By Douglas Goldstein, CFP®

It’s the end of the year again, and the stores have started advertising their January sales. But right now, your job is to review your portfolio to see if there are any changes that should be made before the current tax year ends.

Savings Goals
Are your long-term and short-term goals the same as they were last year? If your goals are both time and dollar specific, it’s easy to tell whether you are on target to meeting them.

Does the savings component of your financial plan include tax-deferred pension plans? The pension companies will soon send out annual statements. Review the details of your pension plan to determine if the division of funds among the saving and insurance components of the plan is still relevant for your current stage in life.

Asset Allocation
Once you’ve put money into savings, your work isn’t done; now you need to make sure it’s invested properly. As the market and the balance of your portfolio change, you need to recheck the ratio between the different areas of your portfolio regularly to make sure that all is in order. Often funds can change focus, and you’ll need to rebalance your portfolio. A stock that does extremely well (or poorly), can also affect your portfolio’s balance.

Review your winners and losers
Before selling stocks/funds and actualizing profits, ask your accountant about the tax ramifications. Depending on your situation, it may be wise to hold onto investments for at least one whole calendar year, to qualify for the long-term capital gains rate. While tax ramifications shouldn’t be the only factor in determining when to sell, they certainly need to be taken into consideration.

Time the purchase of mutual funds
Many mutual funds distribute capital gains during December. No matter how long you’ve held the fund, you must pay capital gains tax on your distribution. Therefore, leverage your ownership of funds, and purchase them the day after their annual distribution.

Before you retire your 2009 calendar, take a moment to review the past fiscal year. Your financial plan needs to evolve with your changing lifestyle. If your savings plan and/or the market swerved off course, adjust accordingly.

Douglas Goldstein, CFP®, 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, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.

By Douglas Goldstein®

Though there are many reasons for people living in Israel to own dollars, many people have expressed concerns about the drop in the value of the currency. Much of the world uses the U.S. dollar as its “reference currency,” meaning that they measure their wealth in terms of dollars. Americans living in Israel often still have a business and emotional connection to their native greenbacks. As the currency of the world’s most powerful economy, it makes sense for people to have some exposure to it.

But major world leaders have begun suggesting a different paradigm. China, Russia and Brazil have suggested creating a new global reserve currency. China, which has been the biggest buyer of U.S. Treasury bonds, has admonished the United States for lack of fiscal responsibility. And several non-U.S. central banks have announced their goal to diversify their reserves away from the dollar. All these developments have weakened the dollar and have caused a drop in Treasury prices.

Talk is Cheap
With all their declarations, though, it’s interesting to note that some of these big talkers are not putting their money where their mouth is. For example, in June, the Treasury sold $100 billion of bonds to foreign entities, a new monthly record [Source: Department of Treasury, Haver Analytics, FMRCo (MARE) as of 7/31/09]. If China, for example, and the other big Treasury buyers were no longer interested in U.S. bonds, shouldn’t we have seen an abatement in the size of their investments? That being said, with changes in U.S. economic policy, it would be responsible for foreign banks to diversify to some extent.

Should You be Like a Central Bank?
Though an individual’s concerns are not the same as those of a government, it’s important to examine your own diversification. No matter what currency you choose to be in, you are making a bet. For those people that want to limit their risk, though not eliminate it, it often makes sense to spread out the risk using a variety of different types of asset classes and currencies. Speak to your financial adviser to examine your situation.

Douglas Goldstein, CFP®, 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, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.

By Douglas Goldstein, CFP®

Have your grandparents ever reminisced about the good old days, when it cost a penny for a treat? Over time, prices of goods increase, but historically this has been paralleled by an increase in salary. Traditionally, a salaried worker’s periodic raises help maintain purchasing power. However, the problem arises when one lives on a fixed pension. If a pension doesn’t increase as the cost of living increases, then over the long term, the purchasing power of the pension decreases. This means that even though a retiree receives a check for the same amount, and buys the same groceries, his refrigerator won’t be as full.

