure your portfolio is diversified among a variety of investments. that way, when one category is declining, hopefully other categories will be increasing or not decreasing as much. To decide how to allocate your portfolio, you’ll first need to come to terms with your risk tolerance. Factors like your time horizon for investing and return expectations will also impact your decision.
THOROUGHLY REVIEW EACH INVESTMENT IN YOUR PORTFOLIO. Decide whether you should continue to own each based on your financial goals and asset allocation strategy. Also make sure your investments are adding diversification benefits to your portfolio.
MAINTAIN REASONABLE RETURN EXPECTATIONS. The higher your expected return on your investments, the less you need to save every year. However, if your assumed rate of return is significantly higher than your actual return, you won’t reach your goals. Thus, it’s important to use reasonable return expectations. Assess your progress every year so you can make adjustments along the way. If your return is lower than expected, you may need to increase your savings or change investment allocations.

REVIEW YOUR PORTFOLIO AT LEAST ANNUALLY. Your portfolio won’t stay within your desirable allocation by itself. Since different investments earn different rates of return, over time your allocation will get out of line. You need to review your portfolio periodically and make adjustments to rebalance it.

Teaching Money Lessons
By Saghir Aslam
Irvine, CA

One of the most valuable lessons parents can teach their children is how to responsibly manage money. Some strategies to teach these lessons include:

Pay your children a weekly allowance so they learn to budget

Some people feel trying an allowance to performing chores instills the concept of working for pay, while others feel chores should be performed without pay as part of the child’s family responsibilities. The allowance should increase with age, but should be large enough so children have money left over to make their own purchasing decisions. As much as possible, let your children spend the money as they wish, but don’t bail them out when poor choices are made. Let them live with consequences, so they are not tempted to repeat their mistakes. That does not mean you can not discuss options or encourage them to make other choices, but the final decision should be theirs.</ b>

Give your children opportunities to earn extra money, so they learn that extra effort results in reward

This gives them a chance to earn money for special purchases, while teaching them the rewards of a good work ethic. As your children get older, they may want to take on part-time jobs for extra cash. While the jobs can offer good experience, they should realize that doing well in school is their primary responsibility. Go over your children’s pay stubs with them, making sure they understand what taxes are deducted and how much of their pay those taxes represent.

Encourage your children to save, so they make saving a habit

It is usually easier to save if your child has a specific goal in mind, such as a new toy or bike. Many children will need incentives to encourage them to save. You can require a certain percentage of their weekly allowance be set

aside for long term savings goals. Or y ou can match your child’s savings, perhaps contributing 50 cents for every dollar he/she saves.

Teach your children the basics of investing, so they learn how to make their savings grow

As your children grow, start exposing them to investment alternatives. Around the age of 8, explain how businesses operate and how investors buy and sell stocks. Ask for their input on which businesses would make good stock investments, and then help them research those choices. They may want to use some of their savings to purchase those stocks. Teach them how to follow stock prices and how to review annual reports. Let your children decide when to buy and sell the stock.

Keep in mind that how you manage your money is one of the most significant influences on your children. Teaching your children good money skills is a lesson that will benefit them for a lifetime.

Understanding Stock Exchanges
By Saghir Aslam
Irvine, US

(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities.)

Mention the words “Wall Street” and images of the bustling New York or American Stock Exchanges come to mind.

If you want to know more about these and other exchanges and what role, if any, they may have in your investment plans, ask your financial advisor.

This Year Could Be Better Than You Think
By Saghir Aslam
Irvine, CA

No, 2008 wasn’t just a bad year. It was an awful year by all standards this was worst. People lost for June. A Johnstown Flood kind of year. The kind that wipes out proud, century-old institution decimates entire industries, and leaves everyone decidedly poorer and the world profoundly shaken in its wake.

Enough of that. On to 2009.

I have no crystal ball. But a sense of history, some basic economics, common sense and just a dash of convinced that this one won’t be all bad.

Oh, sure, there will be layoffs like we haven’t seen since the Great Depression. And you can expect to see a proliferation of empty storefronts and a heap of broken businesses.

But why focus on the negative? Here are five good reasons why 2009 could, if you make the most of it, be good for your financial health.

This will be a good year to invest in stocks.

No one can tell you exactly when or where the market will bottom. But most business-cycle experts agree that the bottom will be found sometime this year.

So a smart strategy will be to put some money in the market and keep doing it. This is what I call cost averages which is one of the best way to invest. Over the course of the year if you’re still shaken over massive losses from last year, this may be hard advice to swallow. But the biggest mistake you can take as an investor is to ride the market down, lose faith, pull out and miss the upturn. Many people do make this mistake. You do not want to be one of them.

Even in the Great Depression, the market bottomed out in 1932, with the Dow Jones Industrial Average at 41, down from a peak of 381 in 1929. By 1937, it had climbed back to a respectable 194. That didn’t make investors whole. But for those who stayed in, it certainly soothed the wounds.

It will be a good year to invest in real estate.

This one’s a bit trickier, since real-estate prices are “sticky” on the downside. Home-owners don’t like to admit that the value of their pride and joy has fallen by 30%. So they’ll put their house on the market at an inflated price and hope some fool will bite.

But here’s the thing: fixed rate mortgages are already at historic lows, and the government is going to use every tool in its bag to get them lower over the course of the year. So if you find a piece of property you want, if the seller is willing to recognize how far the market has truly fallen, and if you have good credit – three big ifs – you can benefit from a once in a lifetime double bonus of low prices and low interest rates.

This strategy requires some patience. Just as real estate prices don’t fall as precipitously as the stock market, they don’t rise as rapidly, either. You may have to wait a decade to reap the full benefits.

3. Americans will learn to live within their means.

Around our house, the crisis is already having a salutary effect. Our teenagers suddenly seem to understand that unlimited dinners out with friends aren’t a birthright, and that blue jeans don’t have to carry triple-digit price tags.

Multiply that by 300 million, and you have a nation that has rediscovered that you can’t spend what you don’t earn or what you do not have. Houses are no longer ATMs, and credit cards no longer come with each day’s mail.

That sudden realization, of course, is what’s causing the economy to swoon. But this reckoning was inevitable, so it’s best to get on with it.

4. President Obama will have a historic opportunity to reshape public policy.

Mr. Obama’s chief of Staff designate, Rahm Emanuel, said the words that have become his team’s rallying cry for 2009. “You never want a serious crisis to go to waste. This crisis provides the opportunity for us to do things that you could not do before.”

The Obama team is busily preparing a stimulus package. That will give the new president an opportunity to do things his predecessors could only dream about. Roads will be rebuilt, schools will be refurbished, medical records will be computerized and windmills will be constructed, all across the land.

Will some of that money be wasted? Of course. But the sums involved are so huge that there’s a good chance someone, somewhere, will benefit.

5. Your (Federal) taxes won’t rise

Never mind those campaign calls for higher taxes on the wealthiest Americans. Truth is, no politician is going to push for general tax increases in the midst of a severe recession.

You may wonder: How is the government going to pay for that trillion dollar stimulus package? Or the multitrillion dollar bailout of financial institutions auto companies and anyone else sideswiped by the current crisis? Or the continued wars in Iraq and Afghanistan? Or the (still) rapidly rising cost of the baby boomers’ retirement?

Well, that’s the sweet secret of the current crisis. While the American people are learning to live within their means, the new American government has discovered an unlimited (for now) line of credit. The United States may have led the world into this crisis, but the world now seems more than willing to lend us unlimited amounts of money to lead the way out.

Eight Tips to Protect Your Personal Information
By Saghir Aslam
Irvine , CA

The Social Security number is the gateway to your identity, but criminals also want your account numbers as well as other pieces of personal information useful for committing identity theft. Limiting the exposure of your personal information will help guard against potential fraud, and in the process cut down on unwanted marketing in some cases.

Screen charities . If someone claiming to represent a charitable organization calls you, ask the caller to send you written information about the charity instead of giving out credit card information over the phone. “If you get any pushback whatsoever, say, ‘You know what? If it wasn’t important enough to send in writing so I have a right to review it, then it’s not important enough for me to respond to this phone call.”
Avoid marketing . People unnecessarily give out personal information when they apply for supermarket club cards and fill out product warranty cards. “Warranty cards ask for date of birth, educational level, income level, number of children living in the home, sometimes occupation – you don’t need to give that information to get warranty protection for your clock radio.” Company owes you the warranty. There is no need to give them additional information.

Experts also caution against providing your telephone number when prompted at a retail point of sale, unless it’s necessary to place an order. While phone numbers are typically used for marketing, it might be possible for someone to find your store charge account with a phone number.

Don’t share too much on social networking sites. Criminals can use social networking sites to commit identity theft it enough personal information gets posted – not to mention that the personal information you post makes it easier to be stalked. Besides your address, avoid putting your full date of birth on your profile, that’s piece of information that a thief needs to steal your identity.
Job hunt online safely. Until a company is ready to hire you, don’t furnish potential employer with your Social Security number. Do a thorough background check on companies before submitting your resume and check the privacy policies of online job boards before posting your information. “You may put your information out on a Website and they may have a privacy policy that says that they’re allowed to sell that information to anyone they choose for any purpose they choose.”
Make sure your computer is secure before surfing the Web.
Limit physical access to your SSN. Don’t store your Social Security number or card in easy access places, such as your wallet, in your cell phone or in the glove compartment of your car. Make sure you don’t have your SSN printed on your checks or used as your driver’s license number. The less information you provide, better it is.
Don’t flag important mail. If you’re mailing something that contains sensitive information, don’t leave it in an unsecured mailbox. “When you put up that little red flag, that’s a magnet. Either get a locking mailbox, where the only people that have a key or you and the post person, or take it to the big secure mailbox on the corner.
Shred documents using a crosscut shredder. Make confetti of “anything that you have that is a document that has any information on you whatsoever that might be considered personal that you’re not interested in keeping around anymore. General rule of thumb for revealing personal information: “Give out your information on a need to know basis. Before you give out your personal information, figure out: Why does this person need my information and how much of that information do they need?”

One Word for Playing This Market
By Saghir Aslam
Irvine , CA

Even with massive efforts to prop up the economy and banking system, the stock market is facing significant head winds that may persist through much of 2009. That means remaining cautious with your investments for many months to come until it becomes clearer whether these steps will bear fruit. Must be extremely careful. Do your research professionally and thoroughly before investing.

It’s now been nearly two years since the collapse of the real-estate bubble began. But it was only late last year that the real impact began to be felt by consumers.

