Archive for July, 2008

Ending the Month Doesn’t Mean All is Well

Published July 27, 2008 Financial advice 1 Comment
By Douglas Goldstein, CFPâ

Just because all your bills have been paid and your bank balance is in the plus at the end of the month, this doesn’t mean you’re financially set.  This is because there’s a difference between short-term fiscal accountability and long-term financial responsibility.  Certainly, making it to the end of the month is a good beginning. But it’s only a beginning.

Pay yourself first

Paying into a bituach minahalim plan is great, but since pensions aren’t always guaranteed and don’t always grow with inflation, you should have another source of retirement income.  Make sure to pay into your savings plan along with your grocery store bill at the end of every month.

How do you motivate spenders to save?

Live beneath your means.  The only way people can save is to live slightly below their means, and be content doing so.  While this is easier said than done, the alternative (outliving your money) provides powerful motivation. Just like you can’t have your cake and eat it too, don’t consider yourself entitled to spend your whole paycheck just because you earned it.

How much money should you save on a monthly basis?

There’s no fixed sum that can be recommended for all people in all situations.  Save the maximum allowable under your bituach minahalim and other tax-free saving options.  Then, consult your financial plan to see how much you need to accumulate in order to reach your fiscal goals.  Develop an asset allocation model and appropriate savings plan to reach your target.

Plan ahead

Save today, because you don’t know what tomorrow will bring.  A millionaire once told me he still feels the need to save, since he doesn’t know what the morrow will bring.  Since no one can predict the future, your best bet is to be as prepared as possible. 

Your savings account is an important part of your financial future.  While you maintain your various taxable and tax-free savings programs, don’t neglect other important pieces of your fiscal future: your emergency fund, life insurance, disability insurance, and long-term health care.

Douglas Goldstein, CFPâ, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc. Member FINRA(formally NASD), SIPC, MSRB, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book, Building Wealth in Israel: A Guide to International Investments and Financial Planning, (with a guest chapter on taxation by Leon Harris, International Tax Partner, Ernst & Young) is available in bookstores, on the web, or can be ordered at: www.profile-financial.com, (02) 624-2788 or (03) 524-0942. Building Wealth in Israel, ISBN 193268784X 308 pages

U.S. Stock Market: Is it 1926?

Published July 20, 2008 Finance , Financial advice , Israel , Money management 1 Comment
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By Douglas Goldstein, CFPâ

I don’t want to age you, but do you remember the crash of the U.S. stock market in 1926? How about 1933?

I just picked up a great piece about the five best historical periods to enter the U.S. stock market. As always, past performance is no guarantee of future returns, but it certainly was interesting to note that in the three years that followed the drop of 1926, and in the three years after the 1933 market fall, U.S. stocks (as represented by the S&P 500 index) shot up by 176% and 195% respectively.

I showed Sandy Ohana, my office manager, the short article and she commented, “I guess people really thought the stock market had gone on sale, so they went shopping.” Why do people frequently buy stocks when they are trading at highs? It’s because of an unusual psychology that gives them a sense of comfort to jump on the bandwagon. In fact, however, the smart move is to invest when the market has suffered losses.

Take a look at your own financial plan and see if it’s appropriate for you to own stocks. If so, consider that this year, 2008, the market had its worst calendar-year opening in 75 years. It fell over 9% in the first two months. That was the worst start to a calendar year since 1933 (-17%). But then again, after the 1933 collapse, the market rallied strongly. Could that happen again? Only time will tell.

Who knows if the stock market has reached its bottom? Keep in mind that when the markets fall, there are often good investment opportunities before the market recovers. So speak to your financial adviser to see if he suggests that you go bargain hunting. If you’d like to read the article about the “Five Best Periods to Enter U.S. Stock Market,” call and we’ll send you a copy.

