Most investors incorrectly think of “risk” as the possibility that the market value of a financial asset might fall below the amount that he or she has invested in the asset. OMG, how could this be happening!

Think about it. The harboring of these misconceptions (that lower market price = loss or bad and/or that higher market price = profit or good) is the greatest risk creator of all. It invariably causes inappropriate actions within the large mass of individuals who are uninitiated in the ways of the investment gods.

Risk is the reality of financial assets and financial markets: the current value of all securities will change, from “real” property through time-restrained futures speculations. Anything that is “marketable” is subject to changes in market value. It is as the gods intended, and portfolios can be designed so that it just doesn’t matter quite so much as you’ve been brainwashed into thinking.

What is abnormal is the hype surrounding market value changes and the hysteria such hype causes among investors. No way should a weak real estate market translate into near zero bank balance sheet entries — it just doesn’t compute, except when it is popular politics.

Similarly, the reality of financial-impact cycles (market, interest rate, economy, industry, etc.) just doesn’t fit at all into the hindsightful, but popular and generally accepted, calendar year assessment mechanisms. Brainwashing again.

The amount, cause, frequency, range, and duration of market value change will always vary in an “I-don’t-care-who-you-listen-to” unpredictably certain way — the certainty being that the change in market values of investment assets is inevitable, unpredictable, and essential to long term investment success.

Without these natural changes, there would be no hope of gain, no chance of buying low and selling higher. No risk, no profits, and no excitement— boring!

The first steps in risk minimization are cerebral, and involve developing an understanding of the fundamental economic purpose of the two basic classes of investment securities.

From the investors’ perspective: (a) equity securities are expected to produce growth in the form of realized capital gains, and (b) income securities are expected to produce spendable (or reinvestable) income. But it isn’t real growth until it’s realized, or real income until it’s received.

Alternative investments? These are the contracts, gimmicks, commodities, hedges, and other creative ideas that college textbooks used to call speculations. Once upon a time, fiduciaries, trustees, and unsophisticated individuals weren’t allowed to use them. The stigma is gone, but the artificial demand adds risk to all markets.

They are especially risky for the millions of 401(k) and IRA investors who probably cannot explain the difference between stocks and bonds, from any perspective. Most investors have virtually no clue what is actually being done inside the products they select, and have even less of an interest in learning about it. They dance knee-jerk style to the daily media buzz.

Wall Street knows this, and takes advantage of it mercilessly. In spite of the recent financial crisis, pension plan fiduciaries (particularly in the public sector, go figure) are falling all over themselves to throw money at the very alternative and derivative speculations that crashed the market just months ago.

401(k) participants are force fed products du jour from self-serving providor menus that make little effort to identify risk, much less minimize it. Very few plans allow participants to develop an understanding of their investment choices with the only education provided by the product vendors themselves.

What ever happened to stocks and bonds, the building blocks of capitalism? Do investors recognize the financial interest they have in the very corporations their elected officials are encouraged to tax, constrain, and regulate into competitive mediocrity?

Another mental step in risk minimization is education. You just can’t afford to put money into things you don’t understand, or which the salesman can’t explain to you in ordinary English, Spanish, French, whatever.

Of course you would prefer to skip this step and jump right into some new product athletic shoes that will hurdle you over the work and directly into the profits. How’s that been working out for you? It was once written (somewhere): no work, no reward.

Risk is compounded by ignorance, multiplied by gimmickry, and exacerbated by emotion. It is halved with education, ameliorated with cost-based asset allocation, and managed with disciplined: selection quality, diversification, and income rules— The QDI.

Real financial risk in equities boils down to: the possibility that a company’s stock (that 30% share of your brother-in-laws’ pizza parlor) will become worthless as management succumbs to economic forces, and/or mandated costs imposed by outside entities whose edicts must be complied with.

In debt-based securities, risk is: the possibility that the issuer of an interest bearing IOU (the money your spouse loaned her brother at 6% to start flinging pizza) stops or falls behind on its payment obligations and/or declares bankruptcy and wipes out both owner (shareholder) and creditor (bond holder) interests.