In previous downturns, consumers mostly kept spending, thanks in large part to easily available credit from banks and credit-card companies which has been extremely difficult these days.

Consumers Carry the Day

Meanwhile in recent decades the already dominant role of the consumer in the US economy become even larger. By the end of last year, consumer spending accounted for 70.4% of US gross domestic product, up from around 63% in the late 1970s. In recent years, the savings rate in the US turned negative, meaning consumers were spending more than they made. This has been the norm for number of years.

But that lending has been choked off, and jobs have vaporized, sending the unemployment rate to its highest in 16 years. Consumers have responded by pulling back on their spending they have not spent.

The government is making unprecedented efforts to stanch the bleeding. Congress has pulled together a roughly $800 billion package even more money is coming to jump start the economy, and efforts to stabilize the housing market are expected to follow. The Federal Reserve has slashed short term interest rates to zero and is working with the Treasury Department on massive programs to get the credit markets-and therefore corporate and consumer lending-back on track. This will slowly start to help.

But the one-two punch of stimulus package and bank bail-out did little to buoy optimism weeks ago. The Dow Jones Industrial Average fell 5.2% - including a big 400-point sell off.

Meanwhile, economists surveyed by The Wall Street Journal agreed that a recovery in the second half of the year is now less likely than it appeared just a few months ago.

This is like turning a battle ship around. Some investment strategists say we could be in for an extended period of hibernation for consumers and, as a result, a lower economy and sub par corporate profits. “The average consumer has had a near-death experience as far their economic security is concerned,” it’s hard to see something like that not having a long-term impact.

Stocks Are Cheap, But . . .

The most important question will be whether the government’s efforts can halt waves of layoffs sweeping through the economy. “The employment situation is the critical element in restoring some sort of stabilization in the economy.”

For investors, the dilemma is that stock prices, especially the closely lined to the consumer, have already fallen sharply. Some argue that the market has already factored in a bleak outlook for the consumer this year, and that while there may not be a sharp rebound in stock prices, the lowest levels on many shares may have already been reached. I believe we are at the bottom or definitely near the bottom we may touch the support again. For long terms stocks are cheap.

That would argue for beginning a gradual shift toward positioning for an eventual economic rebound by adding to positions in so-called cyclical stocks, such as energy and materials companies, whose shares have fallen significantly in recent months.

Avoid discretionary-spending stocks, such as restaurants and most retailers. Among the so-called consumer-staples names such as Kimberly-Clark and PepsiCo. In addition, a hefty slug of health-care stocks such as Abbott Laboratories.

Coming market environment will favour strong dividend payers. “It’s going to be difficult to get returns through an excess of profit growth”. Instead, a big part of the return you are going to get is going to be from dividends so I am heavily in favour of dividend paying stocks.

It could be tough environment for investment strategies that focus on turnarounds of out of favor companies. Such “deep value” strategies may be challenged in an environment where credit is limited.

The focus should be on quality. Among the traits to look for.

Waiting out the Year

But with the economy and stocks potentially struggling for months to come. Quality corporate bonds are attractive. Whenever the economy stabilizes and corporate profits recover, those bonds should rally. In the meantime, yields on those securities are exceptionally high compared with US Treasury, which means investors are essentially paid to wait it out.

Understanding Stock Exchanges
By Saghir Aslam
Irvine , CA

Mention the words “Wall Street” and images of the bustling New York or American Stock Exchanges come to mind.

If you want to know more about these and other exchanges and what role, if any, they may have in your investment plans, ask your financial advisor.

( Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr. Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, or does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr. Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr. Aslam does not have anything for sale.)

Growth and Value: What’s the Difference?
By Saghir Aslam
Irvine , CA

You can define stocks in many ways. Size is perhaps the most common. There are “large-capitalization” stocks, better known as blue chips or “large-caps.” There are small –cap stocks, issued by companies in the early stage of their development, and then there are mid-cap stocks, which are somewhere in between.

Stocks are also categorized by the types of companies that issue them. For example, stocks are issued by companies in the technology, retail, manufacturing, and utility industries.

Yet another way to tell one stock from another is by the investment style of the mutual-fund managers likely to choose them. Some are growth stocks; other value stocks. What’s the difference between the two?

UNDERSTANDING THE DIFFERENCE

Growth stocks generally are companies with above-average growth potential. These stocks may cost slightly more than other stocks, when you consider their price/earnings ratios, but investors are usually willing to pay more for these securities because of their above-average growth potential. (The price-earnings ratio is the market price of a stock divided by its annual earnings per share. For example, if a stock sells at $100 per share and earns $8 per share, it is selling at 12.5 times in earnings.)

Growth-oriented companies typically have products and/or services that are increasingly in demand, a strong executive team with a prudent business plan in place, and a healthy overall financial situation.

Growth investors are looking to buy a stock at a moment when it’s cheap—because the present value of its future cash flows is being grossly underestimated by the financial community.

Value stocks are, at first glance, not the most attractive investment opportunities you will find. Many are coming off periods in which they have experienced a decline in earnings, lost an important client, or suffered a major loss within the executive ranks. So why invest in these securities?

If you look closely at some value stocks, you may find a diamond in the rough. A stock may be down because the industry in which it operates has been doing through a difficult time. This may be the type of stock that will do well when the industry recovers.

Some value stocks have been hurt because the underlying company has recently had a tough time with a particular product, or upper management has experienced a temporary setback. If these developments are unlikely to have a significant bearing on the long-term health of the business, the stock may be worth considering for investment.

Value investors are looking to buy a stock at the moment when it’s cheap—because its current net assets are worth a dollar and the price is 40 cents.

Which should you buy?

Should you invest in growth or value stocks? You should diversify at all times. Growth and value stocks tend to advance at different times, depending on the market’s changing moods. A good way to take advantage of this is to invest equally in both, rebalancing every so often by adding money to whichever type is currently under 50% of your portfolio.

If you have less than $50,000 to diversify with individual stocks, consider mutual funds that invest in growth stocks, value stocks or both. As with any investment decision, talk with your financial advisor before deciding which stocks or funds are most appropriate for your specific financial needs.

What You Need to Know about Gold
By Saghir Aslam
Irvine , CA

Gold shined in 2008. Could 2009 be as bright?

Of all the major assets – stocks, corporate bonds, cash and others – gold was one of last year’s few standouts. While so many investments collapsed amid the turmoil, the price of an ounce of gold posted a gain of about 4.3%.

So far this year, the rare metal is up about 0.7% and longer-term concerns are emerging that aggressive, untested government policies aimed at righting the flailing economy could ultimately fuel a further rise in gold prices.

When that might happen, no one know. But for investors who want to hedge against potential economic turmoil, “buying gold is a very good idea for 2009”

The case for gold is this: The government is pumping trillions of dollars into bailouts and stimulus plans, a purposefully inflationary policy aimed at reversing current deflationary pressures. If inflation results, or if the dollar weakens as the supply of dollars necessarily increases under the stimulus plans, gold is a likely winner because it hedges against inflation and fiat currencies. We have seen this over and over again, so this is great consideration.

The opposing view: “The inflation argument hasn’t been seen yet in government data and once the economy catches gear, the (Federal Reserve) will pull the money back out of the economy,” negating any inflationary pressure.

Though Gold is generally thought of as a physical asset, these days investors have a variety of options. Here are a few of them, along with the inherent pros and cons:

Bullion

This is the pure metal, typically cast as bars or coins in weights ranging from a single gram to one kilogram.

Bars like those minted by Credit Suisse and Pamp Suisse trade at a slight premium to gold’s market price and are generally the least expensive way to own physical gold. Coins such as the American Eagle often include a collector’s premium that can increase the cost slightly. Rarer coins can fetch substantially more.

Local coin shops generally sell bullion, though it’s also widely available – often at a smaller markup – through a variety of online dealers, including Apmex.com and BostonBullion.com, among others.

Pros: Though this is conspiracy theory, if the government ever confiscates gold or limits its ownership – as happened in the 20h century – possessing gold in physical form offers some means of retaining control of your wealth in an economic disaster.

Cons: Risk of theft or loss if you keep gold at home. If it’s in a bank safe deposit box, you won’t have access in an emergency if the bank is closed and safe deposit boxes aren’t insured in the event of disaster.

Pooled Accounts

These are sort of like a gold bank account in that your gold is held in a vault. The markup per ounce is usually less than 1% of gold’s current market price, making this cheaper than owning physical bullion.

Depending on the provider, pooled accounts are either “allocated,” meaning that specific, numbered bars are allocated to you, or “unallocated,” meaning you’re assigned a sum of gold, though not specific bars. Allocated accounts charge annual storage and insurance fees. Unallocated accounts generally don’t. Kitco.com and EverBank.com offer pooled accounts.

Pros: Perhaps the most secure form of owning gold, since the metal is kept in a vault and the inventory is regularly audited. You can also request that your gold be sent to you though you’ill typically pay delivery and fabrication charges.

Cos: Annual fees in allocated accounts can add up over time, while some unallocated accounts are held in the company’s name, meaning that if the firm goes bust, creditors can grab the company’s assets-including your gold.

Exchange Traded Funds

These trade like shares of stock on a stock exchange, with each share representing some fractional portion of an ounce of gold. For instance, each share of the SPDR Gold Shares ETF (symbol: GLD) represents 0.1 ounce, and thus trades at about a tenth the price of gold. The shares are typically backed by physical gold held in vaults in London, New York and Zurich and audited regularly.

Pros: Relatively cost effective ownership, since you’re not paying insurance and storage costs. Nor do you take physical possession of the metal, so there are no fabrication costs or risk of loss or theft. Buying and selling are instantaneous.

Cons: Taxes. The government treats gold as a collectible, and thus capital gains on a gold ETF are taxed at a flat 28% nearly double the long term capital gains rates on stocks.

You also pay the ETF’s management fees – roughly 0.4% - which depletes your account. You can’t request your account. You can’t request that gold be fabricated into bars and if the government ever does confiscates gold.

Mining Stocks

With publicly traded mining companies, you don’t own the metal but you do own shares of companies digging holes in the earth. This is the most leveraged gold play, since a rising or falling gold price is spread across hundreds of thousands or millions of ounces the company has in the ground.

How to Pick Winning Mutual Funds
By Saghir Aslam
Irvine , CA

How good are the mutual funds in your 401(k). Employees benefit plan IRA for any other retirement plan even your regular accounts. It would be nice if there were a scorecard. But rating the investments you hope will glitter in your golden years can be a confusing process. That’s one reason why so many investors have embraced so-called target-date or lifecycle funds, which take care of the guess work.