Douglas Goldstein, CFPâ, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc. Member FINRA(formally NASD), SIPC, MSRB, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book, Building Wealth in Israel: A Guide to International Investments and Financial Planning, (with a guest chapter on taxation by Leon Harris, International Tax Partner, Ernst & Young) is available in bookstores, on the web, or can be ordered at: www.profile-financial.com, (02) 624-2788 or (03) 524-0942. Building Wealth in Israel, ISBN 193268784X 308 pages

Fannie Mae/ Freddie Mac – Day 1

Published July 17, 2008 Financial advice Leave a Comment

Expectations Versus Reality

The day after the Fed and the Treasury announced their plan to support the two mortgage giants, early investor confidence turned to investment reality. The shares of both companies were up approximately 20% in pre-market trading. However, prices declined through the balance of the day with Freddie Mac closing at $7.11 down 8.94% on the day. Fannie Mae followed the same path closing at $9.73 while losing 5.07% for the day.

Things started equally well on the bond side as Freddie Mac looked to raise $3 billion in three and six-month paper. Demand for the notes exceeded expectations; leading yield spreads between comparable treasuries and agency paper to narrow by 5 or 6 basis points earlier in the day. The early morning euphoria quickly dissipated as spreads closed the day 3 basis points wider than the previous close.

It is clear that bondholders are in much better economic position than shareholders. Secretary Paulson has talked about acquiring congressional approval to purchase equity interest in the company that has operated as a growth company sponsored by the government – is that a classic definition of an oxymoron? Shareholders will of course be diluted and regulators will begin their process of tightening regulatory guidelines and limiting the future growth of the company. Citing uncertainty regarding the potential for future credit losses Merrill Lynch reduced Freddie Mac’s price target from $20 to $7 and concurrently reduced Fannie Mae’s from $22 to $9 in an otherwise bold move.

Stay tuned.

Bob Andres

Chief Investment Strategist

This perspective is provided for informational and educational purposes only. It is not intended as and should not be used to provide investment advice and does not address or account for individual investor circumstances. Investment decisions should always be made based on the client’s specific financial needs and objectives, goals, time horizon and risk tolerance. The statements contained herein are based solely upon the opinions of PMC. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Information was obtained from third party sources,

which we believe to be reliable but not guaranteed. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.

© 2008 Portfolio Management Consultants | 35 East Wacker Drive, Suite 1600, Chicago, IL 60601

The Current Economic Situation: Risk Taking Under Siege

Published July 17, 2008 Finance , Financial advice , Israel , Money management Leave a Comment
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If Yogi Berra were asked to give his views on the current economic environment one can hear him say, “This is like deja vu all over again.” The first quarter was characterized by fear, uncertainty and a financial system that came close to a complete breakdown. The second quarter, supported by the Fed’s unprecedented policy initiatives in late March, saw the first tentative indications of market stabilization.

The first two weeks of the third quarter have seen a re-emergence of uncertainty, volatility and fear that characterized aspects of the first quarter. The Fed and the economy continue to face a handful of overlapping multi-dimensional issues including the broad housing crisis, surging energy costs, the threat of escalating inflationary expectations, a declining dollar, a slowing global economy and a financial/credit system under significant strain. It is and has been our view that the epicenter of our current difficulties is the declining housing market. If housing prices continue to decline, the value of mortgage portfolios will also decline causing additional write-offs by financial institutions. This in turn would lead to further job losses, more pressure on consumer confidence, and deepen the credit pressures that already exist. Potentially, exacerbating this situation is the lack of transparency as to who owns what in specific institutional portfolios. It also leaves unclear whether these portfolio are appropriately valued.

Subprime paper has received most of the attention and focus undermining the understanding of the inherent risks associated with Alt-A and Option-Arm paper. Federal regulators seized IndyMac, the twelfth largest mortgage lender in the U.S. on Friday. IndyMac specialized in Alt-A loans, otherwise known as “no doc” loans. These loans allowed potential borrowers not to fully disclose their incomes or assets. The Alt-A segment of the mortgage market dwarfs the subprime component. The Option-Arm and Subprime sectors are thought to have an equivalent amount of paper outstanding. Options-Arms structures provide borrowers with four options: minimum payments, interest only, full principal and interest payments, and accelerated principal and interest payments. Most borrowers opt for the minimum payment structure, which allows the borrower to make a small monthly payment with the unpaid segment added to the loan balance. The combination of unpaid balances and falling home price has left many borrowers with negative equity in their homes.