Here’s an interesting risk in the securities markets, one that governments have cleverly refused to address for fairly obvious reasons. The “Masters of the Universe” routinely get paid obscene amounts of compensation for risking OPM (other people’s money) perhaps a bit too cavalierly.

Company fails, shareholder interests become valueless, debt obligations are worthless, while the fat cats keep raking it in, even suing to preserve their bonuses. Boardroom corruption, and direct lobbying (another euphemism, for bribing) of elected officials are two additional risks that investors need to be aware of.

Go to: Part II – The Basics of Investing: Cruise Control Hedging
http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/6996

Steve Selengut
http://www.sancoservices.com
Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

The first page of search engine research tells you that: “Investors use hedging strategies when they are unsure of what the market will do”— isn’t that always the case? Further along you learn that there are many different kinds of strategies, nearly all of which rely upon some sort of derivative betting mechanism.

But what is hedging all about in the first place? Conspiracy theorists have their hands in the air. What’s that? Portfolio hedging strategies were created to expand the market for the first generation of derivative products— options and futures contracts. Hmmm, not so far fetched an idea, really. Just back up a bit and think about what they are trying to accomplish.

Hedges are designed to massage your market value numbers, a kind of security blanket that softens the highs and lows of the market cycle. But why focus on the fluff of transient market values in the first place? Cycles eventually correct themselves without the unnecessary drama, guesswork, risk, and trading fees.

It’s not the market value of the portfolio that is of primary importance. It’s the actual content of the portfolio and how you deal with the natural dynamics of the securities you own. Why can’t the media reinforce that kind of stuff instead of the emotion of the month?

If a portfolio has a semi-guaranteed “base income” of 4%, a 4% cushion (or hedge) is always in place, one that grows annually with proper asset allocation management, and adds to the market value in upward cycles— nah, too simple.

For the “rest of the story”:
http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/6979

Steve Selengut
http://www.sancoservices.com
Professional Portfolio Management since 1979
Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”

What’s the difference between bus drivers, chefs and surgeons on the one hand, and football players, actors and Web site operators on the other?

The answer is leverage, or what Nassim Nicholas Taleb refers to in The Black Swan as scalability. Whether, and how much, to leverage is one of the biggest decisions to face in choosing a career.

A bus driver can only drive one bus at a time; similarly a surgeon can only operate on one patient at a time. The income of both, and countless others engaged in many non-leveraged professions is proportionate to the time and effort devoted to their work. Of course there are variations within a particular trade, the more skilled the surgeon (or accountant, plumber, gardener…) the higher the unit fee that can be expected. But in all cases, once they stop doing it they stop getting paid.

In contrast, consider the case of most actors. When they’re not waiting tables or driving taxis they might be playing to a few dozen in a community hall. But a few actors get to star in movies, and for the same amount of acting get to be seen by 100s of millions, not to mention DVD sales etc. That’s the power of leverage.

Millions of people have Web sites of one form or another (many many more since the days of social networks and blogging). Of that vast number, a small percentage actually make money from their sites, but of this second group but a tiny fraction enter the financial stratosphere.

The ever-growing influence of the Internet and globalization are skewing the leveraged playing field even further. The so-called network effect describes systems that increase in value the more people that use them. If you want to run an online search engine (or bookstore, auction site, social network, video sharing facility…..) then unless you’ve got a paradigm-shifting twist, tough luck, ‘coz someone’s already monopolized it. Of course there are probably still numerous niche themes to be developed that could earn a living for the right owner, but they are probably more labors of love than golden geese.

So, which to choose? In The Black Swan, Taleb describes the suggestion that he follow a scalable profession as bad advice. Though he made a fortune from trading and writing (both highly scalable) he modestly attributes his success to luck and urges readers to stick to the non-scalable.

Personality and circumstances play a large part in your choice. If you’re a cautious soul and/or have responsibilities to meet then you’ll sleep easier by avoiding leverage. If you’re up for taking a chance, have confidence in your abilities, and aren’t surviving hand to mouth, then consider giving it a go.