Those who still want to pick their own investment lineup often don’t know how, or where, to start. So they wind up defaulting to funds with the best track records.

That’s not strategy, it’s performance chasing – buying high and selling low – and it leads investors nowhere. Matter of fact it’s big mistake to chase winners. You might end up with huge losses.

Picking mutual funds that have been doing very well and not giving proper consideration to the appropriate allocation.

To tell which stock funds in your retirement account are right for you, look beyond performance. Take a page from the methods investment experts likely used for your own company’s 401 (k) plan. Here are 50 some things to keep in mind.

Expenses

In many cases, 401(k) plan offer one actively managed fund and one indexed alternative. Since indexed management is usually cheaper, make sure you’re getting your money’s worth from an actively run choice.

Costs matter. An index fund that charges one-tenth of a percentage point in yearly management fees, for example, has a full percentage point head start over a fund that takes 1.1% or more.

Accordingly, the manager of the more expensive portfolio has a steep hurdle to deliver above-average returns over time. Don’t pay top dollar for mediocre results.

Every penny we can save on expenses is going to translate to better performance. Education yourself to look for the annual fees.

Risk-Adjusted Return

You can’t judge a fund by its advertised performance. Understand the risks a manager took to generate those returns – maybe the fund loaded up on a hot stock, or the manager traded frequently, playing the market’s momentum. Otherwise, you run a risk too – that you’ll fork over good money to a fund that exposed you to more volatility that you can comfortably handle.

Big stakes in any one sector is good reason to dig deeper. How does that fit with the manager’s strategy, and how has that played out for the fund?

One key measure of a fund’s risk-adjusted return is a technical term called standard deviation. It shows how much a funds performance varies, or deviates, from its expected normal return.

You won’t need a slide rule. Sites such as Morningstar.com do the math for you. Click on “Risk Measure.” The bigger the number, the more risky the funds and you must be more careful.

So if Fund A gained 11% with a standard deviation of 18, and Fund B rose 10% with a standard deviation of 12, then Fund B achieved almost the same results with two thirds of the volatility and would have a better risk adjusted return. This is extremely important to keep in mind when purchasing a mutual fund.

Standard deviation can help you see which fund has had higher volatility and has probably been taking more risks.

Results vs. peers

You also want to look at a fund’s performance relative to its category. Investors frequently make the mistake of comparing funds with the market which usually means the benchmark Standard & Poor’s 500-stock index.

But the S&P 500 is a large company U.S. stock index. The only funds to rate against it are large-cap U.S. stock funds; any thing else is simply misplaced. You have to compare the funds in it’s own category.

A small cap stock fund may look great compared with the S&P 500, but it may have underperformed the more fitting Russell 2000 Index benchmark. Similarly, an international small cap stock fund has no business in the same pool as its U.S. small cap counterpart. Once again you must compare with it’s own class, with its own peers. In simple English compare oranges with oranges.

Again, Morningstar.com makes this information readily available. Click on “Total Returns” to see how a fund stacks up in its category.

Be sure that all of your fund choices are related. If they’re not, you really can’t determine if the portfolio manager is doing a good job or if you should just buy an index fund.

Portfolio Yield

Performance-chasing is bad enough, but investors also reach for yield – the dividend income that can provide a cushion in difficult markets.

Beware of a fund with a yield that’s out of synch with its peers. May be the high yield comes from a heavy dose of financial services stocks or lower quality investments. In that case, not only is the yield shaky – some banks have cut or eliminated their dividends, for example – but even the most generous dividend won’t offset major declines.

If a fund manager has been on the job for only a year, then the funds three and five year performance isn’t his to boast about.

You can be more charitable when a new manager is a veteran who has experienced bull and bear market cycles. On the other hand, if a longtime manager is retiring soon, find out when the junior managers joined the fund.

You Should Rebalance Your Account Once a Year
By Saghir Aslam
Irvine, CA

Set a time each year that you want to rebalance your account and do it at the same time each year. You want to take a look at each and every position. Evaluate and see where the market is what the trend of the market and where you want to put your money. Once you have done all your research then take proper action and balance your portfolio.

If your retirement investments are growing, that’s great. But when you receive an update on your account, don’t just look at the bottom line. Also check your asset mix to see if you are still comfortable with how your account is divided among your investment choices. After reviewing your asset allocation, you may need to rebalance your portfolio so that it accurately reflects your investment strategy.

Becoming Unbalanced

When you set up your investment portfolio, you may have selected investments in a variety of asset classes in order to spread out your overall risk. If you have a high tolerance for risk, your portfolio may have been heavily weighted in stocks, with less of your total account in bonds and money market investments. A conservative investor might have only a small fraction in stocks, with more of the account in bonds and money market investments. The right asset allocation is different for every investor.

Over time, your asset allocation will shift based on the performance of your investments. For example, suppose the stock investments in an investor’s portfolio have increased in value significantly over time. Those stock investments, which originally represented 50%of the entire portfolio, now represent 60% of the portfolio. The unbalanced portfolio is more aggressive than the investor intended or is comfortable with.

How to Rebalance

If your portfolio has become unbalanced, it’s relatively simple to rebalance it again. The investor in the previous example would need to reduce his or her stock investments and direct more money into the other investment categories in order to get back to the original allocation.

While you should enjoy the growth of your retirement investments, remember to pay attention so that your portfolio doesn’t get unbalanced. It’s a good idea to review your asset allocation periodically to make sure that you maintain your investment strategy.

Exchange-Traded Funds
By Saghir Aslam
Irvine , CA

It’s a great way to diversify in a given section. In some cases its similar to the mutual funds. You will find exchanging-trade of funds domestic international worldwide then you can decide and take your pick which sector and world you want to continue on.

Exchange-traded funds (ETFs for short) have only recently begun to draw fast-growing investor interest nationwide, but the concept has been around for quite a while. In 1993, the American Stock Exchange began offering the first ETF in the United States, the SPDR 500 Trust (often call the Spider). It allows the investor to invest in the entire S&P 500 with a single security. Most U.S. ETFs continue to trade on the Amex—including the most activity traded ETF today, the Nasdaq 100 Trust, known by its distinctive ticker symbol, QQQQ.

An ETF is an index fund that trades on an exchange like a stock; as with a stock, it can be bought and sold at any time, and its price fluctuates throughout the day. If you buy it, you do not get professional management: the ETF simply tracks the performance of the related index or basket of securities. On the other hand, you also don’t pay for professional management. The annual cost of ETFs are often substantially lower than the costs of managed funds—and since they are not managed, there is no danger of “style drift” or manager changes.

Another potential advantage of ETFs is that large institutional investors can purchase or redeem “creation units” of an ETF, in large blocks at net asset value, through contributions or redemptions of in-kind baskets of the fund’s underlying stocks, with very little transfer of cash. So there is little or no need for the ETF to raise cash to meet redemptions. That means that there are few or no taxable capital gains to report at year end, and there is little divergence between an ETF’s net asset value and its market price.

The main disadvantage of ETFs concerns the investor who uses dollar-cost averaging to invest through small periodic purchases. Buying and selling ETFs will trigger commissions the same as buying and selling stocks, so small frequent transactions are not as economical in ETFs as in the many managed funds, or traditional index funds, that offer such programs.

But for the buy-and-hold investor, ETFs can deliver substantial diversification at low cost. Through a selection of ETFs in various sectors of the market—large-capitalization growth, small-cap growth, large-and small-cap value, and international, for example—you can use ETFs to rebalance your portfolio every year or so, taking advantage of the way these sectors move relative to one another.

For information on whether exchange-traded funds can help you pursue your financial goals, talk with your financial advisor.

Exchange-traded funds are subject to risks similar to those of stocks. Investment returns may fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Request a free prospectus, which contains more complete information, including charges, fees and expenses. Read it carefully before you invest.

Helping You Develop a Personal Financial Plan
By Saghir Aslam
Irvine , CA

A smart financial plan is your road map to life’s most important events. Whether you’re anticipating the purchase of a new home, a loved one’s education or an approaching retirement, you’ll need a professional to help you develop a personal financial plan.

What to Expect

I think the best approach to financial planning is the personal approach. During your first meeting, you and your Financial Planning Specialist will want to get acquainted and examine your current financial standing. In order to establish a clear financial picture, I recommend you take relevant financial information with you, including financial statements from brokerage firms and banks, retirement plan benefits statements and Social Security benefits statements if you have received them. The initial meeting is also an important time to discuss your goals and any future financial needs.

Based on the information gathered, Financial Planning Specialist will recommend specific strategies designed to help you reach your goals. Throughout the financial planning process, Financial Planning Specialist will work with your CPA.

Services Available

Most Planning Specialist can offer complimentary advice in the following areas of financial planning:

Retirement Planning: Identify necessary rates of return, savings and contribution amounts needed to reach your retirement goals. Project a year-by-year cash flow analysis.
Asset Allocation: Review your current asset allocation mix, and provide a custom portfolio based on an assessment of your risk tolerance, goals and time horizon.
Education Funding: Assess your current financial situation, project future education costs and analyze your savings requirements for a public, private, graduate or professional school.
Employee Stock Options: Evaluate various exercise strategies and provide calculations on the potential taxes and net proceeds for each one.
Estate Planning and Preservation: Identify strategies to reduce potential estate taxes and preserve your wealth.

The Best Time to Start

It is never too late, or too early, to begin the financial planning process. Financial Planning Specialist can help you no matter where you are in the process. The important thing is to get started and do get started as soon as possible.

Changing Goals

After you and your Financial Planning Specialist have implemented a strategy, you will want to monitor your progress. As your lifestyle and economic status change, it is important to review your financial plan and modify recommendations to reflect your current situation.

Take the First Step

Start the planning process today by making an appointment. Working together, you and your Financial Planning Specialist can establish the appropriate course of action to help you achieve the financial well-being you seek.

