by Wendy Lanton
Teaching investors the role their financial representatives play is a crucial component of the educational process.
The recent barrage of articles regarding the “fiduciary standard” is not bound to cease but rather to endure. At the crux of the debate is the Department of Labor’s [DOL] intention to adopt and enforce a new standard that would, among other things, force brokers who work with retirement accounts to become fiduciaries.
07/29/2015 - How to Get More Complete Information From Your Client
By Wendy Lanton
Communication is a two-way street.
There is a symbiotic relationship between broker-dealer, advisor and client. They all rely on each other to manage a relationship that can be effective only if each party is honest and provides complete information.
6/26/2015 - Municipal Bonds - Protecting Income with an Opportune Investment Without a Partner
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By Keith Lanton
Buying municipal bonds empowers investors to retain 100% of their interest income.
Melville, NY -- (ReleaseWire) -- 06/26/2015 -- A wise man once said, "Choose your friends wisely. Not everyone has your best interest." Investors, please take note.
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Savvy investors are the ones who most often choose to invest in tax-free municipal bonds. They have a very good reason for doing so—they avoid taking on a stealth partner, such as Uncle Sam or a state government, whose "best interest" is to take away a share of an investor's profit. In fact, by buying tax-free municipal bonds, investors may be able to keep 100% of their interest income.
Every time an individual receives a coupon payment form a taxable bond, earns interest from a certificate of deposit (CD) or a bank account, she or he is investing with a partner. Be it Uncle Sam or the US Government, that partner claims its partnership share of every interest payment received. Uncle Sam in particular is an astute partner. He does not claim his share at the time an investor receives interest payment. Rather, he asks for payment every year on April 15th. By demanding his share at a later date, as part of a complicated tax return, Uncle Sam makes it much harder for investors to realize the magnitude of his "participation" in their hard earned interest income.
For those who are in the highest federal tax bracket, Uncle Sam becomes a 39.6% partner of every taxable interest payment they receive. For investors living in high tax states, such as California or New York, the situation is even worse. For example, for an individual in the highest state tax bracket in California, in addition to Uncle Sam, the State of California joins the partnership by claiming 13.3% of every taxable interest payment she receives. Think about it! That investor puts up 100% of the capital to receive only 47.10% (100%-39.6%-13.3%) of the return!
Buying municipal bonds empowers investors to achieve two key strategic goals: 1) circumvent the risk of taking on unwanted partners; and, 2) secure their ability to retain 100% of their interest income. Currently, municipal bonds are trading at attractive historical levels relative to taxable bonds. Yields on 10-year municipal bonds are 105.16% of the 10-year Treasury and 20-year municipal bonds are yielding 114.39% of the equivalent Treasury. This has a very important implication for investors, as it means that despite the fact that municipal bonds' income is tax-free— consequently, their rates should be lower—their yields on maturities greater than 10 years are higher than those on treasury bonds! Of course, the latter are backed by the full faith and credit of the United States. Nevertheless, municipal bonds levels over 100% are high by historical standards.
So how can investors go about in finding the right bond? Here are 5 tips:
1) Think like a Banker! -- A bond is a loan, and the investor is the bank.
2) Time Horizon – An investor must decide when she wants the loan (bond) to end.
3) High yield is not everything – Is the extra return worth the potential loss of principal and the stress associated with it?
4) Credit Worthiness – Investors must evaluate how likely they are to get their money back
5)Tax Equivalent Yield – An investor must compare apples to apples by calculating upfront what interest rate must be received on a taxable bond to earn the equivalent tax-free yield.
No one knows where interest rates will be in the next few years. What is known instead is that, if investors buy a tax-free bond paying 4% and hold it until maturity, they will receive an attractive tax-free income. In fact, that tax equivalent yield will be 8% if the investor is in a 50% combined federal and state tax bracket. At maturity, as long as the issuer remains in good standing, the principal will be repaid in full.
About Lantern Investments, Inc.
