Donavan Group Consulting in Singapore and Tokyo, Japan

Losing weight and improving one’s finances are almost always at the top of most people’s lists of New Year’s resolutions. It makes sense to look out for your physical and financial health so you can enjoy life to the fullest. Following through on your resolutions is usually the tough part — it takes changes in certain behaviors, discipline and time to experience and maintain the results. This is as true for financial planning as it is for losing weight.

If improving your finances is one of your New Year’s resolutions, here are five steps you can take starting Jan. 1:

Immediately Pay Down Holiday Bills and Credit Cards.

Many people splurge on holiday gifts, parties and travel in December, but the bills will come due in January. Resolve to pay down those debts quickly to avoid large interest charges on your credit cards.

Set a goal to pay off the total amount on one card within a few months, if not sooner. If you or your spouse expects a bonus check from your employer in early 2018, use at least some amount from this check to pay down debt. Finally, start by paying off the credit card with the smallest balance. Even though this card may not have the highest interest rate, paying off the total amount on one card will provide the motivation to keep paying off the others.

Build an Emergency Fund.

Everyone should have at least three to six months of their living expenses set aside in a cash savings account. This number should be higher when you are retired, such as one to three years of spending needs, and should be coordinated with your overall investment mix. In order to accomplish this goal when you are working, set up an automatic draft from your paycheck into a separate savings account. This account can be used for emergency car and household expenses and will help avoid piling up new credit card debt on top of the existing debt from the holidays.

I personally use an online bank for my savings account. Online financial institutions often pay higher interest rates on cash and CDs than traditional brick-and-mortar institutions. Here’s another tip: Consider using different banks for your savings account and your checking account. It’s a little less tempting to access your savings account when the spending impulse strikes if it’s not at the same place as your checking account.

Increase 401(k) Retirement Plan Contributions.

The amount each person can contribute to a 401(k) retirement plan is increasing by $500 in 2018, to $18,500 for individuals under age 50 and $24,500 for people 50 and older. Everyone who is working should resolve to save an extra $500 for retirement this coming year.

If you are getting a raise going into 2018, increase your 401(k) savings rate by the amount of your raise if you are not funding your 401(k) to the maximum already. This is a discipline I have followed since receiving my first paycheck at age 22 — I kept increasing my 401(k) savings rate each year until I was able to reach the savings limit, and I’ve never looked back.

Let’s say you are getting a $5,000 raise in 2018. If you save this amount annually over the next 10 years, and at an average annual investment return of 5%, your retirement savings can be over $60,000 higher. That could buy you a shiny new car in retirement.

Rebalance Existing 401(k) and Retirement Account Investments.

In addition to adding to your retirement account, review your existing investments in January to ensure a reasonable mix of stocks and bonds. With equity markets at all-time highs, the percentage of your funds in stocks may now be higher than you planned. Over time, an investment account that is overweight in stocks can grow substantially, but during a recession or stock market downturn your balance can suffer, too.

If retirement is right around the corner for you, it’s especially important to consider the amount of stocks or stock mutual funds you are comfortable owning. Finally, while you are logged into your retirement accounts, check to see that your beneficiary designations are correct and up to date.

Review Home and Car Insurance Policies.

Over the last five years, the consumer price index for auto insurance has gone up over 20%, compared with the overall CPI of 4.5% during this period. Many insurance companies raise auto and home insurance premiums each year, and even small increases can add up over time.

I recommend sitting down with your insurance agent every three years to make certain you are taking advantage of any discounts available, and that you have proper coverage, given changing asset values. Managing risks and protecting your assets is an important part of financial planning. Also, review the deductible amount on each of your auto and home policies. This move can significantly lower premiums now. If you have an adequate emergency fund built up, you should be able to cover a higher deductible in the event of a loss.

It’s time to make New Year’s resolutions stick. Look out for your personal and financial well-being this coming year. You’ll find that making small progress will empower you, and motivate you to reach your goals. And the following year you may just resolve to keep your 2018 resolutions going!

While retirement may not be on your mind currently as an entrepreneur, the sooner you start planning for this milestone, the better. Before anything else, you need to consider the ways that you will be able to save for your retirement while also keeping your business running today. So, what tips or tricks can you employ to ensure that you will be financially able to retire when ready?

1. Set Up a Roth IRA

You may not have a company 401(k), but you should take advantage of the long-term benefits of a Roth IRA, which will grow and compound over time (tax free) and be removed (again, tax free) when you are at retirement age. - Jeff Epstein, Ambassador

1. Opt for a Solo 401(k)

If you are a business with no full-time employees (other than you and your spouse), you are eligible for a Solo 401(k), also known as the self-employed 401(k). The benefit to this is that you can contribute up to $50,000 of business income pre-tax ($100,000 if you set up a plan for yourself and your spouse). In 2016, I was able to cut my tax bill by $19,500 thanks to this benefit. - Bryan Kesler, CPA Exam Guide

1. Invest in Technology

Put 10 percent of your annual income into the top performing technology stocks. The compound return rate will give you millions after 20 years, especially if you increase your salary or income over the years. - Duran Inci, Optimum7

1. Buy Cryptocurrency

Cryptocurrency is a unique investment opportunity, but make sure you don’t put in money that you can’t afford to lose. It’s risky and volatile, but the payoffs can be great. For example, bitcoin is now trading over $7,000, and a couple years ago it was around $200. But bitcoin isn’t the only one seeing huge returns. Take a look at Ethereum and ICOs as well. - Jared Atchison, WPForms

1. Get a Pro to Help With the Details

Protect yourself from noisy amateurs with a clear game plan. There are thousands of strategies within the retirement plan space that allow generous benefits to be tastefully tilted to the entrepreneur or key executives, while providing an excellent employee benefit. Look for a specialist and have a 20-minute chat; you’ll be surprised at the huge tax perks along the road to building wealth. - Krzysztof ‘Kris’ Garlewicz, ProsperiFi, LLC