Get in the Savings Habit
By Saghir Aslam
Irvine, CA

Can’t seem to find any money to set aside for saving? Perhaps you’re just not looking in the right places. Consider these strategies:

Don’t make any stops for coffee, snacks, breakfast, or lunch. Take whatever money you would have spent on those items and keep it in a piggy bank. Once a month, deposit the money in an investment account. Feel like saving more? Reduce the number of times you dine out, putting the money saved in the piggy bank.
Once you put off your car, keep the car at least another two or three years. Every month, take the money that would have been spent on the car payment and put it in your investment account.
Don’t buy any clothes unless you pay cash and the item is on sale. Better yet, don’t buy an item of clothing the first time you see it. Go home, take a look through your closet, and then decide if you really need it. If you decide not to purchase the clothing, put the money you would have spent in your piggy bank.
Before grocery shopping, look for coupons for items you regularly use. Don’t like clipping coupons? Make sure you go to a grocery store that rewards regular customers with reduced prices. If the receipt indicates how much you saved, take that amount and put it in your piggy bank.
Increase your 401(k) contribution by 1% of your salary. Don’t think about it, analyze it, or come up with reasons why you can’t do it. Just do it.
Receiving a raise or bonus at work? Don’t let it go into your paycheck. Increase your 401(k) contribution immediately so you never see the money.
The next time you get a premium notice for your auto or homeowners insurance, get quotes from for our five different companies. Provided the company is reputable and the coverage is similar, go with the lower cost company and bank the difference in premiums.
Throw out your credit cards and only spend cash. Most people find it harder to spend cash than to charge an item. You’ll really appreciate this strategy after a few months, when y our credit cards debt isn’t increasing. Use some of your savings to pay down your outstanding debt.
Before purchasing any item over a couple hundred dollars, first go over the purchase with your spouse or a friend. Only purchase the item that person agrees it is necessary. Sure, it’s a lot of trouble, but that’s the whole point. You may find you’d rather not purchase the item than go through the whole process.
Looking for a more drastic way to save? Downsize your lifestyle. If you own a home, consider selling it and moving to one the costs significantly less. You’ll save on mortgage payments and other costs associated with owning a home.

Using a Budget to Control Spending
By Saghir Aslam
Irvine, CA

It is difficult to manage your money if you don’t know how much you have or where it is going. Consider these steps when developing your budget:

IDENTIFY HOW YOU AR SPENDING YOUR INCOME. You should review an annual period so you identify regular monthly expenses as well as irregular, periodic expenses, such as insurance premiums, tuition, and gifts. Much of the information can be found by examining canceled checks, credit card receipts, and tax returns. Total expenses in categories that make sense for your lifestyle.
EVALUATE YOUR EXPENDITURES. If you’re having trouble finding money to save, critically review your expenditures:
Find ways to save at least 10% of your income. With essential expenses with fixed amounts, such as your mortgage, taxes and insurance, you may be able to refinance your mortgage, find strategies to help reduce taxes, or comparison shop your insurance to reduce premiums. Essential expenses that vary in amount, such as food, medical care, and utilities, can usually be reduced by altering your spending or living habits. Discretionary expenses, such as entertainment, dining out, clothing, travel, and charitable contributions, typically offer the most potential for reductions.
Limit the use of your credit cards. Not only do credit card balances carry high interest charges, but credit cards tend to encourage impulse spending.
Resolve not to purchase impulse items or items over a certain dollar amount on your first shopping trip. Go home, think about it for a week, and then go back to purchase. Often, you’ll decide you don’t need the item.
Delay the purchase of large items. For example, instead of purchasing a new car every two or three years, keep your car for four or five years.
PREPARE A BUDGET TO GUIDE FUTURE SPENDING. You may want to start by setting a budget for a couple of months, tracking your expenses closely over that time period. You can then fine-tune your budget for an annual period. Consider these tips:
Don’t include income in your budget that is uncertain, such as year-end bonuses, tax refunds or gains on investments. When you receive that money, just put it aside for saving.
Set up enough expenditure categories to give you a good feel for your spending patterns, but not so many that it becomes difficult and time-consuming to monitor.
Make your budget flexible enough to handle unforeseen expenditures.
Don’t be so rigid that your family is afraid to spend any money. Everyone in the family should have a reasonable allowance.
Find ways to make the savings component of your budget happen automatically. Get the money out of your back account and into an investment account before you have a chance to spend it.

Once you follow and master the above you will notice change in our finances. All of a sudden you will feel you have the control you are in the driver seat. You are the caption of the ship and you will InshaAllah see success!
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr. Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, or does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr. Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr. Aslam does not have anything for sale.)

Know Your Investor Profile
By Saghir Aslam
Irvine, CA

(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
            Before developing an investment strategy, answer some fundamental questions that will define your investor profile. Those questions include.
            What are your overall investment objectives?
Investors committed to growth are looking for appreciation of capital with little concern for income. Total return investors want a balance of income and capital appreciation. Income investors are looking for interest or dividend income with capital appreciation a secondary concern. Individuals concerned about preservation of capital are most concerned with protecting their principal.
What’s your investment time frame?
Short-term investors need their money in a year or two, while intermediate-term investors are investing for two to five years. A long- term investor is investing for at least five years.   Typically, stock investments should only be considered for long-term investors. Because stock returns can be volatile, it is important to invest through different market cycles to reduce the chances that you will receive a lower return than you expected.
What is your risk to tolerance?
You should accurately gauge your tolerance for risk. If you take on too much risk, you may be tempted to sell an investment after a market downturn. Those uncomfortable losing more than 5% of their principal in a year have a low risk tolerance and should consider short term cash investments. A person with a moderate tolerance could withstand a loss of 6% to 15% and should consider bonds and high quality stocks. A person with a high risk tolerance could withstand a loss of 16% to 25% and should consider growth and more aggressive stock investments. Keep in mind that these loss ranges are typically for the investment type as a group, but individual investments could sustain much larger losses than a diversified portfolio.
What rate of return do you expect on your investments?
Although past performance is not a guarantee of future results, reviewing historical rates of return for various investments will provide a rough estimate of returns you can expect. Keep in mind that returns typically reward you for risks you assume. Thus, more aggressive investments usually have higher return potential.
Are you concerned with minimizing income taxes?
Investors in higher tax brackets will want to consider investments that help minimize taxes. That might include municipal bonds, investments generating capital gains, and tax-deferred investments, such as 401 (k) plans and individual retirement accounts.
How you should allocate your portfolio among various investments will depend on your answers to these questions. It is also important to recognize that your answers to these questions will change over time, which may require revisions to your investment plan.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr. Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, or does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr. Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr. Aslam does not have anything for sale.)

Financial Outlook
Our New Year Is around the Corner for Preplanning
By Saghir Aslam
Irvine, CA

PUT YOUR RESOLUTIONS IN WRITING. Doing so will go a long way in helping you achieve those resolutions. It is estimated that people who make resolutions are 10 times more likely to alter their lives than those who don’t make resolutions.
MAKE YOUR RESOLUTIONS SPECIFIC AND ACHIEVABLE. Rather than making vague or very broad resolutions, set smaller goals you know you can reach. Once you achieve these smaller goals, you may find it easier to pursue more substantial goals.
DON’T EXPECT PERFECTION. Changing any behavior is tough and you should expect that you might slip along the way. Don’t use all that as an excuse to abandon your goals. Shake it off and keep pursuing your goals.

If you’re looking to shape up your finances, consider these resolutions:
●         SPEND LESS THAN YOU EARN. The amount of money left over for saving is a direct result of your lifestyle. Since you will typically want to continue the same lifestyle after retirement, your lifestyle decisions will impact you now and in the future. To get a grip on your spending, take time to analyze your expenses and to set a budget. Try to reduce nonessential expenditures or find ways to spend less money on the same things.
●       SAVE THE MONEY BEFORE YOU SEE IT. I f you have to find money every moth to save, you’ll probably find there isn’t much left after paying all the bills. Typically, a better strategy is to set up an automatic savings program where money is automatically deducted from your bank account every month and deposited directly in an investment account. Another good alternative is to sign up for your company’s 401(k) plan, having funds withdrawn every pay check (remember that an automatic investing program, such as dollar cost averaging, does not insure a profit or protect against a loss in declining markets. Since such a strategy involves periodic investment, consider your financial ability and willingness to continue purchases through periods of low price levels.
●       DON’T LET DEBT SABOTAGE YOUR GOALS. If a significant portion of your income is used to pay interest on loans, you’ll have less available for saving. Strive to eliminate all debt except your mortgage. Pay cash for all purchases so you won’t incur additional debt. Pay down your existing debts by using additional funds to pay off the debt with the highest interest rate. Once that debt is paid in full, start paying down the debt with the next highest interest rate, continuing until all your debt is paid in full.
●       INVEST, DON’T JUST SAVE. The ultimate value of your investment portfolio is a function of two factors – how much you save and how much you earn on those savings. Become comfortable with various investment alternatives, so you’ll feel more comfortable investing in more aggressive alternatives that offer potentially higher rates of return. Even small differences in your long-term rate of return can significantly impact the ultimate size of your savings.

Know Your Investor Profile
By Saghir Aslam
Irvine, CA

Before developing an investment strategy, answer some fundamental questions that will define your investor profile. Those questions include.

What are your overall investment objectives?

Investors committed to growth are looking for appreciation of capital with little concern for income. Total return investors want a balance of income and capital appreciation. Income investors are looking for interest or dividend income with capital appreciation a secondary concern. Individuals concerned about preservation of capital are most concerned with protecting their principal.

What’s your investment time frame?

Short-term investors need their money in a year or two, while intermediate-term investors are investing for two to five years. A long- term investor is investing for at least five years. Typically, stock investments should only be considered for long-term investors. Because stock returns can be volatile, it is important to invest through different market cycles to reduce the chances that you will receive a lower return than you expected.

What is your risk to tolerance?

You should accurately gauge your tolerance for risk. If you take on too much risk, you may be tempted to sell an investment after a market downturn. Those uncomfortable losing more than 5% of their principal in a year have a low risk tolerance and should consider short term cash investments. A person with a moderate tolerance could withstand a loss of 6% to 15% and should consider bonds and high quality stocks. A person with a high risk tolerance could withstand a loss of 16% to 25% and should consider growth and more aggressive stock investments. Keep in mind that these loss ranges are typically for the investment type as a group, but individual investments could sustain much larger losses than a diversified portfolio.

What rate of return do you expect on your investments?

Although past performance is not a guarantee of future results, reviewing historical rates of return for various investments will provide a rough estimate of returns you can expect. Keep in mind that returns typically reward you for risks you assume. Thus, more aggressive investments usually have higher return potential.

Are you concerned with minimizing income taxes?

Investors in higher tax brackets will want to consider investments that help minimize taxes. That might include municipal bonds, investments generating capital gains, and tax-deferred investments, such as 401 (k) plans and individual retirement accounts.

How you should allocate your portfolio among various investments will depend on your answers to these questions. It is also important to recognize that your answers to these questions will change over time, which may require revisions to your investment plan.

