Socially Responsible Investing: Handle with Care

Weigh Personal Fundamentals Against Socially Conscious Aims

It seems as though everywhere you look, things are turning green. Terms like sustainable, environmentally friendly, and socially responsible have entered the national consciousness and are forming the basis for a growing number of personal investment decisions. For example, more than $1 out of every $10 under professional management in the United States is invested according to socially screened criteria.1

To be sure, many investment opportunities may appeal to your desire to do something socially responsible with your portfolio. And if you’re interested in steering your money toward a particular cause or away from organizations or practices that you disapprove of, that’s great. However, it’s also important not to allow this desire to outweigh the other factors that must be considered when making investment decisions.
Is It a Good Fit?

Investments that meet socially responsible criteria can be a positive addition to your portfolio as long as they are appropriate for your situation. For example, alternative energy is still a fairly young industry; many of the key players are start-ups that may not have a solid earnings record — or any significant earnings at all. These types of investments are generally more appropriate for investors with a high risk tolerance.

Like all investments, socially responsible investments entail risk, could lose money, and may underperform similar investments not constrained by socially conscious criteria. It’s important to consider your time horizon, net worth, and whether the potential return is worth the extra risk.
What Is It?

Billionaire Warren Buffett famously said that he invests only in companies that he understands. The universe of socially responsible investment opportunities is diverse, so it’s important to understand what companies are available and what their objectives are. Most socially responsible investments fall into one of these popular categories.

Green investments are associated with companies that develop products and services to help protect or improve the environment.

Faith-based investments tend to avoid companies with products, services, or practices that violate certain core beliefs or religious principles. Rather, they seek out companies that are more closely aligned with certain moral or ethical standards.

Community investing is focused on making loans and capital available to underprivileged communities for affordable housing, child and health care, and business start-ups.

If you are interested in socially conscious Naperville investment services, we can help make sure that your decisions are based not only on your beliefs but on sound investment principles as well.

1) Social Investment Forum Foundation, 2009

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.

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Put Your Business in Agreement

Buy-Sell Agreements Can Help Smooth Transitions

Business owners are good at long-range planning, according to recent research. Actually, it might be the other way around: People who naturally have a long-range outlook tend to make good business owners. Surveys have found that a common trait among small-business owners is the ability to focus on the future, and that family businesses may be better positioned to weather economic downturns than non-family-owned businesses because of their ability to take a long-range approach.1–2

Although you might know with equal certainty what you are going to do tomorrow and what you intend to do years from now, life can step in and hand you a surprise. You may be able to plan for that eventuality by putting together the appropriate buy-sell agreement, a binding contract that can help smooth the transfer of ownership, regardless of whether you were expecting to leave.
Find the Best One

Buy-sell agreements can be shaped to fit a business’s unique circumstances.

A cross-purchase agreement stipulates that the departing owner will sell his or her share of the business to the remaining owners.

A stock redemption agreement provides for the exiting owner to be bought out by the business itself.

A hybrid agreement combines elements of the first two; typically, the departing owner offers his or her share to the business first, then to the other owners.

Arranging for the business or the partners to buy out a departing owner is a good first step, but it’s meaningless if the sale is unexpected and the buyers don’t have the money. For that reason, it may be a good idea to fund a buy-sell agreement with life insurance and/or disability income insurance policies. The guaranteed liquidity from the policies can help prevent survivors from having to sell assets or borrow money.

The cost and availability of insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving insurance, it would be prudent to make sure that you are insurable. Any guarantees are contingent on the claims-paying ability of the issuing insurance company.

For Strategic Business Planning in Naperville, please contact us at 630-548-9600




1) Inc.com, July 1, 2010
2) GrowthBusiness.co.uk, 2009

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.

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Thats How You Roll

The amount of money Americans put into traditional IRAs has been steadily increasing, topping $300 billion for the first time in 2007 (according to the most recent data).1

Yet direct contributions have accounted for a declining percentage of the total amount of money flowing into IRAs. In 1996, 11% of IRA inflows was due to direct contributions; by 2007, direct contributions were responsible for only about 4% of new money in IRAs.2

If workers are contributing only $14 billion of the more than $300 billion going into individual retirement accounts, where’s the rest of the money coming from?
Meet the Rollover

An alternative method for investing in an IRA is through an IRA rollover, which can be used to transfer assets from a former employer’s retirement plan or another IRA.

When you leave an employer for another job or for retirement, it might be tempting just to withdraw your retirement plan assets, but doing so could be one of the costliest mistakes you ever made. Every dollar you withdraw is subject to ordinary income taxes; and if the sum is substantial, the extra income could force you into a higher tax bracket. Plus, if you are younger than age 55, your withdrawal may be subject to a 10% federal income tax penalty (with certain exceptions).

By contrast, a properly executed IRA rollover may help preserve the tax-deferred status of your retirement funds. Not only will you avoid a 10% tax penalty, but once you begin withdrawals in retirement, you can spread your tax liability over multiple years.