It is possible (sensible?) to leverage by degree. For example, if you’re a chef and your first restaurant is doing quite well, you might consider opening a second. Of course you can only be in one kitchen at once, so you’ll need to hire staff you can trust to apply your methods. And if that works you can open a third, and so on. The bigger you get the more time you’ll spend behind a desk and the less with pots and pans, but that’s the price of leverage.

Another way to leverage by degree is by taking a non-scalable job just to keep food on the table and a roof overhead while devoting the rest of your time to developing a scalable alternative. This is what would-be actors are doing waiting tables. The Internet makes it possible for the little guy to try a whole range of scalable business ideas for minimal entry costs. If/when your scalable venture overtakes the day job you can switch your attention entirely to the former.

Many of the things you think you know about investing are part of a mythology designed to make you bounce around between investment products. Modern day “conventional wisdom” just isn’t all that its cracked up to be. Concepts you worship are inaccurate; indices and averages you trust do not tell the complete story; the basic investment concepts still work — but Wall Street won’t tell you what they are.

It’s time to determine your investment IQ, here’s the deal:

Just take the True-False test below and send me an email list of the statements you feel are generally TRUE — please refrain from including any rationale or explanation. If you don’t get 80% or more correct — you should attend our FREE Web Workshop.

On April 21st, I will be hosting a FREE Workshop where my panel of experts will discuss the answers, the rationale, and the concepts in and around each of the statements. You will be able to participate, ask questions, whatever. No one will try to sell you any products.

Here we go:  Generally speaking, are the following statements mostly True or mostly False? Note: you’ll do better if you research terms that you are unfamiliar with. Terms in “quotes” have very specific meanings in the Market Cycle Investment Management/Working Capital Model methodology.

1. The proper gauge of your Investment Portfolio Performance is the change in your market value vs. the S & P 500 or Dow Jones Industrial Average over the course of a calendar year.

2. Mutual Funds are a safer route to long-term investment success than trying to create your own portfolio of individual securities.

3. You really don’t need to worry about growing your “Base Income” until a year or so before you plan to retire. That’s the time to begin designing a safe income portfolio.

4. The Day-Limit Order assures you of getting your trade executed no matter what happens during the trading day.

5. The Dow Jones Industrial Average is comprised of “investment grade” companies, and generally gives a clear indication of what is going on in the Stock Market.

6. In the long run, investing in the Stock Market will assure you of keeping up with inflation.

7. Annuities are perfect investments at retirement both for people of limited resources and for the wealthy, particularly Variable Annuities.

8. Technical Analysts can predict the future movements of the economy, individual securities, and the Stock Market with a very high degree of accuracy.

9. If you were to chart them, your total “Working Capital” line will almost always exceed the portfolio Market Value line.

10. There is no such thing as a freebie on Wall Street.

11. It is important that you take your tax losses regularly, particularly if you have held the losing position for less than one year.

12. Asset Allocation is a strategy used by investors to move assets from weak markets to strong ones in order to improve the growth of the investment portfolio’s bottom line.

13. Sell your losers and let you profits run is the essence of sound Investment Management thinking.

14. Closed End Mutual Funds (CEFs) are not popular with Wall Street professionals because they are inherently more risky than normal Mutual Funds.

15. It’s smarter for income investors to buy short duration individual municipal and corporate bonds, even at a premium, because it assures them of less market value volatility in the income portion of their portfolios.

16. DRIPs and Dollar Cost Averaging are recommended strategies because they are guaranteed to enhance the long-term performance of a properly diversified portfolio.

17. There are fewer than 400 “Investment Grade Value Stocks” traded on the NYSE.

18. Closed End Muni-Bond Funds are a much maligned and little appreciated income generation machine in spite of the fact that they generally maintained their 6% or so tax free dividend yield during the recent financial crisis and outperformed the DJIA in market value growth during 2009.

19. “Smart Cash” is an integral part of any Asset Allocation formula because it allows investors to time the market successfully. Professional market timers know precisely when to move into or out of cash in anticipation of the next major directional change in the market.