Leave Your 401 (K) Funds Alone
By Saghir Aslam
Irvine, CA

If you leave your employer decide what to do with your 401 (K) funds. your worst option is to take a distribution, pay taxes and a penalty on it, and then spend the money on something other than retirement funds and forego any further tax-deferred growth on those assets. In addition, you may incur a large tax bill, since withdrawals are subject to ordinary income taxes and a 10% federal income tax penalty if you are under age 59 ½ (55 if you are retiring).

Don't make the mistake of thinking it's just a small amount and won't make much difference for your retirement. Over the long term, even a modest sum can grow to a significant amount. For instance, assume you have $10,000 in your 401 (K) plan.

If you withdraw the funds and are in the 25% tax bracket, You will have $6,500 left after paying income taxes and the 10% federal penalty. However, if you keep the funds invested earning 8% annually on a tax deferred basis, your funds could grow as follows (before the payment of any income taxes):

Investment period Amount

5 years $14,693

10 years $21,589

15 years $31,722

20 years $46,610

25 years $68,485

30 years $100,627

(This example is provided for illustrative purposes only and is not intended to project the performance of a specific investment).Which could be more or less that will depend of what kind of investment you chose and your's amounts above accordingly.

You have three options to keep your 401 (K) funds in a tax-deferred vehicle until retirement:

Leave the funds in tour former employer's 401 (k) plan

Generally, you can leave the funds in your former employer's plan if your balance is at least $5,000.However, most plans will not allow you to borrow from your account once you leave the company. Until you consider all your option, you might want to at least temporarily leave the funds with your former employer's plan.

Transfer the funds to your new employer's 401 (K) plan

Find out if your new employer's plan accepts rollovers. If so, you can typically make the rollover even before you are eligible to make contributions. However, first check out the investment option offered to make sure the new plan has option that will fit your investment goals. Once the funds are in your new employer's plan, you will be able to take loan if permitted by the plan. Also, if you work past the age of 70 ½, you won't be required to take distributions from the 401 (K) plan until you retire. With individual retirement accounts (IRAs), you must take withdrawals once you turn age 70 ½,even if you are still working. If you decide to transfer the funds to your new employer's plan, get the appropriate paperwork from your new employer so the funds can be transferred directly to the new plan's trustee. Otherwise, if the funds go directly to you, your former employer will be required to withhold 20% with your own funds within 60 days or the 20% withholding will be considered a distribution, subject to income taxes and the 10% federal penalty.

Roll the funds over to a traditional IRA

Again, you should have your former employer transfer the funds directly to the IRA trustee to avoid the 20% withholding described above. Once the funds are rolled over to an IRA, you can invest in a wide variety of investment alternatives. With a 401 (K) plan, you typically have a limited number of options. If you plan on leaving part of your 401 (K) balance to your heirs, an IRA usually has more flexible option than a 401 (K) plan. After the funds are transferred to a traditional IRA, provide your adjusted gross income does not exceed $100,000 in the conversion year. I will right later about the IRA as roles are different for the tradition.

Becoming an Investment Savvy Woman
By Saghir Aslam
Irvine, CA

Americans are more knowledgeable about investments today than ever before due to their increasing level of participation in the stock market through stocks, mutual funds and retirement accounts. Changes in the roles woman play in the work force and family, combined with demographic shifts, have required that woman become particularly investment savvy.

A generation ago, many women left most financial decision to their husband or other male family members. However, women’s increasing participation in the work force, their increasing earning power and changing roles in the family structures have created a desire and provided opportunities to participate in making investment decisions. Today, many women are their families’ sole planners for retirement and other future goals.

Even for those married women who are not currently the family’s primary investment decision makers, investing is a necessary skill.

According to the U.S Census Bureau, the average woman outlives her husband by seven years. While simply living longer than men is reason enough for women to be savvy at investment, divorce may also leave a woman suddenly in charge of the family’s finances. The likelihood of spending at least a few years in charge of finances has spurred many women to educate themselves about investments

Being prepared means being informed

Being informed about your financial situation and investment will help you prepare for any circumstances you may face now or in the future. Whether you are single or married, there are three easy steps to becoming more informed about and involved in your financial life.

The first step is developing a statement of net worth. By adding up all your assets (stocks, bonds, insurance, pensions, collectibles) and liabilities (mortgages, loans, other debts) you get a very clear picture of where you stand financially. The second step is to identify goals, or financial milestones you can see in the future. If you have children, it could be paying for college. It could be a vacation home. Or, it could be building retirement savings. Whatever your goals, you need to assess what they are going to cost so you know the amount of money required.

The third step is developing and implementing an investment strategy to20reach your objectives. Often, this is done with an investment advisor who can help you identify the vehicles that will help you reach your goals while remaining within your personal tolerance for risk. An important part of implementing this strategy is monitoring progress toward your goals. You should stay in touch with your advisor and ask questions. Also, read publication on investing and follow trends so you can make adjustments to your strategy along the way.

Women are far more knowledgeable and involved in investing for their financial futures than ever before. However, even expert female investors unique challenges in managing their financial futures. By recognizing and addressing these challenges, they and their families will become more financially secure.

Don’t Play Games with Asset Allocation
By Saghir Aslam

Don’t play games with asset allocation. Any time particularly in this worst market that we have every seen.

For investors, 2008 has been a nightmare. The most widely followed market barometer, the standard & poor’s 500, NASDOW are all down considerably depending on the index any where from 32% to 36%. Many fortune have been lost retirement planes such as IRA,401k and other have been destroyed. This is the worst market we have ever seen. It even beats.com bubble just for comparison. The high of NASD in 2000 was 5600 and now it’s around 1700. DOW on the other hand was 14100 now it’s around 9100.shrinking the holding of millions of ordinary people who have put their faith into index style and other wall street investing.

All major U.S stock indexes have been hammered as well. And although many investors had bet on foreign stocks, hoping that international diversification would soften the ups and downs of their U.S portfolios, most foreign stocks are down dramatically, too. And a recent rebound in the U.S. dollar, while it boosts American’ buying power, has undermined their foreign holdings even further.

What are small investors to do in such a climate? Have the rules of the game changed in some fundamental way?

As in most cases, small investor will do better sticking with their long term plan rather than pulling money out in a downturn, it’s just too hard to spot the market’s high and low points except in hindsight. The credit crunch could continue to drive stock down but that investors who move to the sideline would risk waiting too long to get back in, missing the rebound.

If one plans a long-term asset allocation of, for example, 60% stock 30%bonds and 10%cash, the best strategy is to stick with it through thick and thin, regardless of the mix this is not time to sell instead be patient sticks with it

That means putting money into stocks when that portion of the portfolio falls below the target, as it has this year for many people. “The most important strategy is to make sure that the long run allocation is kept intact during market downturns like we are experiencing, should steer clean of illiquid assets right now, otherwise might not be able to get their money out of those investments turn out badly

Some market followers have argued that popular investment strategies, such as indexing, are not as appealing as they once were. Mutual funds and exchange –traded funds that follow indexing strategies simply buy and hold stocks in a underlying index like the S&P 500,seeking to match the market’s gain rather than beat it. Low costs and taxes help boost their returns.

At the start of 2000 the NASD was near its peak at the tail of the dot-com. bubble Comparing today’s level to that bloated peak is misleading, Results looks much better if one starts at the post-bubble bottom in October 2002. From than through the end of August the S&P 500 was up about 9% a year. Add dividends and investors made 10.5% to 11% total annual result. That’s a pretty good return. In the real life, not many investors put all their cash into a single investment on a single date, either the peak or trough, they add money gradually over time.

With steady investing know as “dollar cost averaging,” a given sum buys more shares when prices are lower than when they are high, helping to reduce the per share cost as a holding accumulates. Over time, an investor is likely to do better this way than by trying to judge the best moments to move money in or out of the market.

That the S&P 500 was at600 in 1995, while it is over 1100 today. Investor who stuck with the index rather than bailing out during the dot-com crisis early in this decade or in the turmoil of the past year enjoyed handsome and the relationship between the economy and the market doesn’t always hold. The most recent recession ended in Nov 2001, but the S&P 500 did not bottom out until October 2002. Those who used the recession’ s end as a signal to buy---- assuming they could identify the end as it occurred and not later --- would have lost money over the subsequent 11 months.

“the lessons from this are_ don’t play game with asset allocation because you will inevitably be out of the market long after the rally begins----- and it will be difficult to know when to increase equity position.

Many investors cannot resist the temptation to play the peaks and troughs, though it’s best to try this with only a small portion of one’s holdings.

Those investors might find some bargains today in classes of stocks that have been badly hammered: foreign stocks in general, especially emerging-market stocks, and small company stock.

“many of us are significantly under weighted in foreign industrial country and emerging-market stocks, so we should consider adding those position,” But be aware that some foreign economies such as Germany and Japan are deteriorating faster than our, so expect some bumps in the near future.”

While stocks always pose risk, the dangers may be worse in some other investment, Real Estate Investment Trust, which are like mutual funds that own real estate, “don’t seem to have fully priced in the tightening of credit” and may lag stocks in the next recovery. Credit investment such as high-yield bonds, know as junk bonds, are still deteriorating only the very brave are going into distressed assets at this time.”

High oil prices have been a key issue in the past year, helping to it drive inflation up and threatening to undermine consumer spending, while is key to the U.S economy and stock performance. Now that oil has fallen below $100 a barrel and gasoline below $4 a gallon, this threat is easing. That leaves trouble in the housing market as the key factor in the economy, and it is not clear when this crisis will end.

Stick with a long-term plan, maintaining the desired mix of stocks, bonds and cash, there is “huge uncertainty” in today’s markets.

“I think you have to be conservative at the moment, because there are a lot of very difficult times coming up.”

Get in the Savings Habit
By Saghir Aslam

Can’t seem to find any money to set aside for saving? Perhaps you’re just not looking in the right places. Consider these strategies:

Don’t make any stops for coffee, snacks, breakfast, or lunch. Take whatever money you would have spent on those items and keep it in a piggy bank. Once a month, deposit the money in an investment account. Feel like saving more? Reduce the number of times you dine out, putting the money saved in the piggy bank.

Once you put off your car, keep the car at least another two or three years. Every month, take the money that would have been spent on the car payment and put it in your investment account.

Don’t buy any clothes unless you pay cash and the item is on sale. Better yet, don’t buy an item of clothing the first time you see it. Go home, take a look through your closet, and then decide if you really need it. If you decide not to purchase the clothing, put the money you would have spent in your piggy bank.

Before grocery shopping, look for coupons for items you regularly use. Don’t like clipping coupons? Make sure you go to a grocery store that rewards regular customers with reduced prices. If the receipt indicates how much you saved, take that amount and put it in your piggy bank.