1. Include It in the Budget

Make it a budget line item. Many people don’t add it in as a critical need along with their monthly short-term costs. But it’s just as important, if not more. Putting it in the budget will mean you will have less to spend at Starbucks, the movies or the mall, but it will mean that you have a retirement fund when you need it most. - Andrew O’Connor, American Addiction Centers

1. Create a Monthly Recurring Income Stream

Monthly recurring income streams are great because they allow you to generate passive income and live a retired lifestyle without being solely dependent on the fluctuations of the market. You can set up monthly income streams by investing in rental properties, utilizing Airbnb or creating a SaaS business. - Syed Balkhi, OptinMonster

1. Save 10 Percent of All Your Earnings

Make this a standard about your approach to saving. Take 10 percent of your finances and place it into savings accounts or low-risk investments. This applies whether you are an entrepreneur or not. The effects are cumulative. As your wealth grows, real estate becomes a very worthy investment. - Nicole Munoz, Start Ranking Now

1. Use an App to Regularly Contribute Small Amounts

There are apps that let you save and invest for retirement where you take small amounts and incrementally add and buy into mutual funds that help build that retirement account, from even a little. Doing so can lead to larger amounts that grow even when you think it won’t amount to much. - Zach Binder, Bell + Ivy

1. Follow Einstein’s Theory

Albert Einstein is believed to have said that compound interest is “the most powerful force in the universe.” If you start young, that compound interest can work harder than any human ever could. I recommend buying a house as early as possible and putting in at least 10 percent. Don’t look at the account often and remember; that is not your money until you retire. - Tommy Mello, A1 Garage Door Repair

1. Don’t Bank on an Exit

While all entrepreneurs secretly (and sometimes not so secretly) dream of a big “exit” down the line, it’s dangerous to bank your retirement on that happening. There are a million reasons why you might not sell your business, so preparing along the way ensures you don’t have an “oh no” moment in your golden years. - Ross Beyeler, Growth Spark

1. Diversify and Never Retire

Diversify your activities and most importantly, never retire. A true entrepreneur will never reach a point of full satisfaction. Plus, it’s my personal belief that retirement is really not good for you. Any entrepreneur should diversify and when your financials allow it, invest in real estate for your peace of mind. It is best to invest in a new development and in an area that you believe in. - Adrian Ghila, Luxe RV, Inc.

1. Don’t Retire Early

Just step out of the day-to-day jobs and move into advisory or steering committee type positions. Chances are, if you are a successful entrepreneur, you’ll struggle to fully retire. It’s addictive work! Find ways to stay involved that are enjoyable and allow you to invest as much or as little time as you have. That way you can still enjoy retirement! - Baruch Labunski, Rank Secure

As the end of the year approaches and investors begin to take stock of their savings, one consideration they may want to take into account is how they should allocate money across 401(k) and IRA plans.

In a traditional, employer-sponsored 401(k) plan, employees can contribute tax-deferred money that is generally matched by a company up to a certain percentage. Traditional IRAs are accounts individuals set up independently, where earnings grow tax-free until they are withdrawn in retirement. For a Roth IRA, contributions are taxed first and then withdrawn tax-free, and a Rollover IRA allows individuals to transfer money over from employer-sponsored plans.

Here are some tips to help you navigate the retirement planning process.

Contribution levels

The maximum amount an individual can contribute to a 401(k) plan is significantly higher than what is allowed for an IRA. Beginning next year, the Internal Revenue Service (IRS) will increase the contribution threshold for 401(k) plans by another $500 to $18,500 per year. The maximum allowable, cumulative contribution per year across both traditional and Roth IRA plans is $5,500 or $6,500 for those ages 50 and older.

Uses

“Most of the time people work for an employer and obviously the easiest way to invest is to make it automatic … [that’s also] typically the most advantageous,” David Hays, president of Comprehensive Financial Consultants, told FOX Business.

IRAs can be useful for a variety of purposes, however, including higher education expenses for yourself or your children or a down payment for a first-time homebuyer. If funds are withdrawn for these purposes when an investor is under the age of 59.5, they can generally be exempt from the 10% distribution penalty.

401(k) plans don’t provide those options, but Hays said the plans do offer loans for up to 50% of the vested account balance, or $50,000, whichever is less. Not all plans include this allowance.

Investment options and fees

While a traditional 401(k) usually offers limited investment options, IRA choices tend to be limitless, offering investors more flexibility to curate a unique portfolio.

In terms of fees, Hays said IRAs, which tend to be more on the retail side, sometimes comes with higher fees. With 401(k) plans, big companies can offer really low, competitive fees.

Withdrawal

For a 401(k), if you are no longer working with an employer, you can generally withdraw funds if you are age 59.5 or older. In some cases, you only need to be over the age of 55. If you withdraw early, you will pay income taxes and a 10% penalty.

On the other hand, you can rollover your 401(k) savings into an IRA plan, should you choose to continue stashing cash away.

For IRA plans, the age 59.5 rule applies, and early withdrawal would also result in a 10% penalty on top of income taxes.

There is a wealth of ways to invest your money, but let’s face it: you probably don’t have endless time to figure them all out. And with time at a premium, using energy to keep abreast of the ins and outs of your investment portfolio can seem impossible. Although Singaporeans are on average earning more each year, the global market hasn’t been as successful recently — and that’s enough to give anyone pause before approaching today’s complex investment landscape.

One way to get to grips with the investment climate is to take advantage of a smart investment tool, which can help to identify investment opportunities. Standard Chartered Bank now offers Personalized Investment Ideas (PII), the latest tool to give investors the info they need to grow their wealth. Thanks to technological advancements like this, you can invest wisely, and without giving up your valuable time.