We are not surprised by the current re-emergence of heightened volatility and uncertainty. We do not downplay the role surging energy costs play both economically and psychologically. We do reiterate our beliefs that declining home prices and home price affordability are critical to long-term economic growth and rational risk pricing and risk taking. At the end of March 2008, home ownership rates were 67.80% and had declined from the high of 69.20% in December of 2004. We suggest that a return to percentages that prevailed in the late 1990′s (65.50%) would be very supportive of the broad housing market. Until we see stabilization in these areas, we expect a continuation of volatility and uncertainty and a concern for risk taking. Yogi would simply put it this way “it ain’t over till it’s over.”

Current Views
  • Economy – Last weeks May trade balance surprised the street when the gap narrowed to $59.8 billion from $60.8 billion. Exports rose approximately 1.0%. The fact that net exports increased strongly suggests that GDP for the second quarter will be higher than previous street estimates. Current estimates – 2 ½% to 3.0%
  • Equities – Expect volatility to continue with limited upside until housing prices stabilize. Financial stocks even at these depressed levels are a risk until the threat of more write-downs has abated.
  • Bonds – The bond market is the beneficiary of the problems currently facing the economy and the equity market. The concept of a “flight to quality” is back in vogue. Bond valuations are supported by the strong likelihood that the Fed is on hold through the end of the year.
  • Oil – Eventually the global slowdown will affect oil prices. The supply/demand curve is shifting to such an extent that it’s hard to justify current prices.
  • Inflation – We expect headline inflation to move above 5.0% during the summer. We expect core inflation to hover slightly above the Fed’s comfort zone of 1 ½% to 2.0%. We believe that there are merging deflationary forces led by the real estate decline, moderating money supply growth, and a broad slowdown in global growth, which will reign in inflation over the near-term.
  • We were encouraged by Chairman Bernanke’s comment linking the weak dollar with an “unwelcome rise in import prices and consumer inflation.” The dollar has been relatively stable since he has made those comments. We do not foresee any fundamental changes in the administration’s long held position of benign neglect regarding the dollar.

Treasury/Fed announcement regarding Fannie Mae and Freddie Mac – Sunday, July 13, 2008 The Fed and Treasury Department announced on Sunday a plan designed to support both Fannie Mae and Freddie Mac. The Fed has in effect offered the mortgage giants access to a discount window through the Federal Reserve Bank of New York. The exact language stated “should it prove necessary.” The discount structure being utilized was put in place in late March as the Fed attempted to provide liquidity and reduce disruptions in the financial markets. Fannie and Freddie Mac would pay 2.25%, the same rate that commercial and investment banks are currently being charged. The Treasury is seeking additional authority from Congress to expand current lines of credit and to possibly make equity investments in both companies.

Issues to watch today -
  • Watch the reception Freddie gets as it attempts to raise $3 billion at auction in three and six month securities.
  • Investor reaction to the package – this is not how an implied guarantee of the U.S. government was thought to work. Investors may question the entire notion of implicit guarantees.
  • Financial stocks should come under additional pressure. Expect to see additional commentary from PMC on Fannie and Freddie as information becomes available.

Bob Andres

Chief Investment Strategist

This perspective is provided for informational and educational purposes only. It is not intended as and should not be used to provide investment advice and does not address or account for individual investor circumstances. Investment decisions should always be made based on the client’s specific financial needs and objectives, goals, time horizon and risk tolerance. The statements contained herein are based solely upon the opinions of PMC. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Information was obtained from third party sources, which we believe to be reliable but not guaranteed. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.