Increase your 401(k) contribution by 1% of your salary. Don’t think about it, analyze it, or come up with reasons why you can’t do it. Just do it.

Receiving a raise or bonus at work? Don’t let it go into your paycheck. Increase your 401(k) contribution immediately so you never see the money.

The next time you get a premium notice for your auto or homeowners insurance, get quotes from for our five different companies. Provided the company is reputable and the coverage is similar, go with the lower cost company and bank the difference in premiums.

Throw out your credit cards and only spend cash. Most people find it harder to spend cash than to charge an item. You’ll really appreciate this strategy after a few months, when y our credit cards debt isn’t increasing. Use some of your savings to pay down your outstanding debt.

Before purchasing any item over a couple hundred dollars, first go over the purchase with your spouse or a friend. Only purchase the item that person agrees it is necessary. Sure, it’s a lot of trouble, but that’s the whole point. You may find you’d rather not purchase the item than go through the whole process.

Looking for a more drastic way to save? Downsize your lifestyle. If you own a home, consider selling it and moving to one the costs significantly less. You’ll save on mortgage payments and other costs associated with owning a home.

Checking Your Personal Financial Ratios
By Saghir Aslam

When reviewing the financial health of a company, it’s common to look at financial ratios, such as earnings per share, price/earnings ratios, books value, and total return. The reason financial ratios are so popular is they give you a means of evaluating financial information, while allowing you to track changes in a company’s performance over time.
Consider using the same concept to assess and track your personal financial situation. At least annually prepare a net worth statement and then calculate various financial ratios. Comparing those ratios over time will help you assess whether you are making progress toward your financial goals.
You should start by preparing a net worth statement, which lists all your assts and liabilities, with the excess representing your net worth. All assets should be listed, including vested balances in retirement plans and 401 (k) plans, personal property, jewelry, and household items.
Assets should be valued at the price you would obtain if you sold them now, not the amount you paid for them. You’ll also want to list your annual income, for ease in calculating some of the ratios.
Now, ask yourself the following questions about your finances.

HAS YOUR NET WORTH GROWN BY MORE THAN THE INFLATION RATE?
Calculate the percentage growth in your net worth over the past year and compare that to the inflation rate. To make progress toward achieving your financial goals, your net work should increase by more than the inflation rate. If your net work is not growing, determine the reasons.

WHAT IS YOUR RATIO OR ASSETS TO LIABILITIES?
A ratio of less than 1 indicates you have more liabilities then assets—a negative net worth. If that is the case, take active steps to reduce your liabilities. This ratio should increase over time, which would indicate you are reducing debt.

WHAT IS THE TREND IN YOUR LIABILITIES?
Review the amounts and types of debt outstanding. Mortgages are typically used to purchase a house or other items that appreciate in value, so they are considered “good” debt. Credit card balances and auto loans are used to finance items that typically don’t appreciate in value and should be kept to a minimum.

WHAT PERCENTAGES OF YOUR ASSETS ARE LIQUID AND NONLIQUID?
Nonliquid assets include items like your home, other real estate, jewelry, and works of art. Although they may increase in value over time, they can be difficult to sell quickly at full market value. Liquid assets, such as bank accounts and stocks, are more easily converted to cash. You want sufficient liquid assets to cover financial emergencies.

WHAT IS YOUR SAVINGS TO INCOME RATIO?
For this ratio, your savings equal all assets designated to help fund your retirement. It typically won’t include your home, since you will probably live there after retirement. First you need to decide what this ratio should equal to retirement. It is basically the amount of savings you want at retirement age, preferably determined after a careful analysis of all appropriate factors, divided by your annual income. For instance, if you want retirement assets equal to 2,000,000 when you retire and you currently earn $100,000, you would need a savings to income ratio of 20 when you retire. You might then develop benchmarks over your working years to help you gauge whether you are on track to achieving that goal.

WHAT IS YOUR SAVINGS RATE?
Calculate what percentage of your income you are saving on an annual basis. Typically, you’ll want to save a minimum of 10% a year. This would include 401(k) contributions and individual retirement account contributions. If your employer matches your 401(k) contributions, you can include those contributions as part of your annual savings.

HOW HAVE YOUR INVESTMENTS PERFORMED?
Now may also be a good time to thoroughly analyze your portfolio’s performance over the past year. Measure the performance of each investment, comparing it to an appropriate benchmark. This can help you identify portions of your portfolio that may need to be changed. Also calculate your overall rate of return and compare it to your targeted return. If your actual return is lower than the return your targeted when designing your investment program, you may need to increase your savings, select investments with higher return potential, or settle for less money in the future.

Do You Have a Budget?
By Saghir Aslam

A budget serves as a road map for your spending, helping you find ways to save money for your financial goals. Inefficient and wasted expenditures can be major impediments to accomplishing your financial goals. For a one-month period, keep track of every dollar you spend, whether by cash, check, or credit card. Are you surprised by how much small expenditures add up over a month?
To make sure you get the maximum benefit from the budgeting process, keep these points in mind:

Use spending categories that make sense for your spending patterns. If there are areas with good potential for spending reductions, even if the amounts are relatively small, set them up in their own categories.
Set up enough categories to give you a good feel for your spending patterns, but not so many that it becomes difficult and time consuming to monitor your progress.
Include non-recurring items in your budget, such as gifts, tuition, insurance premiums, property taxes, etc.
Periodically compare your actual expenditures to your budgeted expenditures to find out when you are having problems.
While everyone in the family should have some cash that can be spent without accounting for it, don’t make the amount so large that it detracts from your savings efforts.
Include savings in your budget and make sure you’re actually save that amount every amount.
While at times a budget may not seem worth the effort, remember that it is a tool to help you accomplish your financial goals. Remain committed and stick with it.

Market Update
By Saghir Aslam

FIRST FEW MONTHS REVIEW-the first half of 2008 dramatically reinforced the idea that over the short term, the stock market can be extremely volatile. A sharply negative first quarter was followed by two months of positive returns, but the stock market sell off resumed in June. The S&P 500 is down 11.9% for the first half of this year with international markets down 12.7%. There were some bright spots, specifically investment-grade bonds that experienced positive returns for the year; however, according to Morningstar, the average intermediate bond mutual fund was down 0.6%. the financial sector took a big hit in the first half; Citicorp was down 43%, Wells Fargo was off 21%, and some major banks are in serious trouble.
THE IMPORTANCE OF STRATEGIC ALLOCATION-as expected in an environment of fear, there are a lot of questions: What is going on? How bad could it get? What should be done in investment portfolios? Though this particular environment is in many ways unique and presents its own set of challenges. While each of those periods presented their own particular challenges, one thing that was common to them all was a sense of accelerating bad news, escalating risk, fear, and panic.
This is why suggesting friends select an appropriate investment objective is so important. It is times like these that illustrate the importance of getting the right investment objective for friends, i.e., mixture of stocks and bonds. Young friends can ride out this volatile market by keeping their eye fixed on the long-term, knowing that stocks will outperform bonds over time. Retired friends need to have a good portion of their portfolios in bonds and other income oriented investments, helping to cushion the portfolio when stocks fall a significant amount.
PAST MARKET CYCLES-As always, there are positive in this environment as well. Outside the financial sector, corporate balance sheets remain generally healthy and earnings have been decent. One source of strength has been exports, which have managed to offset much of the impact of the housing decline on U.S. economic growth so far. But overall, risks to the economy remain high, and the financial stock market are now more fully discounting this risk—evidently by battering stocks have taken in recent weeks.
Though I have seen a number of market crises over the years, I also recognize that history never repeats itself exactly, and almost anything can happen from here. One possibility is that things in the stock market could get worse before they get better. Even without a bad recession, fear and pessimism can take hold of investor psychology and send the market down further than what would be justified by long-term economic fundamentals. In this type of environment, a sense of perspective and a reliance on our investment discipline help us avoid becoming panicked by short-term concerns and paralyzed by longer-term uncertainty.
WE ALL KNOW FEARS BRING OPPORTUNITY-In part market cycles the current market environment lead me to two important conclusions. First, I believe it is important to have a proper perspective. It is easy to put too much weight on negative scenarios when bad news dominates the daily headlines. And, currently view stocks as priced to outperform bonds and cash in most scenarios over the next five years. Second, big market downturns invariably present opportunities. Without them, I would not have had the chance to invest in excellent funds and businesses at bargain prices.
Mr. Buffett has experienced his biggest peak to trough decline in 18 years. Even so, he wants prices to go lower knowing that he can buy more great businesses before they bounce back. The “world’s most successful investor” always aims to profit from market declines and volatility.
If you are an investor, “a bear market is a gift from the financial gods—and the longer it lasts, the better off you will be. Instead of running from the bear, you should embrace him.”
CONCLUSION: We suspect this will continue to be one of the most challenging investment environments we have faced, at least for a while. We also know that many of the managers we respect are buying shares of high-quality companies at bargain-basement prices. Even though the overall market remains weak, the current economic and market turmoil appears to be creating significant opportunities for bargain hunters with a reasonable time frame.
Indeed, it is often when the overall trend is negative that disciplined investors can build a portfolio for long-term out-performance by carefully taking advantage of the opportunities created by these dislocations. This requires patience as well as the ability to favor long-term analysis over short-term fear, which is what distinguishes successful investors.

The Path to Your Financial Goals
By Saghir Aslam

Are you sure you’re being paid a competitive wage with competitive benefits? Even if you aren’t interest in changing jobs now, pay attention at what is going on in y our field.
Do you have an outside interest or hobby that can be turned into a paying job? This could be a good way to supplement your current salary. It may also turn into a part-time job or business after retirement.
Can you get some additional education or training to help secure a promotion or qualify for another job? Read up on which jobs are expected to have the highest growth rates and/or highest salaries over the next few years. If you don’t enjoy your current job, you have even more incentive to implement these suggestions.

INVEST ALL UNEXPECTED INCOME. Instead of spending money from tax refunds, bonuses, and inheritances, invest the money immediately. You may also want to put any salary increases into savings, possibly in your 401(k) plan.
SAVE REGULARLY SO IT BECOMES A HABIT. One of the best ways to save regularly is to make saving automatic. If you have to remember to write a check every month, it’s easy to forget or not get around to doing it. It’s usually easier to have the money automatically deducted from your bank account and deposited directly in an investment account. Another good alternative is to sign up for a company’s 401(k) plan, having funds withdrawn every paycheck. (Keep in mind that an automatic investing plan, such as dollar cost averaging, does not assure a profit or protect against a loss in declining market because such a strategy involves periodic investment, you should consider your financial ability and willingness to continue purchases through periods of low price levels.)