When it comes to your investments, you have three potential options:

Buy

Taking risks with your money is not only daunting, but can keep you up at night if you’re not confident in your choices. Which investment is right for you? There is such a huge range of investment opportunities available that opting for a select few that compliment your needs can seem difficult.

Know this: There are times to invest aggressively and times to invest conservatively. If you’re just starting to build your portfolio, conventional wisdom tells you to take lots of risks since you have plenty of time for the market to right itself in the event of a downturn. If you are approaching retirement, however, now’s the time to stay safe with your investments and ensure you have plenty of funds to sufficiently support you later in life.

Hold

When all is said and done, investing money is not only about accumulating wealth. Your investment is where your heart is — whether that is making a better life for your family, establishing a solid future, or funding a business idea. That’s when holding your stocks could be your safest bet, but only if you feel confident in where your money is invested.

The global market is anything but predictable, so be aware of the current climate. Uncertain times can produce huge gains and huge losses, but without an intimate knowledge of where the market is headed, a fork in your investment road can be dangerous.

Although it is a passive investment strategy, holding can still produce gains in the long run — but that only works if time is on your side. With a 2016 average annual growth rate of 5.5% in South Asia, the market is showing positive numbers, but holding for too long could prevent you from significantly growing your portfolio.

Sell

Knowing when to let go of your investments can be tough, but there are signs out there that will alert you when it’s time. Big life changes can impact your investment goals, and your perfectly balanced portfolio can be thrown out of whack in an instant — perhaps by a marriage, retirement, or the birth of a child.

Knowing when to let go of your investments is just as important as knowing when to buy. Treat your portfolio like a living, breathing organism: when one part gets too big, it’s time to reallocate to avoid an uneven balance.

You may also need to sell to create liquidity. Perhaps there’s a property you’d like to invest in, or a business venture that is too good to miss. Whatever the case, selling your investments isn’t always a bad choice — but it must be done at the right time, in the right way, and with a vast breadth of market knowledge behind it.

Technology is working to make investing smarter, easier, and more profitable.

Technology-driven solutions can be the roadmap you need to know when to buy, sell, or hold — and exactly how to go about it. Software that offers bespoke solutions for each individual is essential.

The benefit of having smart investment tool crunch numbers for you, as well as a team of real people with real investment knowledge keeping an eye on things puts you in a strong position to make the decisions that work best for you. The market can change quickly, and your investment software should adapt just as fast, ensuring you’re well equipped to grow your wealth effectively.

How will I know when it's the right tie to retire? Is there a barometer that experts rely on to know when it's the right time to go?--B.K.

I don't know of any generally recognized gauge or barometer for calling it a career, but I can tell you that the decision to retire definitely isn't just about reaching a certain age. I recently took personal finance guru Suze Orman to task for suggesting as much when she recently asserted in no uncertain terms that "70 is the new retirement age -- not a month or year before."

She's right that many people may need to stay on the job longer these days to accumulate a large enough nest egg to support them in retirement. But to say that 70 -- or any single age, for that matter -- is the right age to retire? That's far too simplistic. The decision to retire involves too many subjective factors that can vary significantly from person to person to be boiled down a single number.

So how can you tell when it's the right time for you, given your specific situation, to make the transition from the work-a-day world to post-career life?

One place to start is by assessing whether you're financially capable of leaving the workforce. One major question: Do you have enough saved so that draws from your nest egg plus income from guaranteed income sources like Social Security, pensions and annuities will allow you to maintain an acceptable standard of living throughout a retirement that could last 30 or more years?

It's difficult to answer that question with absolute certainty because of a variety of uncertainties, including how long you might live, the rate of return your investments will earn, what your expenses will be during your post-career life. And, indeed, research shows that many people don't have an accurate sense of whether they're on track to a secure retirement. Still, without too much effort you can come up with a pretty decent estimate of whether you've got the financial resources necessary to pull the trigger.

Start by doing a retirement budget so you'll have a realistic idea of the amount of income you'll need to cover your expenses once the paychecks stop. You can do a budget the old-school way with paper and pencil, but I think you'll find it a lot easier to use an online tool like BlackRock's Retirement Expense Worksheet, which lists more than four dozen different expenses, including both essential living costs (housing costs, transportation, food, health care, taxes, etc.) and discretionary expenditures (travel and entertainment, charitable donations, dining out, etc.). You won't be able to predict your costs down to the penny, but you can update and refine your estimate annually after retiring.

Once you have a decent handle on expenses, you can plug that figure, along with such information as your age, current retirement savings balance, the amount you'll collect from Social Security any other guaranteed income sources, into a good retirement income calculator that uses Monte Carlo analysis to estimate the probability that your resources will be able to generate the income you'll need for the rest of your life.

Again, we're dealing with approximations here; no tool can predict the future. But if after going through this sort of analysis you find that your chances of being able to generate the income you'll need are uncomfortably low -- say, less than 80% or so -- then you may want to postpone retirement until they improve or find other ways of tilting the odds in your favor, such as downsizing, taking out a reverse mortgage or paring your discretionary expenses.

As you're going through this financial review, you'll also want to take a look at your retirement investments. The single most important thing you want to do is ensure you're properly balancing risk and reward. During your career you have plenty of time to rebound from severe market setbacks, so you can afford to tilt your portfolio mix heavily toward stocks to generate higher long-term returns. In retirement, however, the combination of big losses plus withdrawals from your portfolio can increase the risk you'll outlive your nest egg.

So as you near and enter retirement, you'll likely want to scale back your stock holdings to prevent a market downturn from decimating your nest egg.