© 2008 Portfolio M

Managing Your Finances: Look Forwards, Not Backwards

Published July 16, 2008 Financial advice Leave a Comment
By Douglas Goldstein, CFPâ

When it comes to managing money, procrastination is one of the most common causes of failure. Postponing investing can actually mean losing money. As many financial decisions aren’t fun and can be stressful, they are readily pushed off. But while ignoring your finances may be tempting, the longer you ignore them, the further behind you get. Have you ever procrastinated balancing your checkbook, so that by the time you get around to it, the scribble on the check stub and/or receipt is a total mystery?

Depending on your situation, financial procrastination could either make or break your bank account.

Rule of 72

The “Rule of 72″ is a simple way to estimate how your money may grow. Divide 72 by the interest rate you expect to earn. This number will tell you how many years it will take to double your money.  Then, divide 72 by the number of years in which you want your money to double. This figure is an estimate of the interest rate you’ll need to earn in order to double your nest egg within your desired time.

The horizon is always in front of you

Don’t be discouraged if the path to saving seems long. Take a look at the horizon – doesn’t it seem as if you can just reach out and touch it? Yet, as you get closer, it appears to move further away. But, when you turn around, you can see how far you’ve come. It’s the same with investing: the end goal may seem unreachable, but regular contributions to your accounts can build up rapidly. It may be difficult to see your progress if you only look forward. Periodically re-evaluate your savings program, and hopefully you’ll be able to measure your concrete movement toward achieving your goals.

Douglas Goldstein, CFPâ, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc. Member FINRA(formally NASD), SIPC, MSRB, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book, Building Wealth in Israel: A Guide to International Investments and Financial Planning, (with a guest chapter on taxation by Leon Harris, International Tax Partner, Ernst & Young) is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942. Building Wealth in Israel, ISBN 193268784X 308 pages

“Can You Buy Me…?”

Published July 7, 2008 Financial advice Leave a Comment
By Douglas Goldstein, CFPâ

Recently my son wanted to watch a soccer game, and he asked me why we don’t have cable television.  I explained that I didn’t think the benefits of TV were worth the monthly cost.  Another child who overheard this conversation remarked, “We could have a family pizza dinner twice a month for the same money.”  Another child commented, “With the money saved from not paying cable, we could save and go on vacation.”  I pointed out, “We could also make sure everyone has food to eat.”

This conversation reminded me of the different approaches people have toward money: to be used for necessities, spent on instant gratification or saved for short- and long-term goals.

When a child’s every wish is taken care of, it is difficult to teach the concept of prioritizing needs and wants.  However, if children don’t learn about fiscal responsibilities, they will grow into fiscally irresponsible adults.  Instant gratification feels good at the moment, but before you make an impulse purchase contemplate whether that good feeling will still be there when the credit card bill comes at the end of the month.

It’s hard to watch parents give into their children’s material requests knowing they don’t have the means to purchase them.  It is also difficult to watch parents say no to their children’s requests because they can’t afford them.  However, the second scenario may be better, since even though the original request isn’t met, the child might walk away from the encounter with the knowledge of how the real world works.

Managing finances is a balancing act: your income can only be divided among so many priorities.  It is up to you to decide which pieces are more important and where your hard-earned money should be spent.

Taking care of your family’s necessities extends beyond putting food on the table.  It means planning for your immediate, short-term and long-term goals.  While my son won’t watch the game tonight, he will have a nutritious dinner.  And one day he’ll have a family of his own and will decide the best way to save/spend his own money.

Douglas Goldstein, CFPâ, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc. Member FINRA(formally NASD), SIPC, MSRB, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book, Building Wealth in Israel: A Guide to International Investments and Financial Planning, (with a guest chapter on taxation by Leon Harris, International Tax Partner, Ernst & Young) is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942. Building Wealth in Israel, ISBN 193268784X 308 pages

Is There a “Recess” in “Recession”?

Published July 7, 2008 Financial advice Leave a Comment
By Douglas Goldstein, CFPâ

 

When the financial reports predict a recession, it’s natural to want to take a vacation from the news.  But if we look beyond the current slowdown, it’s possible to think about profiting from the changes in the economy.  Specifically for investors: don’t worry about whether the economy is in a recession, but consider to what extent the stock market may have already discounted economic weakness.