HOW WELL YOU INVEST. To ensure that your savings grow, you need to invest them wisely. Consider these tips:

SET AN ASSET ALLOCATION STARTEGY FOR THE LONG TERM. The most basic investment decision you’ll make is how to allocate your portfolio among the various investment categories, such as cash, bonds, and stocks. You want to ensure your portfolio is diversified among a variety of investments. that way, when one category is declining, hopefully other categories will be increasing or not decreasing as much. To decide how to allocate your portfolio, you’ll first need to come to terms with your risk tolerance. Factors like your time horizon for investing and return expectations will also impact your decision.
THOROUGHLY REVIEW EACH INVESTMENT IN YOUR PORTFOLIO. Decide whether you should continue to own each based on your financial goals and asset allocation strategy. Also make sure your investments are adding diversification benefits to your portfolio.
MAINTAIN REASONABLE RETURN EXPECTATIONS. The higher your expected return on your investments, the less you need to save every year. However, if your assumed rate of return is significantly higher than your actual return, you won’t reach your goals. Thus, it’s important to use reasonable return expectations. Assess your progress every year so you can make adjustments along the way. If your return is lower than expected, you may need to increase your savings or change investment allocations.
REVIEW YOUR PORTFOLIO AT LEAST ANNUALLY. Your portfolio won’t stay within your desirable allocation by itself. Since different investments earn different rates of return, over time your allocation will get out of line. You need to review your portfolio periodically and make adjustments to rebalance it.

Text Box: The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities

Take a Closer Look at Expenses
By Saghir Aslam

High investment costs remain out of sight and out of mind when overall returns are strong. Why sweat decimal points when basking in 20 percent gains?
But when returns turn meager or slide downward, as they have in 2008, hefty expenses become visible and painful.
While investors can find low-cost mutual funds, exchange-traded funds (ETFs) and bank accounts these days, it requires research and willingness to read fine print.
Keeping investment expenses low was important a decade ago, but now is critical. You can’t control markets, but you have some control over expenses and that is important in a low-return environment.
The sad reality is most investors pay no attention to expenses, including the fees they’re paying on retirement accounts.
The average mutual fund’s annual expense ration had fallen from 1.00 percent to 0.90 percent from 2003 through 2006.
However, it remained stagnant at 0.90 percent in 2007, and costs of some asset classes rose. Overall increases may be ahead.
The annual expense ratio represents recurring management fees as a percentage of fund assets. It includes managerial expenses, administrative costs, 12b-1 marketing expenses, administrative expenses. Mutual fund expenses have flattened out—going down for international funds but up in other areas such as balanced (stock-and-bond) funds. Too many investors put money in popular but high-cost funds. There are a lot of different fund markets, some sensitive to fees and others indifferent to them.”
International fund fees have gone down because their large assets inflows have driven down overall costs of running them, that’s not the case with most domestic funds, whose outflows halted previous downward fee momentum.
There are plenty of low-cost funds, but you must exert discipline in using their expense ratios as a good first screen on finding those that are low in cost.
Though not alone among fund companies with low costs, Vanguard Group remains the low-cost leader. Vanguard Total Stock Market Fund Index (VTSMX), a “no-load” (no sales charge) fund. It features a low annual expense initial investment percent, requires a $3,000 minimum initial investment and has a three-year annualized return of 9 percent.
Exchange-traded funds, those increasingly popular baskets of securities traded like individual stocks on an exchange, offer another low-cost opportunity. They can be bought and sold throughout the trading day. Most have lower expense ratios than mutual funds, though you must pay a commission to buy and sell their shares.
Exchange-traded funds used to be purely index funds and were therefore extremely low-cost. But as more focused an intricate ETFs are increasingly introduced, expense ratios have been rising.
While people think ETFs will always have the lowest expense ratios and always be tax-efficient, that’s not necessarily true. Costs are rising for those ETFs that require more research and intervention.
ETF expense ratios are still usually lower than conventional mutual funds, though not always. Vanguard Total Stock Market ETF (VTI) has an annual expense ratio of 0.07 percent, lower than its mutual fund counterpart, while HealthShares Euro Drugs ETF (HRJ) has an expense ratio of 0.99 percent.
Fees at banks are on the rise but can generally be avoided altogether with smart planning.
Read find print when shopping for bank accounts to determine the fees you could wind up paying.
Bank fees have been marching steadily higher for the past decade. ATM surcharge and credit card late fees and over-limit fees have increase most notably.
Free checking is widely available. It provides the saver with a transactional account unencumbered by balance requirements or heavy fees, freeing up money you can then devote to higher yielding investments.
Online access to your account, which is available to you 24/7, can also help avoid late and other fees. Finally find the location of a nearby ATM where you can make free withdrawals, monitor your available account balance, and avoid overdraft and other charges.

Checking Your Personal Financial Ratios
By Saghir Aslam

When reviewing the financial health of a company, it’s common to look at financial ratios, such as earnings per share, price/earnings ratios, books value, and total return. The reason financial ratios are so popular is they give you a means of evaluating financial information, while allowing you to track changes in a company’s performance over time.
Consider using the same concept to assess and track your personal financial situation. At least annually prepare a net worth statement and then calculate various financial ratios. Comparing those ratios over time will help you assess whether you are making progress toward your financial goals.
You should start by preparing a net worth statement, which lists all your assts and liabilities, with the excess representing your net worth. All assets should be listed, including vested balances in retirement plans and 401 (k) plans, personal property, jewelry, and household items.
Assets should be valued at the price you would obtain if you sold them now, not the amount you paid for them. You’ll also want to list your annual income, for ease in calculating some of the ratios.
Now, ask yourself the following questions about your finances.
HAS YOUR NET WORTH GROWN BY MORE THAN THE INFLATION RATE?
Calculate the percentage growth in your net worth over the past year and compare that to the inflation rate. To make progress toward achieving your financial goals, your net work should increase by more than the inflation rate. If your net work is not growing, determine the reasons.
WHAT IS YOUR RATIO OR ASSETS TO LIABILITIES?
A ratio of less than 1 indicates you have more liabilities then assets—a negative net worth. If that is the case, take active steps to reduce your liabilities. This ratio should increase over time, which would indicate you are reducing debt.
WHAT IS THE TREND IN YOUR LIABILITIES?
Review the amounts and types of debt outstanding. Mortgages are typically used to purchase a house or other items that appreciate in value, so they are considered “good” debt. Credit card balances and auto loans are used to finance items that typically don’t appreciate in value and should be kept to a minimum.
WHAT PERCENTAGES OF YOUR ASSETS ARE LIQUID AND NONLIQUID?
Nonliquid assets include items like your home, other real estate, jewelry, and works of art. Although they may increase in value over time, they can be difficult to sell quickly at full market value. Liquid assets, such as bank accounts and stocks, are more easily converted to cash. You want sufficient liquid assets to cover financial emergencies.
WHAT IS YOUR SAVINGS TO INCOME RATIO?
For this ratio, your savings equal all assets designated to help fund your retirement. It typically won’t include your home, since you will probably live there after retirement. Firs,t you need to decide what this ratio should equal to retirement. It is basically the amount of savings you want at retirement age, preferably determined after a careful analysis of all appropriate factors, divided by your annual income. For instance, if you want retirement assets equal to 2,000,000 when you retire and you currently earn $100,000, you would need a savings to income ratio of 20 when you retire. You might then develop benchmarks over your working years to help you gauge whether you are on track to achieving that goal.
WHAT IS YOUR SAVINGS RATE?
Calculate what percentage of your income you are saving on an annual basis. Typically, you’ll want to save a minimum of 10% a year. This would include 401(k) contributions and individual retirement account contributions. If your employer matches your 401(k) contributions, you can include those contributions as part of your annual savings.
HOW HAVE YOUR INVESTMENTS PERFORMED?
Now may also be a good time to thoroughly analyze your portfolio’s performance over the past year. Measure the performance of each investment, comparing it to an appropriate benchmark. This can help you identify portions of your portfolio that may need to be changed. Also calculate your overall rate of return and compare it to your targeted return. If your actual return is lower than the return your targeted when designing your investment program, you may need to increase your savings, select investments with higher return potential, or settle for less money in the future.

Selling a Stock? Follow the Rules, Don’t Panic
By Saghir Aslam

You have invested your hard earned dollars and we have been witnessing the market slide. Matter of fact according to some news we had one days worst drop for years, one news reporter said since 1929.
Yet one of the biggest challenges investors face is how and when to sell a stock.
You’ll find many analysis—online and elsewhere—on which stocks are good buys and which are not. Everyone has an opinion. But when it comes to selling something you own, you’re all along. There is no news you are left on your own.
More often than not, emotions and attachment to a stock play a stronger part in your decision. But the decision to unload a stock should be cold and calculating, not hot and emotional.
Just follow some of these rules and you can try to come up with your own, but emotion must not be one of them.
If a stock is falling, don’t suffer more than an 8% loss. There is no gray area. If you follow these rules and limit your losses, your capital should be safe. Now most of us are past that stage so now you must analyze thoroughly before selling.
But when you’re sitting on gains, it gets a bit trickier. There are usually several elements at play.
Generally, you may get ready to sell once you’ve attained a 20% to 25% gain from the stock’s buy point from a valid base.
But some stocks can surge that much in less than three weeks. In those cases, history shows you can expect far more. Hold on for eight weeks. You may have found a truly extraordinary issue. I usually start selling some shares or continue raising stop loss called trailing stop.
You can also look for signs that your stock is running out of steam. If a stock falls big in heavy trade, this is often a clue that the big funds are running for the exits. You don’t want to hold a stock that institutions are vigorously dumping. Remember its supply and demand and it’s the institutions that make the stock move higher or lower.
The same holds true when a stock is notching new highs in lower volume. This meanst here are no buyers left in the market.
If volume is high but the stock is simply stalling, the stock is churning. Think of your car stalling even as you give it the gas. You know there’s a problem.
Spending too much time below its 50-day moving average can be alarming. And a 200-day line that turns down is also worrisome. In this technology age all these charts are available to you.
Breakouts in weak volume signal trouble. Late-stage breakouts are often a last-gasp shot at the upside. Then often fail. You should sell out before you get to this point.
Climax tops indicate that the stock is near the end of its run. You can usually stop one when price gains suddenly accelerate to 25% to 50% in just a few weeks after an already long run-up.
The stock’s weekly price spread will be greater than on any previous week since the beginning of the run. It may also have its largest single day jump sine its advance. Get yourself familiarize with all this. It will help you make the right decisions and help you grow your nest egg.