Just as there's no single retirement age that's right for everyone, neither is there a stocks-bonds mix that suits retirees and near-retirees. But you can get a decent idea of how to divvy up your portfolio between stocks, bonds and cash by completing this risk tolerance-asset allocation questionnaire.

But deciding the appropriate time to retire isn't just a numbers game. To make a smooth transition into retirement, you also want to consider how you actually want to live and whether you're socially and emotionally prepared to leave the work-a-day world. Do you have activities that will keep you occupied -- and better yet, make your time in retirement fulfilling and meaningful -- now that you won't have the structure of a job to plan your days? Do you have a solid network of friends and family to help you stay socially connected? Will you spend most of your time close to home or do you plan to travel? Do you expect to seek part-time or occasional work for pay or volunteer?

These are the sorts of issues I put under the general heading of lifestyle planning, and it's better that you look into them before you leave your job than after. That's especially true if you're thinking of working in retirement, as finding a job you'll enjoy and that pays an acceptable wage may be more challenging than you think.

It would be nice if after going through the process I've described, you could be sure to arrive at firm yea or nay on retiring. But things aren't always so clear. For example, you may find that you've got all the resources you need to call it a career, but you enjoy working too much to give it up now, which is fine. Conversely, you could come up short on financial readiness but because you feel you're simply unable to go on with your job you figure you're better off retiring anyway, even if that means scaling back your retirement vision.

And sometimes you may not have much of a choice. Almost half of retirees left their jobs earlier than they planned, according to the Employee Benefit Research Institute's 2017 Retirement Confidence Survey, often due to health problems, being laid off by their employer or because they had to take care of a spouse or other family member. Faced with such a situation, one person could decide to try to find work, any work, and postpone retirement. Another person may decide to retire and fashion the best post-career life as possible, given the circumstances. There's no one correct response.

Ultimately, deciding when to retire is really about deciding how you want to spend whatever time you have left in this life. So while I recommend that you weigh the issues I've raised above, recognize that neither I nor anyone else can know what the right decision is for you. This is a call you'll have to make as best you can give the circumstances you face.

CHRISTMAS is approaching fast and the all too familiar feeling of pressure on our wallets is coming around quick.

The last thing you want at Christmas is the burden of how you’re going to pay for your loved ones Christmas presents or how you’ll afford the turkey.

There are certain things you ought to try to avoid when you pay for Christmas to make sure you don’t start a new year with bad debt hanging over you.

It sounds obvious but before you start spending, if you’re going to have to borrow make a conscious effort to spend less.

This doesn’t mean people will think you’re Scrooge; you just need to be savvy.

By making tweaks to how you pay for things, you’ll save yourself money and avoid the 2018 Christmas hangover.

Hannah Maundrell, Editor in Chief of money.co.uk revealed the best and worst ways to pay for Christmas.

Avoid:

Store cards: Not to be confused with loyalty cards, store cards are often flogged at the till with the promise of 10% off your next shop and the chance to pay later.

Store cards can come with some benefits like discounts or invites to events, however if you're using them as a form of borrowing they are a big no.

If you haven’t saved enough for Christmas and plan to use store cards to pay for your shopping, it’s one of the most expensive ways of borrowing.

You’ll end up paying much more for your goods in the long run so try to avoid store cards at all costs.

Unauthorized overdraft: Unless you have a pre-arranged interest free overdraft avoids using them as much as possible.

Going into an unauthorized overdraft, or over your limit could cost you dearly.

There are lots of different fees you could be charged including daily fees which can be anywhere between £1 and £8 a day (with a monthly cap).

This is not a cost-effective form of borrowing and you could wind up paying double for your goods if you can’t pay back your overdraft quick enough.

High interest credit cards: If you’re using a credit card that charges you monthly interest – stop.

If you already owe money on the card you could use a 0% balance transfer credit card to move that sum into an account that doesn’t accrue interest for a certain number of months.

This would give you the chance to pay it off without the amount continuously rising.

Using a credit card that charges you interest should only be used if you’re disciplined enough to pay the full amount off at the end of the month.

Consider:

Money you’ve saved: Ideally we’d have all saved enough to pay for Christmas entirely upfront.

If you have been squirreling away this is great, you won’t need to borrow, however if you’re disciplined you could still consider using a credit card to pay for your purchases to get section 75 protection.

Section 75 protection means your credit card provider is equally liable if things go wrong meaning they can help you get your money back if your goods cost over £100.

0% purchases cards: These credit cards let you borrow interest free for a certain number of months which is great if you haven't saved enough and they can help you spread the cost of Christmas.

You still need to keep up with your monthly payments and make sure you can pay off the card in full before the end of the interest free period.

If you take one out make a note in your diary to make sure you’re all paid up before the interest kicks in.

Rewards credit cards: If you have the money to pay for Christmas upfront but want the reassurance of Section 75 protection then a rewards credit card could be a good choice.

These cards offer you different benefits depending which you go for like supermarket or Avios points or even cash back.

They are only a good choice if you know you will be able to pay off your balance in full at the end of each month.

A friend once asked me, “How do I start investing if I don’t have much money?”

That is a legitimate question, especially for students just out of college or working adults who have just entered the corporate world.

To answer my friend’s question, I jogged back my memory to recall out how I first started investing. I, too, didn’t have much money when I started my investing journey.

I remember all I had was the monthly allowance given to me during National Service, which I had squirrelled away diligently.

With the money I had, I invested in books on personal finance and stock market investing. I remember the first book I bought was Rich Dad, Poor Dad by Robert Kiyosaki. I also went for an investment course to help bring down the steep learning curve (I had no accounting or finance background from school).

Essentially, what I did was to invest in myself. By investing in myself and not on a broker’s hot tip, I accumulated the knowledge needed to navigate the stock market.

Warren Buffett, one of the most successful investors the world has seen, mentioned in an interview recently that the best investment you can make is one that “you can’t beat” and that is investing in yourself.