 

Boil a frog

 

It’s said that if a frog is placed in boiling water, it will jump out; but if it’s placed in cold water that is slowly heated, it will never jump out. Rather than actually simmering a frog, consider the lesson of this analogy: make yourself aware of gradual change before suffering a catastrophic loss.  This is easier said than done in the stock market, since it usually takes about six months after a recession has begun before it gets officially diagnosed. So like the frog, you may hardly know that you have a problem until you’re halfway cooked.

 

Economic recessions sometimes, but not always, coincide with stock market drops. In fact, in the 1980 and 1990 U.S. recessions, the market (represented by S&P 500 Index) hit its low before the recession was officially announced. Therefore, it might have been wise to buy into the market after hearing the announcement. In today’s down market, when a recession hasn’t been officially announced, what should you do?  Since past performance isn’t a guarantee of future returns, you can’t just say, “Well it happened before, so it will happen again.” On the other hand, if you’re looking for a reason to enter the market, and have a long-term outlook, speak to your financial adviser to determine whether you should be investing despite the recent economic woes.

 

For more information about recession investing, contact us and ask for a copy of the report, “Has the U.S. Stock Market Discounted a Recession?”

 

Douglas Goldstein, CFPâ, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc. Member FINRA(formally NASD), SIPC, MSRB, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book, Building Wealth in Israel: A Guide to International Investments and Financial Planning, (with a guest chapter on taxation by Leon Harris, International Tax Partner, Ernst & Young) is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942. Building Wealth in Israel, ISBN 193268784X 308 pages

When is the Best Time to Buy Stocks?

Published July 7, 2008 Financial advice Leave a Comment
By Douglas Goldstein, CFPâ

If you went back in time and didn’t know what the future held, would you have bought stocks and increased your market holdings during:

The OPEC Oil Embargo of 1973 – When oil prices shot up, would you have bought stocks, or would you have said, “With oil so expensive, no companies will be able to make any profits”? If you had invested, you may have found that after some short-term losses you would have probably enjoyed huge gains in a well-diversified portfolio.

The Iran Revolution and oil crisis of 1979 – You might’ve said, “Why invest in stocks when the world is on the verge of a major war?”  But though you would have been correct in the short-term, the jitters of the world’s stock exchanges were relatively minor and short-lived.

The U.S. Recession of 1980-1982 – How could you justify buying stocks when America’s economy was melting? True, things were down in the short term; but as the numbers began to pick up, the stock market rose, too. Beginning to see a pattern?

In 1990, the U.S. Savings and Loan Crisis was followed by a recession. Two years later, Britain’s currency devalued, followed by the crumbling of the Mexican peso and the Asian financial crisis of 1997.  Afterwards, the tech bubble burst, and America experienced another recession.  Since then, the markets suffered from 9/11, SARS, the Iraq War, and we’re still reeling from the sub-prime mortgage crisis.

Is it better now?

Despite the daily headlines, remember that in the last quarter of 2007, six out of the 10 major market sectors posted double-digit earnings growth. Since past performance is no guarantee of future returns, the key point to remember is that short-term traders often get hurt, but long-term investors can ride through the rough markets and often achieve success. Send an e-mail to information@profile-financial.com if you’d like more comparisons between long- and short-term turmoil in investing.

Douglas Goldstein, CFPâ, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc. Member FINRA(formally NASD), SIPC, MSRB, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book, Building Wealth in Israel: A Guide to International Investments and Financial Planning, (with a guest chapter on taxation by Leon Harris, International Tax Partner, Ernst & Young) is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942. Building Wealth in Israel, ISBN 3268784X 308 pages

Paying Off Debt

Published July 7, 2008 Financial advice Leave a Comment
By Douglas Goldstein, CFPâ

Most people feel there’s little risk involved with paying off debt.  Once the debt is paid, it’s gone.  But, the flip side of repaying debt early is that by putting every penny aside toward making payments, you might not have the necessary liquid funds if and when you really need them. 