20. Buy and Hold continues to be the proper investment strategy for most individual investors.

21. It is a well-known fact that there are certain Core Portfolio issues that belong in all investment portfolios if long-term success is to be expected.

22. Every properly diversified portfolio will have up to 5% in each of these areas: miscellaneous speculative opportunities, gold or other commodities, small cap stocks, and global index funds.

23. Zero Coupon Bonds are an important part of the fixed income portion of the investment portfolio, especially when retirement is contemplated within five years or so.

24. These are the FOUR most Important elements of successful long-term investing:

Diversify properly.
Establish a target for taking profits.
Buy high quality securities.
Increase annual income.

25. Greed and Fear are important performance enhancing emotions; those who sell when others are greedy, and buy when panic rules the markets have a much better chance of investing successfully.

26. The second step in every stock purchase should be the establishment of a Stop Loss Order. Such an order assures you that your losses will be limited to a specific percentage of your purchase price.

27. “Investment Grade Value Stocks” will be the next red-hot market sector.

28. Mark-to-market valuation of mortgages backed securities has proven to be good for investors.

29. Wrap Accounts provide investors with the opportunity to obtain private, personal, investment management by a well known professional at a reasonable cost.

30. The expression Managed by the Mob with regard to open-end mutual funds refers only to the direct impact of Wall Street and Washington on the movement of mutual fund prices.

Investing is as fascinating as it is frantic, as scary as it is exciting, and as intimidating as it is satisfying. But perhaps the most interesting thing about it is how educationally unprepared most individual investors are for the adventure!

The first and most important step in your investment program is a non-product biased investment education— and that goes for both part-time and full-time investors.

Thank you for participating.

Steve Selengut
http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/5641
Portfolio Management since 1979
Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

The results are in! Roughly 260 people took the time to respond to the first income investing survey and I thank y’all very much for being so generous with your time. First, the generalizations:

As you will recall, the survey included eight “mostly true” or “mostly false” statements. Most people answered all of the questions without explanation or analysis (as requested), and most of the analysis explained exceptions to the “in general” nature of the questions being asked. All of your comments were well thought out, most were right on target and much appreciated.

Unanswered questions were judged half right and half wrong because there were too many of them to label totally wrong and wind up with meaningful statistics. Still, as a class, those who responded barely achieved a passing grade. A composite grade of just 72% correct is pretty scary.

Only 20 people assessed all eight statements correctly.

Here are the individual item results, based on my forty years of investment experience, including 35 managing OPM (other people’s money) professionally.

1. Tax deferred income is better than tax-free income. This turned out to be the easiest question of all, as 92.3% of you correctly labeled it “False”. One lesson to be learned early in your investment life is to grow a personal, tax-free, portfolio. “Uncle” has dibs on your retirement plans— all of them.

2. All individual investment portfolios eventually become retirement income portfolios. 38.5% of you failed to get the point— you can’t spend market value unless you sell the securities, and there is no guarantee that the market will cooperate with your retirement plans. Eventually, this one rings “True”, loud and clear.

For “the rest of the story”:

http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/6874

Steve Selengut
http://kiawahgolfinvestmentseminars.net
Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

Reverse mortgages are hot. Baby boom demographics, inadequate retirement funding, and problems in the traditional mortgage market (pushing brokers into alternate products) have combined to make marketing of reverse mortgage products to senior citizen homeowners one of the hottest niches in the mortgage business.

And the effort is paying off for marketers. Federally-insured Home Equity Conversion Mortgages (HECMs) are the predominant type of reverse mortgage in the U.S. Recently, the number of HECMs originated has averaged about 9,000 per month, more than double the average in 2005. Moreover, about two-thirds of the total HECM reverse mortgages ever issued have been originated in the last two years.

Reverse mortgages are only available to homeowners age 62 and older who have paid off their mortgage or have only a small mortgage balance remaining. The sales pitch for these loans is enticing: tax-free retirement income for as long as you own the home – even for life; no monthly loan payments; no repayments until the home is sold, and payment options flexible enough to meet any need! In many cases a reverse mortgage is the ideal tool for senior homeowners.