He said:

“Ultimately, there’s one investment that supersedes all others: Invest in yourself. Nobody can take away what you’ve got in yourself, and everybody has potential they haven’t used yet.”

By investing in ourselves first, we will have a proper foundation on which to build our stock portfolio. Without such knowledge, we might lose money from our investments without us knowing why.

Even after we have amassed the knowledge needed to invest in stocks, we should never stop learning.

In Tamil, there’s a saying that goes, “Known is a drop, unknown is an ocean”. There’s always something new to learn about investing every day since the stock market is very fluid.

When it comes to preparing for retirement, 50 can be a pivotal age. At that age, most people are just 10 to 15 years away from leaving the workforce, and time is relatively limited to save for retirement.

But with a decade or more of work still remaining, you have enough time to make changes to your retirement savings strategy to ensure you reach your savings goals.

"Add up all of your life savings—your 401(k), your investments, the money under the mattress—and then divide that by 25. Could you live on that amount comfortably for one year?" asks David Rae, a certified financial planner and founder of DRM Wealth Management. "If the answer is yes, then you may be on track for retirement. If its no, it's time to sit down with a fiduciary financial planner to figure out what else you can do to secure your financial future."

Rae's formula of dividing by 25 is based on the assumption that people will withdraw about 4% per year from their retirement funds to live on after leaving the workforce.

With that in mind, here's a look at what retirement and personal finance experts say you should do at age 50 to maximize the likelihood of achieving your retirement savings goals.

1. Maximize Current Retirement Contributions

Maximizing your current retirement contributions is a common tip offered by advisers. It's one of the easiest steps to take to help increase the amount of money you're saving.

You can max out contributions to both personal IRAs and company-sponsored 401(k) plans.

"Starting at age 50 you're eligible to increase your 401(k) contributions by an additional $6,000 per year, and can increase contributions to IRAs or Roth IRAs by an additional $1,000 per year," says Matt Hylland, a registered investment adviser at Hylland Capital Management. "At age 55 you're eligible to save an additional $1,000 per year in a health savings account, which is a great retirement savings vehicle."

1. Consider Limiting Your Tax Exposure

There are fewer tax breaks on the horizon as you get closer to retirement, says Wayne Fisher of Fisher Financial Tax & Insurance Solutions.

If you're saving money in a government-recommended retirement plan such as a traditional IRA, 401(k), or 403(b), you'll eventually have to pay taxes on that money—and the tax rate may be much higher than you expect.

"Per David Walker, the former US Comptroller General, we're heading to a future where we'll have to double federal taxes or cut federal spending by 60%, which makes tax-free look pretty good, right?" says Fisher.

1. Carefully Evaluate Asset Allocation

As you reach age 50 and beyond, many advisers say it's time to start reducing the risk in your investment portfolio to protect it from market declines.

"Depending on your risk tolerance, you may want to look at adding bonds, annuities, CDs, or other safer options," says Hylland. "As you go through your fifties, the chance of your portfolio having time to recover following a major decline will decrease. By having safe investments, you can ensure that your equity investments have time to grow and recover if needed."

1. Drop Unnecessary Insurance

Many people purchase insurance coverage when their children are young or if their spouse depends upon their income.

But if your children are financially independent and no one else relies on your income, consider dropping unnecessary coverage, says Ryan McPherson, a managing member of Intelligent Worth.

"There's little need to pay for policies that have outlived their purpose," says McPherson. "Saved premium dollars can be directed toward retirement savings or paying down debt."

1. Evaluate Your Health Care Coverage

Part of keeping your retirement plan on track involves preparing for big expenditures such as health care. In fact, health care can be one of the most expensive parts of retirement, says Mark Painter, founder of EverGuide Financial Group.

"Make sure you have your health care covered, both in terms of health insurance and also potentially long-term care," says Painter. "You want to spend your money enjoying retirement and not simply paying medical expenses. It will be a lot cheaper to look at coverage at age 50 than when you are 65 or 70."

1. Create a Get-Out-of-Debt Plan

Debt and retirement don't mix. Start developing an action plan now to eliminate credit card bills and other expenses weighing you down.

"Come up with a plan now, while you have plenty of time to execute it to get out of debt," says Hylland. "Maybe you're an empty nester and can downsize your home and mortgage, or consolidate credit card debt and pay it off, or get rid of a car with a long and expensive loan. Create a plan today to get your debt eliminated as soon as possible."

No matter your age, you still have time to create an effective retirement savings plan. Find out if you're financially prepared for retirement and put these tips into action.

Human beings are intelligent people, capable of making good decisions, weighing all options and making a rational and well thought out conclusion. However, sometimes it feels like we act irrationally without even realizing we are doing it. In some cases, our brains are hard wired or pre-dispositioned to behave in a certain way if our conscious mind does not take over and think rationally.

Luckily, because of our conscious mind, we can override our natural evolutionary desire to act irrationally in certain instances. Here are 5 biases and fallacies that make us terrible with money and how we can overcome them.

1. Recency bias

Recency bias occurs when we base on current or future behavior or outcome on what has happened in the recent past. Put differently, whatever is happening now, will also happen tomorrow and the day after. Recency bias occurs because of our flawed and selective memory. Most people’s memories are not as good as they think and much of what we do remember may be distorted based on what we focused on and our emotions at the time.

Common examples of recency bias include: house prices have been going up each month for the past 2 years, so they are bound to continue going up. This stock/mutual fund has reported a gain each day this quarter, so it must be a promising investment. I have kept a steady full time job with the same company for the last 3 years; therefore I don’t anticipate this will change in the future.