If you pay off your debts early, consider the opportunity cost: When your pocketbook is empty because you paid your debts, a good investment opportunity might present itself and you won’t have available funds to invest.  Another factor to consider in early payment is taxes.  Interest paid on some debts (i.e., American mortgages) are tax deductible in the U.S., while in Israel, mortgage interest normally cannot be used as a tax deduction.  Depending on your tax bracket, it may be profitable for you to pay off existing loans.  In considering your choices, speak with a qualified financial planner, tax adviser or accountant.

When debating whether to pay off debts or invest, remember this key point: Paying off debts has a guaranteed rate of return as compared with the market’s variable rate of return.  In other words, if your bank charges 15% on your negative balance, then by lowering your balance, you save 15% annually.

Maintaining debt

Debt isn’t cheap.  Staying in debt costs you more than the monthly interest on your loan/mortgage.  To quantify the true cost of debt, subtract your loan’s interest rate from the potential profit you might have made on an investment. If you choose to invest, then select an investment that hopefully will return more than the loan’s interest rate.

Is a penny saved really a penny earned?

Ben Franklin extols the benefits of saving, but sometimes it might be more prudent to spend your money paying off debt than placing money in investments.  The decision to pay off debt shouldn’t be viewed as running away from the market; this choice might provide you with your highest actual return.

Douglas Goldstein, CFPâ, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc. Member FINRA(formally NASD), SIPC, MSRB, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book, Building Wealth in Israel: A Guide to International Investments and Financial Planning, (with a guest chapter on taxation by Leon Harris, International Tax Partner, Ernst & Young) is available in bookstores, on the web, or can be ordered at:

www.profile-financial.com (02) 624-2788 or (03) 524-0942. Building Wealth in Israel, ISBN 193268784X 308 pages.

The Apple Doesn’t Fall Far From the Tree

Published July 2, 2008 Finance , Financial advice , Israel , Money management Leave a Comment
By Douglas Goldstein, CFPâ

The most important lessons our children learn aren’t what we consciously teach them, but what they pick up from observing our daily behavior. It’s therefore reasonable to assume that our children’s approach toward money will closely resemble our own. Do both you and your children have good saving – spending – habits?

Effective money management doesn’t mean putting every penny in the bank. Rather, it means prioritizing needs and wants.  When a child knows what his limits are, he can learn to prioritize and set short- and long-term goals.

Spend less than you earn

Children need to learn that although their parents will do their best to take care of their needs, sometimes their desires won’t be met. Even if parents could afford to buy every toy on the market, having a closet overflowing with toys may not be in their children’s best interest.

Money is a useful tool, not an end in and of itself. Just because one has money, that doesn’t mean it needs to be spent. Sometimes window-shopping is better than lugging home heavy shopping bags.

Savings is important

Let your children know that you are putting away a set sum of money for the future. Explain to them the purpose of an emergency fund.  Describe what your ideal retirement looks like and how, by foregoing a purchase today, you hope to build a solid nest egg for tomorrow.

Saving is important, but so is charity

Teach your child to consider others when they receive income or gifts. Placing a tzedakah box next to the piggy bank demonstrates the importance of money as a tool that can help others.  Many parents choose to discuss with their children where they make charitable donations and why.

Learning about investing

Explain to your child the difference between saving and investing. The internet has many investment simulation games. These fantasy stock games can be a good basis for the whole family to get involved in financial discussions. And best of all, these games can demonstrate the volatility of the markets and the idea of market timing without risking (and losing) a cent. 

Hopefully the examples you set by wise money management will help set the tone for a generation of money smart and savvy investors.

Douglas Goldstein, CFPâ, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc. Member FINRA (formerly NASD), SIPC, MSRB, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book, Building Wealth in Israel: A Guide to International Investments and Financial Planning, (with a guest chapter on taxation by Leon Harris, International Tax Partner, Ernst & Young) is available in bookstores, on the web, or can be ordered at: www.profile-financial.com, (02) 624-2788 or (03) 524-0942. Building Wealth in Israel, ISBN: 193268784X 308 pages