But there is one big drawback with reverse mortgages: high up front closing costs that can sometimes reach $20,000 or more. Combined with the regular interest that accrues on the loan balance, the up front costs can make this an extremely expensive way to borrow. To spread these costs out and make the cost of borrowing reasonable, it is imperative that the borrower be confident in their ability to remain in the home for at least 5-7 years and, preferably, longer. Unfortunately, government data shows that most HECMs are paid off in seven years or less.

So, while a reverse mortgage may be a good fit for seniors in many situations, it is always important to carefully explore alternatives to see if a more cost-effective means to achieve your retirement financing goals is available.

We discuss below seven alternatives for you to consider:

1. Intra-Family Loan – Do you have a relative or friend with deep pockets and a good heart? An intra-family reverse mortgage loan can be an excellent way to gain the advantages of a reverse mortgage, but avoid most of the costs. The concept is straightforward: instead of a bank lending you retirement funds in exchange for a lien on the house, structure an arrangement with a relative or friend to lend you the money instead – collateralized with your home, of course. You can avoid most of the up front costs this way and have more flexibility to set interest rates and loan terms. There is even a company called Circle Lending (http://www.circlelending.com/familyadvantage/reverse-mortgage.asp) that specializes in drafting these loans as “official” arms length transactions and then provides monthly loan servicing just as a traditional lender would do.

2. Price Appreciation Agreement – There are also firms that will give you money today in exchange for an “equity-share” in the future appreciation of your home’s value. These programs are usually aimed at higher value homes (over $500,000) and may only be available in areas of the country with a track record of strong property value growth. The benefit of these programs is that you may be able to tap into your equity without the high up front costs of a reverse mortgage. The drawback is that it could cost you substantially more in the long run in the form of foregone home appreciation.

If you think this type of arrangement may be a good fit for you, here are two programs to look into to: Equity Key (http://www.equitykey.com/) and, Rex Agreement (http://www.rexagreement.com/)

3. Home Equity Line of Credit (HELOC) – As noted, reverse mortgages make most sense if the homeowner is able to remain the home for seven years or more. The reality, however, is that more than one-half of all HECM reverse mortgages terminate in less than seven years. To finance short and intermediate cash needs, a HELOC loan may provide a more cost-effective way to tap into your home equity. With a HELOC, closing costs are generally minor (sometimes zero). The downsides are two-fold: 1) there are monthly loan payments required and, 2) you will likely need to show the lender that you have adequate income to make the required loan payments.

An “interest-only” HELOC loan typically requires monthly payments equal only to the accumulated interest on the amount borrowed to date. With care it is possible to borrow an amount each month that provides cash for living expenses and is adequate to make the monthly interest-only payment. In this way the HELOC mimics a reverse mortgage with interest building up in the loan balance until the loan is repaid when the home is sold.

4. Delay Receipt of Social Security Benefits – The majority of Americans start their (reduced) social security benefit at the earliest possible age (62). While people may feel it is smart to “get the money while you can”, the truth is that Americans are living longer than ever before and the decision to take early social security can cost you several hundred dollars per month for the rest of your life. People in their seventies and eighties often feel a reverse mortgage is needed to close a budget gap – a gap that might not exist if they were receiving full social security benefits.

5. Sell and Downsize or Rent – Using home equity to help pay for retirement is not a new concept. For generations, it was common for elderly homeowners to sell their homes and use the proceeds to buy or rent a smaller, more affordable dwelling. This remains a viable strategy and one of the best methods available to ensure you get full use of your hard earned home equity.

It is sometimes possible to sell your home to an “investor” and who will then rent it back to you. This provides you with needed cash while allowing you to remain in the home. Investors like this type of transaction since they get a “good” tenant who likely will take good care of the property.

6. Deferred Payment Loans – Many states, local governments and nonprofit organizations sponsor loan programs for the benefit of “house rich, cash poor” senior homeowners. Much like reverse mortgages, these programs lend money today that is paid back when the senior homeowner sells the home or dies.