There are a number of reasons why you may want to transfer your money out of a former employer’s plan, but they all come down to greater control over your money.

    * Employer plans are an expense to the employer, who may not be interested in providing benefits to former employees. When you roll your money into an IRA, the custodian is directly accountable to you, not your former boss.
    * IRAs tend to offer greater investment flexibility. Employer plans typically have a limited number of investment choices and often don’t offer the opportunity to purchase individual securities (such as stocks and bonds). An IRA can be directed to purchase just about any qualifying investment.
    * If you have multiple retirement accounts, including multiple IRAs, you may run the risk of losing track of your money. When you consolidate the assets into a single IRA, it may be easier to make adjustments, reallocate, rebalance, or simply maintain a clear picture of your financial situation.

The critical element in any rollover is doing it correctly, which means you may need professional help. Otherwise, you could incur unexpected taxes and penalties. Contact us at 630-548-9600 for assistance with your Naperville IRA options.

1–2) Investment Company Institute, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.

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Four Steps to Get Your Finances Ready for the New Year

 About one year ago, 63% of Americans told pollsters they had resolved to improve their personal finances. In fact, saving money beat the usual self-improvements: exercising more, eating less, losing weight. The only resolution that rated higher than personal financial improvement was finding ways to relax and reduce stress.1

It’s not clear how well Americans fared with saving more money (the personal saving rate remained fairly level for the first half of the year).2 But these steps may help improve your financial situation and reduce stress.

Rebalance and Reallocate

It’s likely that some of your investments have performed at different rates over the past year, possibly leaving your portfolio overexposed to one asset class and underexposed to another. The process of rebalancing involves buying and selling securities to restore your portfolio to your target asset allocation. And if its been a while since you reviewed your asset allocation, now might be a good time to determine whether you need to shift your strategy. Asset allocation does not guarantee against loss; it is a method to help manage investment risk.

Revisit Your Beneficiaries

Are the people you have designated as the beneficiaries on your life insurance policies and retirement accounts still the ones you would like to see inherit these assets? Reviewing your beneficiary designations can help ensure that your intended heirs receive these assets. It’s especially important to revisit your beneficiary designations after a marriage, birth, divorce, or death in the family.

Check Your Credit Report

Because identity theft is a growth industry, it’s wise to check your credit report for evidence of fraud or any inaccuracies that may affect your creditworthiness. The three major credit reporting agencies are required by law to provide you with a free credit report once a year. Log on to www.annualcreditreport.com.

Consider Your Taxes

Reductions in tax rates on income, capital gains, dividends, and inherited assets (adopted by Congress in 2001 and 2003) had a December 31, 2010, expiration date. Because of the ever-changing tax landscape, this is a good time to reconsider some of your financial decisions, such as whether to realize capital gains, reevaluate the role of dividend-paying stocks in your portfolio, boost your contributions to tax-deferred accounts, and alter the timing of bonuses and tax payments.

You may not be able to perform these tasks on your own. We can help. Contact us at 630-548-9600 to learn all the options available to you regarding Naperville Financial Planning

1) U.S. News & World Report, December 24, 2009
2) Haver Analytics, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an
independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.

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Coverage Like an Umbrella

If you are like most people, you have some liability insurance coverage through your homeowners and automobile policies. But have your coverage limits kept pace with your exposure to risk? Are you making more money, living in a more expensive home, or holding more assets than you were a decade ago? Even if your income and net worth haven’t increased significantly over the past 10 years, consider this: Between 2001 and 2007, the average jury award for all liability cases increased by almost 62%.1

Although the risk of being hit with a multimillion-dollar judgment in a personal injury case is fairly low, so is the cost of owning adequate protection. An umbrella liability insurance policy may help add an extra layer of insurance coverage to your current risk-management strategy without significantly higher premiums.
For a Rainy Day

An umbrella liability insurance policy is designed to supplement your auto and homeowners policies. If your obligations to a plaintiff exceed the limits of these primary policies, the umbrella policy can help pay the difference, up to the policy limits. Umbrella policies typically charge a few hundred dollars a year for $1 million of coverage. The benefits can be used to help pay jury awards, plaintiff medical expenses, and legal fees — even to defend against a lawsuit that has no merit.
Are You at Risk?

Not everyone needs $1 million or more in liability coverage, but this short quiz may help determine whether your situation calls for it.

    * Do you have teenagers (especially teens who drive) living at home?
    * Do you employ workers in your home?
    * Do you have a swimming pool?
    * Do you entertain frequently in your home?
    * Do you have a substantial net worth and/or income?
    * Do you serve on a board of directors of an organization that does not indemnify you against accusations of libel and slander?

If you answered yes to one or more of these questions, it may be time to conduct a review of your risk-management strategy to help ensure that you wouldn’t have to sell your home, cash in your retirement portfolio, or use your future earnings to settle a liability claim because your current insurance coverage turned out to be inadequate.


Contact us at 630-548-9600 for additional information regarding Naperville Liability Insurance.

1) Insurance Information Institute, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.

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