For seniors dependent on social security, it’s important to note that at the end of September the American government announced that social security recipients won’t receive a cost of living increase in their monthly checks for the next two years. This is a radical change in policy, given that the American government has been adjusting monthly checks since the high-inflation 1970s. The adjustments will end because the government projections for the CPI (consumer price index – upon which adjustments are made) show that it is expected to decline over the next two years.

The CPI is a broad index designed to measure the cost of living. However, the products and services used in the calculation may not reflect an individual’s lifestyle. While the CPI may be down, the price of health care (a service most seniors need) continues to rise.
This is bad news for those who rely on American social security payments to help pay their bills. These people will have to figure out how to live on less.

This change in policy should serve as a wake up call for the rest of us: Make sure your pension payments are linked to inflation and/or have a cost of living increase built into them. And second, even if you have a “guaranteed” periodic adjustment, don’t trust it! Make sure you have a diversified set of pension and retirement income sources.

The U.S. government is not (yet) defaulting on social security, but it is taking something as American as apple pie and changing the recipe. Nothing is guaranteed.

Douglas Goldstein, CFP®, 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, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.

By Douglas Goldstein, CFP®

When you hear people talk about “living off the interest from their investments,” chances are that their portfolios include bonds. This is because bonds are “fixed-income” securities – they provide a steady stream of revenue to investors who agree to hold them for a predetermined period of time.

Bonds are essentially loans to organizations. The principal that the investor puts in is repaid on the maturity date of the bond. The amount due on maturity is known as the bond’s “face value.” Until maturity, fixed interest payments, also known as “coupon payments,” are made at set periods of time, usually every six months.

Why Buy Bonds?
There are two main reasons to include bonds in your investment plan. First, bonds are generally considered to be less volatile than stocks. While stocks may fluctuate unpredictably, high-quality bonds can usually be counted on to return the principal. The default rate on high-quality bonds is very low, which means the issuer will most likely be strong enough to return the face value to you upon maturity of the bond.

Secondly, bonds are an income-producing investment, meaning they provide a dependable flow of income. As opposed to stocks, where you often need to sell your shares in order to receive money (unless the stock pays a dividend), you can maintain your bond holdings and still see an inflow of cash.

Bond Strategies
Bond payment schedules can be designed to deliver income according to individual needs. This is useful for people living on fixed budgets who rely on their bonds’ interest payments to help meet their expenses. By “laddering” bonds to be due when you need money, you can create an income stream that matches up with your cash-flow needs.

Though a bond ladder may not always give you the highest possible return on the fixed-income portion of your portfolio, it is a smart strategy for people who want to try to protect themselves against swings in interest rates and desire predictability in their fiscal lives.

Douglas Goldstein, CFP®, 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, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.

By Douglas Goldstein , CFP®

When I participated in Maslulim’s advanced driving course (www.maslulim.co.il), the first thing I noticed was their slogan hanging on the wall: “Changing the driving culture in Israel to personal responsibility and cooperation.” Maslulim teaches that every driver must focus not only on his own situation, but must work together with others around him. I realized that the same motto could be hanging in my office. As a financial planner and investment adviser, I often direct clients to take control of their money, and to combine forces with their family and advisers in order to have a safe financial journey.

Look over there!
In order to allow drivers to respond better to an emergency, Maslulim’s trainers insist on drivers looking further ahead than they are accustomed. When walking, individuals often pay attention to only five meters ahead them. Unfortunately, when driving, they also only look a few meters ahead. However, when sitting behind the wheel, people have to look way into the distance to help them anticipate what might happen. This increases their response time. In fact, one study showed that the vast majority of accidents could be avoided if drivers had reacted one second earlier. In heavy traffic, you can even look through the windshield of the car in front of you in order to know what to expect.

Like average drivers, most folks focus on the short term in planning their investments. They think so much about paying the next bill that they don’t look further down the line to see what they’ll need next year, in five years, or in twenty years. Then, when those points come near, they have no time to plan and end up failing. If investors spent more time now thinking, they might be able to avoid the accidents that occur with last-second decisions.

If you want to have a successful financial future, you must take responsibility for your own situation, and work in cooperation with your family and professional team. And, if you really want to make an improvement in your life, be sure to take the advanced driving course at Maslulim. Drive and invest safely!

Douglas Goldstein, CFP®, 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, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.