Assuring Your Financial Safety
By Saghir Aslam

The largest part of your wealth will most likely come from your career…not from your investments. Do not take risks with complicated or risky investment schemes in hope of multiplying your capital quickly. You’re risking a lot of relatively little gain.
Do not assume you can replace your wealth. Just because you made it once does not mean you can do it again. Circumstances change; you may not be the right place at the right time again. So treat your wealth as if you can never replace it.
Do not use leverage. The overwhelming majority of people who go broke do so because they take on too much debt. The most effective way to make sure you don’t have too much debt is to have no debt. If you live life on a cash basis, virtually nothing can completely destroy your wealth.
No one can predict the future. No one. Investment markets encompass millions of participants each acting in their own best interests. With so many forces contributing to the eventual direction of the market, events rarely unfold as expected. Avoid investments which rely on predictions for the future.
No one can time the market. You may hear about Wall Street wizards who lay claims to fantastic records, but you can rely on them losing their touch as soon as you entrust them with your money.
No trading system will work as well in the future as it did in the past. You may see a system with a tremendous track records, but you can bet they won’t do as well in real life as they do in the lab.
Understand the difference between investing and speculating. When you invest, you accept the return the market is paying. When you speculate, you attempt to beat the market’s return. In attempting to outperform the market you take on additional risk. There is nothing wrong with speculating, but you must be prepared to lose money in the process, and you should not speculate with money you cannot afford to lose. Capital that is dear should not be risked on a best that you can is dear should not be risked on a bet that you can outperform other investors.
Never give anyone signature authority over your money. You have no way of knowing for sure what he may be prompted to do someday by pressures or problems.
Never invest in something you do not understand. Don’t get caught in the trap of investing in something your best friend or your investment advisor understands but you are not sure about. It is better to hold onto your cash than to find out someday that there were risks you did not understand at the outset.
Beware of tax avoidance schemes. Complicated tax strategies may include risk and liabilities of which you are unaware. Particularly with tax rates so low, the savings are minimal compared with the risks. Even a “friendlier” IRS is no fun to deal with.
Diversify your investments. Include in your portfolio a variety of investments that will perform differently in extreme situations. Be careful to avoid dependence on a single investment environment (i.e. rising stock market, moderate inflation, low interest rates, strong/weak currency, etc.). You can achieve a great deal of diversification with a fairly simple portfolio.
Speculate only with money you can afford to lose. This is a restatement of #7 above, but it is worth noting again. For most people, market returns will get them to their financial destination. However, if you must speculate, be very specific about how much money you will expose to possible loss. Take the step of setting this money aside in a separate account. Don’t’ speculate with money you cannot afford to lose.
Develop a budget for your own pleasure. Set aside a specific amount which you can spend each year without concern that you are jeopardizing your future.
When in doubt, take the safe, conservation course of action. If you pass up an opportunity to increase your wealth, there will always be another chance. If, however, you lose your life savings, there may not be another chance.

When it comes to handling money and investments, there are very few assurances. But following these guidelines will save you many headaches and put you on a most likely path to sustained wealth. You may not “hit the jackpot,” but neither will you experience the agony of losing everything you have.

Market Review and Investment Strategy
By Saghir Aslam

US equities decline in troubled economy; foreign markets retreat
The broad domestic equities market lost ground during the quarter as worries about the U.S economy grew. In the retreating market, large-cap stocks outperformed small-cap stocks, and value stocks surpassed growth stocks.
A number of factors equities down, including the widening U.S. credit crisis, falling home prices, declining consumer discretionary spending, rising unemployment, plummeting consumer confidence, soaring energy prices, and a slowing economy. These factors contributed to the growing conviction among economies that the economy has slid into recession.
Non-U.S. markets in all parts of the world also suffered losses for the quarter—a dramatic reversal from their collectively strong 2007 performance. Emerging markets, which has surged during 2007, generally posted the worst declines. Many economists believe that market struggles cropping up outside the U.S. may indicate the domestic financial crisis is spreading globally.

Treasuries again lead broad fixed-income market
With investors continuing to seek safety, U.S. Treasuries continued to dominate quarterly returns. The cash flow into Treasuries—coupled with the Federal Reserve’s (the fed) aggressive actions to alleviate the widening credit crisis—helped drive Treasury prices higher.
For the quarter, high-yield bonds delivered the worst returns. The sector was battered by Treasuries and was significantly outperformed by investment-grade bonds, as investors showed their unwillingness to take on the additional risk high-yield bonds carry. Asset-backed securities—which carry broad exposure to mortgages and consumer credit—significantly underperformed versus Treasuries. Commercial mortgage-backed securities also underperformed, as investor concerns regarding residential real estate spilled over into the commercial real estate sector.

REITs, large-cap value lead Portfolio performance
The Portfolio’s real estate investment trust (REIT) exposure contributed to performance, as REITs proved to be the only equity class within the Portfolio that delivered a positive return through quarter end. Also, the Portfolio’s large-cap value exposure was a primary contributor due to the out-performance of these holdings relative to both their asset class benchmark and the S&P 500. On the fixed-income side, the Portfolio benefited from its allocations to cash the high-yield corporate bonds, as equities in general underperformed fixed-income securities. Absolute performance of the Portfolio’s large- and mid-cap growth and non-U.S. (developed markets) equities were the primary detractors.
U.S. economy struggles as credit crisis spreads and inflation rises
The market turmoil that began with sub-prime mortgages last summer intensified during the first quarter, spreading to other U.S. credit markets. Stocks, with very few exceptions, continued to falter as the credit crisis expanded to hit higher-quality mortgages.
Meanwhile, inflationary pressures mounted, and the economy slowed. Oil price sky rocketed and commodities in general surged. Rising oil prices tend to encourage inflation because they raise the cost of producing goods and services; however, rising oil prices can dampen the economy at the same time by siphoning more and more money from the pockets of consumers, whose spending historically has been responsible for about 70 percent of the country’s economic activity. As costs for essential items such as food and gasoline rose, consumers out of necessity cut back on discretionary purchases. Declining consumer discretionary spending and a deepening credit crisis took (and continue to take) a toll on the struggling economy.

Expect the Unexpected

By Saghir Aslam

Now that the primaries are behind us we will see debates new issues beings discussed going back and forth.
Strange things have been known to happen during election years. As we enter a campaign cycle that is already unlike others we’ve seen, we can expect to see out-of-the-ordinary behavior by everyone from policymakers to Wall Street traders. In fact, we have already seen some change from past election years.
Take the primaries as an example. In 2004, nine states held their primaries prior to February 5. In 2008, at least 22 states will have held their primaries by that date. In fact, no fewer than 29 states have moved their primaries to earlier dates in order to jockey for greater influence over choosing the next president.
As we move through this year, it may be good advice to expect the unexpected.

Uncertainty Is Certain

One concern in any election year is uncertainty. In this respect, 2008 may be no different. Regardless of the election outcome, we can expect changes in tax policy, entitlement spending, and healthcare insurance. Public and private sectors tend to postpone making big decisions when faces with uncertainty.

Tax Debate Still To Come

The bulk of the debate over tax policy probably still lies ahead. Although the general direction in which each party plans to steer tax policy is already well known, the individual candidates disagree over the finer points. Neither party is likely to nail down this plank in its campaign platform until it selects nominees.
What’s at stake, is whether the 2001 and 2003 tax cuts will be extended, allowed to expire after 2010, or revised to include or exclude certain income groups. The fate of capital gains taxes, the estate tax, and the alternative minimum tax also lies in the balance.
All of this will be decided on who is the next president and what’s ahead in congress. Naturally senate as well. Be prepared for any expected and unexpected.

Systematic Risk

External risks such as war, recession, tax policy, and other foundational disturbances frighten the market because they have the potential to threaten the health of consumers.
Strategies to manage systemic risk tend to be fairly limited. Effective ones revolve around the principles of asset allocation and diversification because different areas of the market tend to react differently. However, when world events affect broad market segments or multiple market sectors, diversification and asset allocation do not guarantee against loss; they are simply methods used to help manage investment risk.

Unsystematic Risk

The internal challenges that a single company or a small number of companies face are called unsystematic risk. When a firm has trouble with sales, debts, cash flow or management practices, investors may shy away, thus reducing demand for the stock and causing the price to fall. Diversification and asset allocation can be effective in helping manage unsystematic risk. In fact, unsystematic risk is sometimes called diversifiable risk.
It’s very difficult to make meaningful investment gains without accepting some risk, but this doesn’t mean that all risk equal gains. Being aware of the risks that affect your investments is a good way to help ensure that you are not assuming more risk than necessary to meet your objectives.

By Saghir Aslam

Know Your Investor Profile By Saghir Aslam Irvine, CA

Know Your Investor Profile By Saghir Aslam Irvine, CA

Leave Your 401 (K) Funds Alone By Saghir Aslam Irvine, CA

Becoming an Investment Savvy Woman By Saghir Aslam Irvine, CA

Being prepared means being informed

Don’t Play Games with Asset Allocation By Saghir Aslam

Don’t play games with asset allocation. Any time particularly in this worst market that we have every seen.

Checking Your Personal Financial Ratios By Saghir Aslam

Do You Have a Budget? By Saghir Aslam

Market Update By Saghir Aslam

The Path to Your Financial Goals By Saghir Aslam

Checking Your Personal Financial Ratios By Saghir Aslam

Selling a Stock? Follow the Rules, Don’t Panic By Saghir Aslam

Expect the Unexpected

Uncertainty Is Certain

Tax Debate Still To Come

Systematic Risk

Unsystematic Risk

Know Your Investor Profile
By Saghir Aslam
Irvine, CA

Know Your Investor Profile
By Saghir Aslam
Irvine, CA

Leave Your 401 (K) Funds Alone
By Saghir Aslam
Irvine, CA

Becoming an Investment Savvy Woman
By Saghir Aslam
Irvine, CA

Don’t Play Games with Asset Allocation
By Saghir Aslam

Checking Your Personal Financial Ratios
By Saghir Aslam

Do You Have a Budget?
By Saghir Aslam

Market Update
By Saghir Aslam

The Path to Your Financial Goals
By Saghir Aslam

Checking Your Personal Financial Ratios
By Saghir Aslam

Selling a Stock? Follow the Rules, Don’t Panic
By Saghir Aslam