Why It Is Dangerous

Recency bias is dangerous because it assumes future investment performance is based on past performance and puts a disproportionate amount of weight on this assumption. Some ways of you can minimize recency bias include:

• Increase the timeline used to assess financial information. History is never an indicator of future outcome, but the further back in history you go to understand a topic the more you will be able to see trends and patterns of history. Trends and patterns offer better information than a few years or months of information.
• Speak to someone with an opposing view and get their perspective. The recency bias can cause us to be closed minded to other possibilities and outcomes. Talking to someone with an opposing view can give us perspective. For example: if you are basing a decision on the fact that prices will go up, talk to someone that believes they will go down. Keep an open mind, but also insist in credible data to be used when disputing both sides. This experience may either strengthen your stance further or at a minimum, widen your perspective.

1. Sunk cost fallacy

Sunk cost is any cost that has been paid already and can never be recovered, no matter what the future outcome or business decision. It is a past cost that is not affected by a future decision. Sunk cost can also be the loss of time or non-monetary resources. The point is that they are not and will never be recoverable. Examples of sunk cost include: you paid $500 to get your 15 year old car fixed last week. Two weeks later, you discovered another problem that will cost you $2,000, but you have already decided last week to keep the car. The $500 would be considered a sunk cost whether you actually decide to go with your original decision to keep the car or decide to get rid of it. Another way example would be overeating at a buffet in order to get your ‘money’s worth’. Regardless of how much you eat, will not change the outcome of how much you pay.

How to Overcome Sunk Costs

Overcoming the sunk cost fallacy can be difficult because we place more pain in our losses than we do pleasures in our wins. This can cause use to continue make even more bad decisions in hopes of recouping our losses. Continually putting money into a dying business or investment is another example of the sunk cost fallacy. Here are a few tips to overcoming the sunk cost fallacy:

• Know in advance a dollar amount or percentage you are willing to lose before you decide to get out. Having a floor value helps to minimize the emotion around this fallacy that can result in dumping more money into a bad decision. For example: if this investment drops more than 10%, I will sell my holdings and walk away. If this business produces a loss for more than 3 years, I will cut my losses and close the business.
• Give yourself the opportunity to fail, but also provide yourself with an out. Put differently, never put all your eggs in one basket. Making mistakes is a part of life, but when it comes to financial decisions, diversification in your investments can help minimize the impact of this fallacy.

1. Gambler’s fallacy

The gambler’s fallacy is the mistaken belief that if something happens more frequent than normal during a period, it will happen less frequently in the future. Gambler’s fallacy is opposite to the recency bias. If things are going too good, surely they are bound to go bad soon. Alternatively, if things are going poorly, surely they are bound to turn around soon. Gambler’s fallacy is what keeps people continually losing money in the slot machines or buying lottery tickets, because surely there can only be so much bad luck that at some point, good luck will come.

Why Is It Dangerous

Gambler’s fallacy is dangerous because it gives little regard to probability or distorts how probability works in the mind of the person that is hoping for the desired outcome. For example, when you flip a coin, there is a 50/50 chance it will be heads or tails. If you flipped the coin 7 times and it always came up as heads, the 8th flip would still have a 50/50 chance of showing heads or tails. Assuming this probability would be skewed towards tails would be incorrect; the probability would still be 50/50.

Some ways to reduce gambler’s fallacy include:

• Avoid financial decisions that rely entirely on probability. For example: gambling, buying lottery tickets etc. In many instances, these probabilities are stacked against you.
• If probability is all you have to go by, make sure the probability is stacked in your favor. This doesn’t remove the possibility of incurring a loss, but it does hedge some risk.

1. Buyer’s remorse

Buyer’s remorse is the sense of regret after having made a purchase. It is frequently associated with making an expensive purchase. It may stem from fear of making the wrong choice, guilt over extravagance, or a suspicion of having been overly influenced by the seller. We have all experienced buyer’s remorse at some point in our lives and it is not a good feeling. Some practical ways to avoid buyer’s remorse include:

• Implementing a waiting period. Set a waiting period for the purchase of items over a certain dollar amount. Typically, we get buyer’s remorse over more expensive purchases. However, expensive can mean different things to different people. Figure out what your dollar threshold is and the length of time you are willing to wait before making a purchase. Typically you want to wait at least 48 hours (2 days) or more for major purchases. Waiting to make the purchase allows you to think more carefully about the decision. It also removes the opportunity of making a purchase based on feelings as our feelings are always changing and never constant.
• Know the return/exchange policy before you buy. Even if you have no intention of returning the product, it is important to understand what the companies return policy is. What if you purchased the item but it did not work as you would have hoped? What if you found a better priced alternative? Make sure you know what type of exit strategy you have available to you (if any) and how much time you have available to act.
• Check your budget and assess the timing. You may have implemented a waiting period and even been comfortable with the return policy, but if the budget does not allow the purchase then you may still find yourself with buyer’s remorse. Make sure you are not financial strain after making the purchase. Review your budget to know what you can realistically afford.

1. Confirmation bias

Confirmation bias occurs when we favor information which confirms our pre-existing beliefs and biases. Confirmation bias narrows our understanding and perspective because we fail to read, listen to or understand differing views. Examples of confirmation bias include: watching a particular news channel that only align with your political views. Reading financial information from bloggers or companies that agree with our views on spending, saving and investing.

Confirmation bias is not inherently bad, but reading and listening to information that we already agree with does not increase our learning or expand our perspective. Ways to reduce confirmation bias include:

• Consciously making an effort to read or listen to other people’s views even if we do not agree with them
• Understanding the perspectives of both sides before making a decision
• Putting you in the other person’s shoes and looking at things from their perspective.

Growing up during the last major recession means that today’s millennial college entrepreneurs are already in the savings mindset. They’ve learned how to live with less than previous generations, which has made them much more conscious of how much things cost. Unlike other generations, they’re looking to offset the cost of things like tuition, housing, food, entertainment, and healthcare expenses.