The drawbacks are: 1) the use of loan proceeds is usually restricted to a specific purpose (e.g. home repair, payment of property taxes or special assessments, etc.) and, 2) eligibility may be restricted to seniors qualifying as lower income.

Deferred loan programs often have very low (even zero) closing costs and interest rates. This which makes them an alternative worth looking into before deciding on a reverse mortgage. To find out what deferred loan payment programs are available in your area, contact the Area Agency on Aging (AAA) for your region (http://www.eldercare.gov/Eldercare/Public/Home.asp).

7. Other Assets – Home equity should be viewed as a financial asset on par with CDs, stocks, bonds, cash-value insurance policies or other investments you may own. Before deciding to “cash out” home equity with a reverse mortgage, compare this strategy to other possibilities like selling other financial assets you may own. Stocks and bonds can be turned into cash much more efficiently than home equity can.

Deciding whether to take out a reverse mortgage is an important financial step for both you and you heirs. Be sure to consider the alternatives before making a final decision.

About The Author
Tim Paul is a financial management executive with more than 25 years experience. His websites focus on personal finance issues and include: http://www.sagetips.com and http://www.reverse-mortgage-information.org.

Reverse mortgage loans are being touted as the ideal solution for older homeowners who may need extra income during their retirement years. On the surface, reverse mortgages seem to have no down sides. The homeowner receives a monthly payment from the bank, which allows them to remain in their home and pay expenses. There are no payments due as long as the homeowner remains in the home, at which time the loan is due and can be repaid by selling the home. A reverse mortgage loan agreement can seem like a godsend, but there are both pros and cons to reverse mortgage loans. A wise homeowner will do well to examine them carefully.

What is a reverse mortgage loan?

A reverse mortgage loan is a home loan that is paid out in monthly installments to the homeowner. No payments are due on the loan as long as the homeowner continues to live in the home as their primary residence.

What are the requirements for getting a reverse mortgage loan?

One of the earliest reverse home mortgages was created by the Federal Housing Administration (FHA). Since then, there have been specific requirements set up to qualify for a Home Equity Conversion Mortgage, more commonly called a reverse mortgage. In order to qualify for a reverse mortgage through the FHA:

- you must be at least sixty two years of age

- you must either own your home outright, or have a small amount remaining on your mortgage that can be paid off with the proceeds of the reverse mortgage

- you must live in the home

- the home must be either a single family home or a 1-4 unit multi-family home, with the owner occupying one of the units

- condominiums and manufactured homes that meet FHA standards may also qualify

- the homeowner must speak with an HUD-approved counselor before signing a reverse mortgage loan

What are the pros of a reverse mortgage loan?

Because reverse mortgages are designed to benefit seniors who want to remain in their homes, there are some very important benefits to a reverse mortgage. They include:

- There are no income requirements to qualify for a reverse mortgage loan, so it is easy to qualify for one.

- There are no payments due on the reverse mortgage as long as the homeowner continues to use that home as their primary residence.

- You can never owe more than the value of your home at the time that you (or your heirs) sell the home, even if the lending company has paid out more than the home is worth at sale time.

- You can choose one of several options to receive your loan, which makes it one of the most flexible home loans available.

- The reverse mortgage loan does not come due until the borrower (or borrowers, if there is more than one) dies, sells the home, or moves out of the home. At that point, the mortgage comes due in full.

- The homeowner can not be evicted from his or her home as long as insurance and taxes are kept current.

What are the cons of a reverse mortgage loan?

While reverse mortgages have many benefits, it is also crucial to look at their potential negatives. They include:

- Closing costs on a reverse mortgage loan can sometimes be twice as high as closing costs on a regular mortgage.

- If there is an outstanding mortgage or home loan, it must be paid off with proceeds from the loan at closing. Thus, if you can borrow $100,000, but have a $10,000 outstanding mortgage, you will need to take at least $10,000 in a lump sum payment to pay that off.