Based in Melville, NY, Lantern Investments, Inc. is a wealth management firm that educates and guides multi-generational clients to achieve their financial goals by managing risk, growing assets and preserving wealth. The firm has offices in Westbury, NY, Chicago, IL, Houston, TX, San Francisco, CA and Hoboken, NJ. For more information call (631) 454-2000 or visit http://www.lanternwealth.com
About Keith Lanton
Keith Lanton is the President of Lantern Investments. He works with clients to develop optimal asset allocations and investment portfolios that factor in the clients risk profile and income needs. He has appeared on financial radio shows, been quoted in newspapers and industry publications and also served on numerous investment panels and forums. He can be reached at keith@lanterninvestments.com
Source URL: http://www.releasewire.com/press-releases/release-606807.htm
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6/22/2015 - Cybersecurity is Not Just for the Big Firms
By Wendy Lanton
While almost all broker-dealer and investment advisory firms recognize they need a plan to deter, prevent and detect cyber invasions, most advisors don’t seem to realize the vital role they play.
Simple steps can make the difference between keeping client data secure and suffering a cyber attack
4/21/2015 - Establishing a Sound Corporate Culture Can Alleviate Compliance Problems
By Wendy Lanton
Corporate culture is a top down approach. Management at member firms should take a close look at their corporate culture to ensure that what is being preached is actually being practiced.
4/06/2015 - This April Don't Be Fooled by Your Brokerage Statement
Melville, NY -- (ReleaseWire) -- 04/06/2015 -- "Don't judge a book by its cover and your investment performance by its brokerage statement!" cautions Keith Lanton, President of Lantern Investments.
Lanton warns that investors continue to inaccurately assess the performance of their investments, especially around this time of the year, tax season, when they review their 1099 Form.
4/03/2015 - Money Fix: Stock market correction on horizon?
By Sherly Nance-Nash. Special to Newsday
3/09/2015 - Zero-coupon bonds offer certainty
By Keith Lanton
Holding tax-free municipals to maturity can make otherwise skittish investors more confident
The only certain thing about investing is uncertainty. That theme was validated last year and humbled the wise men of Wall Street. Seventy-two out of 72 economists polled predicted that interest rates would rise. Yet the 10-year Treasury yield fell to 2.20% from 3.00%. In addition, none of the economists foresaw the price of oil tumbling to under $60 a barrel from $110, yet it did.
1/28/2015 - Don’t Give up Your FINRA License
By Wendy Lanton
Lately, registered representatives at FINRA registered broker dealer firms seem to be quickly heading for the doors to join RIA firms.
1/08/2015 - Tax-Free Zeros Shine Amid the Bond-Market Blahs
By Keith Lanton
Zero-coupon tax-free bonds may offer the best investment opportunity in today’s fixed-income market. Intermediate- and longer-term tax-free zeros are currently yielding about 20% more than comparable coupon-paying bonds. For example, an investor in a high-tax state can earn 3.50% to 3.75% on a 20-year tax-free muni. A client in a high federal and state tax bracket could see a tax-equivalent yield of 7.00% to 7.50%.
12/28/2014 - Money Fix: 5 ways to invest like a pro
By Sheryl Nance-Nash. Special to Newsday
11/24/2014 - The Dreaded Annual Compliance Questionnaire
By Wendy Lanton
It's that time of year when the compliance department hands out the annual compliance questionnaire. It comes with an overwhelming sense of anxiety to many advisors even if they have nothing to fear. Why is it so dreaded? Here are the top five reasons why it is so feared:
4/23/2013 - Truth and Investing
3/06/2013 - Advisers warn bond rally maybeover
By Ted Phillips ted.phillips@newsday.com
2/04/2013 - Jonathan A. Heimowitz Joins Lantern Investments As Senior Vice President of Investments
12/15/2012 - The #1 Mistake Wise Bond Investors Make
By Sal Favarolo
The Federal Reserve, in keeping with its dual mandate of pursuing full employment and stable prices, has been conducting aggressive monetary policy driving interest rates to historically, low levels. This action by the Fed has resulted in large gains in bond prices. As such, most bonds are now trading at what is referred to as a “premium”.