Knowing where they are going and what they want means that millennials are also empowered to say no to paying too much or relying on credit too often. That’s why this new breed of young entrepreneurs is constantly on the lookout for money-saving tips.

Growing up with technology has also enabled these entrepreneurs to do price comparisons online and access deals and discounts for everything from appetizers to phone cases.

However, there may be some unfamiliar money-saving tips that can help millennials. The millennial wants to save money in areas that aren’t essential to launching their burgeoning startups but can further their frugal ways.

Separate Your Business and Personal Expenses

As a startup owner, especially while you are at college, may be challenging to determine what a business expense is and what a personal one is. It becomes particularly sticky given the fact that you might be running your new business from your dorm or apartment.

However, it’s important to keep good records that separate these expenses and account for them in distinct ways. For tax purposes, keeping good records can deliver additional savings in the form of deductions while lowering your risk of being audited.

Software like QuickBooks allows you and helps you to set up separate records for your business and personal accounts. QuickBooks can also be set-up to track the “what if” category. The What-if category is, “what if a portion of my dorm room can apply to tax credit?” These are the money spending categories you’ll check on when tax time comes. Boom! You track it, you’ll know what questions to ask and it helps you understand how to separate and track various types of expenses.

Because you’re always on the go, it also helps to use an expense-tracking app like Expensify. This app manages every type of expense you have, makes it easy to divide up expenses, and even integrates with QuickBooks.

Reduce Expenses through Comparison Shopping

As a millennial you already do online comparisons. Would you eat at a restaurant without checking on yelp or some other verification site? Probably not. Go to a movie without reviewing? Never. For a movie, you check the review; the movie has your 5 star rating. Next steps, you click over and get the ticket — hop on maps if you haven’t been to this venue (which you also checked out) and you’re outta here.

You may not have realized how savvy you are to the many ways you can undertake cost-cutting and tracking exercises. As millennials you are connected in such a way as to get the word out online where the savings can be found in any business sector. Use this same process for your dorm room entrepreneur system.

Your search now includes ways to reduce utilities, internet, TV services, and more that previously seemed impossibly challenging. Many of these service providers didn’t have competition before, so you were locked into paying what they felt like charging.

With the advent of cable-cutting companies, you can now negotiate. You can also seek out comparison shopping websites designed to save you a bundle with convenient connections to reduced internet services. There are numerous deals out there, and having a platform like this can help you locate and leverage them quickly. Like that movie. Boom, 60 seconds, not hours.

Establish Credit to Build a Good Score

Your business may need to tap into funding to grow and expand. Investors may not be as interested in you, or you may not need much in the way of capital. This is where credit can help, even if you’ve previously avoided it. Some use of credit can not only provide necessary capital, but it also offers a way to establish the credit score you need to get access to more credit later on.

When it comes to accessing business credit, both your business and personal credit scores are checked. With little to no experience with credit, it’s important to educate yourself before making any decisions about what kinds of credit to apply for and how to use it. After all, you don’t want to do anything that ruins this score and costs you more money.

Companies like CreditSoup are there to help. CreditSoup, for example, offers an effective tool that you can tap for learning how to get a credit card. With how fast the millennial searches, you’ll know how to determine which cards are best for your situation, what your credit score means, and what it takes to raise your credit score. The better decisions you make about credit, the more you can use it to manage cash flow.

Tap Campus Resources

Your university has charged you a considerable amount of tuition for access to the campus, including all of its facilities. Make sure you get the best bang for those bucks. Colleges often have school sites and pages where you can advertise your business. These are also sources for finding individuals who can serve as brand ambassadors or work as interns.

Additionally, your school most likely has an incredible library for completing research. And yes, sometime it’s just a quiet place to sit and look online accessing information, and furthering your knowledge of your startup industry or business niche. However the library databases cost money for those not attending a school with paid subscriptions. Get as much of this intelligence as possible while it’s free, and do your compare right there on the spot.

Your university may also have a radio station or other channels to get the word out about what you offer. Even your classes and professors may be able to connect you with more assistance and networking opportunities to grow your business. Look at what’s available, and use as much as you can while you’re still attending school. Also, consider creating an advisory list with contact information that can be beneficial long after you graduate.

Leverage the Sharing Economy

We live and work in the sharing economy, which emerged in response to the recession and continues to be a valuable way to save money. Most social media sites host groups of individuals who are looking to trade items and equipment for other resources. Scour these sites for items and products that could be useful to your business. You can also offload all that junk you collected in college — it might be a treasure trove to someone else.

Besides these online social media groups — usually referred to as exchanges on sites like Facebook — other online sites, including Craigslist, offer opportunities to share, borrow, or trade things that might otherwise be too expensive. There are sharing sites for home and office items, clothing, transportation, and various services.

Go Crazy for Coupons

Coupons used to be all the rage for your parents. Your mom most likely clipped them from newspapers to use at the grocery store or to buy school clothes. While that saved money, carrying those everywhere meant they were frequently forgotten or lost.

Today, you can tap digital sites, coupon codes, and downloadable discounts. A quick search can find you immediate deals, and browser extensions like Honey can continue to hunt for you while you do other things.

There should be no shame in your money-saving game by taking advantage of coupons. It’s a great feeling to realize that you just saved a significant percentage of your purchase — no one wants to pay full price for anything.

Save, Save, and Save Some More

Those savings mean more money for other items; these strategies put dollars toward your emergency fund, savings account, or retirement planning. Here is a nifty macrs calculator to get there quicker. Best thing about all of this, they set your burgeoning company up for success today — and long after you’ve left school.