- The proceeds of the loan, whether in a lump sum payment or in monthly payments, may affect your eligibility for Medicaid or other state or federal aid payments.

- Your loan will come due when you no longer occupy it as your primary residence. At that point, you or your heirs will need to sell the house to repay any money that has been paid out. If you want your home to remain in the family, a reverse mortgage may not be the best plan for you.

Deciding whether or not to take out a reverse mortgage against your home is a complex decision with many pros and cons. The FHA requires that those considering reverse mortgages sit down with a home loan counselor and discuss all the ins and outs of the process. Take full advantage of the requirement to explore all the pros and cons of taking out a reverse mortgage so that you can make the best decision for your financial circumstances.

About The Author
Allan Young is a freelance writer who writes about financial products and specific services available from a mortgage lender .

Simply stated, a reverse mortgage is a loan that enables homeowners (age 62 and older) to convert part of the equity in their home into a tax-free income without having to sell the home, give up the title, or take on a new monthly mortgage payment. More and more homeowners are using this to supplement their retirement income, pay for health care, modify their home, or just get some cash for emergencies. Since this is a new product, some people have misconceptions of what a reverse mortgage is. The bank doesn’t give you money and take your house. Let’s look at some of the most common questions.

Are reverse mortgages for desperate people? No. It is an excellent financial planning tool used from people of all walks of life.

How do I qualify? You must be 62 or if both parties are on the mortgage, then you both must be at least 62. And, you must have equity in your home.

What if I still owe on my home? You may still qualify even if you have a balance on your first mortgage. The proceeds must be used to pay off the mortgage, first.

How much can I get? This depends on several factors such as, the age of your home, the value, your age at the time of closing, and interest rates.

Is it just monthly payments? No. You can get a lump sum, line of credit, monthly payments or a combination of monthly income and a line of credit.

But, won’t I have to pay taxes on these monthly payments to the government? No. The funds are tax-free. Its your money, not additional income.

Should I seek a lawyer or receive some counseling before I get a reverse mortgage. Yes. You must be counseled before receiving a reverse mortgage. You don’t have to talk to a lawyer or accountant, but it would be advised.

Who owns the title to my house? You still own the title.

What happens when I die? Once your home is passed on to your heirs, the mortgage becomes due. Your heirs may pay the mortgage and keep the home or sell the home and pay off the home. They may keep any excess sales proceeds.

What if I owe more than the house is worth? You can’t. Your repayment amount will never exceed the value of the home at the time the loan comes due. Also, there are no prepayment penalties.

What if I move? If you move, then the mortgage becomes due and must be repaid.

Where can I learn more? The National Reverse Mortgage Lenders Association at http://www.reversemortgage.org

About The Author
Stuart Simpson has a neat mortgage calculator FREE to use. Try it out at:
http://www.mortgage-refinance-review.com/calculator.php

The Investment Grade Value Stock Index “Bargain Stock Monitor” clearly reflects the profit taking that hit the market late in January— you and I have been harvesting our gains all along though. Right?

Although there are nearly twice as many IGV stocks 15% below 52-week highs as there were at year-end, there is no evidence that a new correction has commenced— tune in again in March or April.

The numbers are telling you that most Investment Grade Value Stocks are still well above bargain price levels, and no matter how much “smart cash” has accumulated in your portfolio, it’s not necessary to re-load your portfolios with new stuff all at once. Like apples, one a day is just fine.

Most Market Cycle Investment Management (MCIM) Program portfolios are still a hiccup or two below the all time high profit levels achieved in 2007, but those with larger income allocations are generally well above those levels.

So, aren’t you glad you’ve been taking profits and positioning yourself to take advantage of the new bargains sauntering down the runway? Take your time. Always start new positions slowly while you continue to take profits instantly.

The Bargain Stock Monitor is reporting a slight dip in Investment Grade Value Stock market values, but it is predicting nothing. What matters now is what you do with the paper profits that remain in your portfolio. You should always “beat” your index!

If you have not, or have not taken profits, one or more of these things has happened:

* You were greedy and reset your profit taking targets higher than 10%.
* You didn’t have profit taking opportunities because you failed to take advantage of hysterically lower prices over the past two years.
* You didn’t have profits because you were unable to add to your portfolio when prices were lower
* You didn’t want to be burdened with short-term capital gains.
* You thought that the rally would last forever.

Yes, we are still in a rally, and the longer that we experience slow improvement over longer than monthly analytical periods; the less likely it is that the next correction will be as devastating as the last. But there absolutely will be another correction, and remember—

An ex-NFC team is certain to win the Super Bowl!

For your information, the Bargain Stock Monitor is one of three market statistics used as performance expectation analyzers in Market Cycle Investment Management portfolios. Search Investment Grade Value Stock Index for current data.

A “WCM friendly” watchlist program identifies specific IGVSI companies trading at least 20% below the 52-week high water mark, and that also meet the price selection criteria outlined in The Brainwashing of the American Investor: The Book that Wall Street does not want YOU to read.

The fewer IGVSI stocks at bargain prices, the stronger the market and the more “smart cash” that should be building up in investment portfolios. As the list of bargain stocks grows, portfolio smart cash should be finding its way back into undervalued securities.

The other numbers used for MCIM portfolio performance evaluation are: The Investment Grade Value Stock Index itself (The IGVSI), IGVSI Issue Breadth, and new 52-week High vs. new 52-week Low numbers.

Steve Selengut
http://www.valuestockindex.com
Professional Portfolio Management since 1979
Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

The IGVSI Bargain Stock Monitor clearly reflects the strength of this eleven-month-rallying stock market. In fact, the bargain monitor is sporting the best numbers ever recorded. No, this is not a “buy” signal.

The numbers are telling you that most Investment Grade Value Stocks are at or approaching their highest valuations of the past 52 weeks. Market Cycle Investment Management (MCIM) Program portfolios are approaching the all time high profit levels achieved in 2007, and only a handful of IGVSI equities are at “bargain” price levels— i.e., down 20% or more from their 52-week highs.

Additionally, the most conservative MCIM portfolios have been achieving new all time highs regularly, for the past three or four months— this because managed income closed end funds rose about 31% in market value during 2009.

So, with the very best numbers we’ve seen in two and a half years, why aren’t you taking profits and positioning yourself to take advantage of the next market correction instead of (as usual) being victimized by it?

The Bargain Stock Monitor is reporting that a 52-week high has been achieved in Investment Grade Value Stock market values, but it is predicting nothing. What matters now is what you do with the paper profits that the past eleven months’ rally should certainly have provided for you.

If you have not taken profits, one or more of these things is happening:

* You are being greedy by ignoring Working Capital Model (WCM) profit taking guidelines.
* You do not have profit taking opportunities because you fearfully failed to take advantage of hysterically lower prices over the past two years.
* You don’t have profit positions yet because you were unable to add to your portfolio significantly when prices were lower
* You don’t want to be burdened with short-term capital gains.
* You think that this rally will last forever.

Yes, we are still in a rally, and the longer that we experience slow improvement in the more widely worshipped numbers, the less likely it is that the next correction will be as devastating as the last. But there absolutely will be another correction, and

There is no such thing as a bad profit!

For your information, the Bargain Stock Monitor is one of three market statistics used as performance expectation analyzers in Market Cycle Investment Management portfolios.

A “WCM friendly” watchlist program identifies specific IGVSI companies trading at least 20% below the 52-week high water mark, and that also meet the price selection criteria outlined in The Brainwashing of the American Investor: The Book that Wall Street does not want YOU to read.

The fewer IGVSI stocks at bargain prices, the stronger the market and the more “smart cash” that should be building up in investment portfolios. As the list of bargain stocks grows, portfolio smart cash should be finding its way back into undervalued securities.

The other numbers used for MCIM portfolio performance evaluation are: The Investment Grade Value Stock Index itself (The IGVSI), IGVSI Issue Breadth, and new 52-week High vs. new 52-week Low numbers.

Steve Selengut
http://www.valuestockindex.com
Professional Portfolio Management since 1979
Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”