When I got my first paycheck after college, I was so excited about all the stuff I could finally afford to buy. I was living at home with my parents at the time, so my expenses were low and my shopping wish list was long. Then my dad asked me if I had set up my 401(k), or thought about other investment accounts like an IRA or a brokerage fund.

My head began to spin: I barely made enough money after taxes and paying for insurance to save up to move out. Now I was supposed to put more of my income into an account I couldn't touch? And even risk losing some of it in the stock market?

Now, I understand how important (and smart!) it is to start investing for long-term goals like retirement from your first payday. That's because of compound interest—when your interest earns interest, a hundred dollars can grow into thousands over time. So if you put $5,000 in an account with an interest rate of seven percent and contribute $200 a month, after 30 years you'll have a little over $280,000.

If you're not already investing, now's the time to begin! Here are four steps to getting started:

1. Know why you’re investing

Are you looking to start saving for retirement, or grow a nest egg to buy a house down the road? The answer to this question will help determine what account to open. If you're thinking about retirement (my advice: always think about retirement), you should open a 401(k) and IRA. A 401(k) is set up by your employer and pre-tax, meaning you won't be taxed on this money until you withdraw it. Some companies even match your contributions.

A traditional IRA is also tax-deferred, but you don't need an employer to set up this account for you. If you earn less than $118,000 individually, or $186,000 as a married couple filing jointly, you can open a Roth IRA. Unlike a traditional IRA, this account taxes the money you contribute, but when you withdraw it for retirement, what you see in your account is what you get. The caveat: You can only invest $5,500 a year. Since these accounts are created for retirement savings, you'll face a fine if you withdraw money before you're 59 years old.

If you're already investing for retirement and looking to grow your money for a short-term goal, something you want in a few years, like buying a house or travel, consider opening a brokerage account. This is an investment you can access at any time. You can work with a broker to help you invest, or take a DIY approach to make some investments on your own.

1. Decide what to invest in

No matter what account you choose to open, you'll need to know how to actually invest your money. First, consider how involved you want to be in your investments. Look at investments like a restaurant menu: If you like to create your own meal and order à la carte, then invest in individual stocks. The key is to buy low and sell high, but once you invest in a stock, give it time to grow and dip over a few years. Not every IPO will reach Amazon heights.

An index fund is more like the chef's tasting menu. If you're not sure which individual stocks to invest in, an index fund offers a cross section of a specific part of the market, like the S&P 500. This fund gives you a taste of 500 of America's largest stocks. "Instead of buying each of these stocks individually, you can use a brokerage firm to invest in an index fund," financial guide Nicole Lapin tells Redbook. "Buying a share of an index fund gives you exposure to a sector of the market."

Some index funds are mutual funds, which are operated by money managers, who shuffle assets to try for the biggest profits, Lapin says. Others are exchange-traded funds (ETFs) that can be D.I.Y. and traded like stocks.

1. Diversify your portfolio

Savvy investors know this step is key. A diverse portfolio is an investment account with money spread out between various stocks, funds, and bonds. This way you don't have all your eggs (read: money) in one basket. Think about it: If all of your money is invested in Tesla and its stock crashes right when you need to cash out, you can kiss your retirement savings goodbye. But if you have money in various funds and one of these investments fail, the others act as safeguards. You might not have as much money as you'd have hoped for, but something is far better than nothing.

1. Manage your Accounts

The final thing to consider is what firm you want to invest with. If you go the traditional route, investing with a firm like Vanguard or Fidelity, you'll need around $3,000 to open an account. These firms let you buy, sell, and monitor your investments on your own or connect you with an advisor who can set up your accounts for you. If you want to start smaller, online firms like Wealthfront and Betterment have low or no minimum investment. These firms use algorithms to help you allocate your investments so you make the most money.

Want to start even smaller? Sign up for Acorns, an app that lets you invest your spare change. You connect your credit card, and after every purchase Acorns rounds up to the nearest dollar and invests the difference into recommended stocks and bonds. If you're still hesitant to start investing, financial planners and brokers can help you navigate your investment options for a fee. Just make sure yours is registered through the National Association of Personal Financial Advisors or the Financial Industry Regulatory Authority's Broker Check database.

Now that I'm investing, I track all of my accounts with Mint, and I really do see my money grow from year to year. It's important to monitor your investments—I check mine once a month to make sure I'm still happy with the ETFs I chose—but don't drive yourself crazy if a stock or fund has a bad day. Remember: You're in this for the long-term gain, not quick cash.

The term “independent financial adviser” was originally used to describe advisers who work independently for their clients rather than representing an investment, insurance or banking company.

According to Cerulli Associates, the independent financial adviser sector is the fastest-growing segment in the financial services market, having grown assets in 2015 by 6.2 percent versus Wall Street firms, which shrunk by 1.9 percent in asset value.

Many of the most-successful investment professionals have come to realize the value of independence – both for themselves and their clients – and want to provide unbiased and independent advice.

The following are some aspects that pertain to most independent advisers:

Independent advice

Independent advisers are not tied to proprietary funds or investment products. They have the freedom to choose from a wide range of investment products and services and to customize their solutions according to each client’s needs.

This freedom does not allow for a cookie-cutter approach, requiring an adviser to better understand each client’s unique circumstances. This ensures that they are properly aligning with their clients’ best interests.

Independent accountability

Independent advisers tend to have the experience and dedication necessary to build a successful and self-directed practice. They often transition away from brokerage houses and private banks to better concentrate their acquired skills and provide local decision-making on behalf of their clients. This new-found autonomy allows them to avoid the distractions of ever-changing corporate mandates to more closely align their day-to-day operations with their clients’ needs.

As entrepreneurial business owners, independent advisers can only hold themselves personally accountable for successes and failures. They do not receive a salary and/or bonus from a company, so they have a direct duty of loyalty to their clients. The long-term viability of their businesses keeps them focused on building long term relationships.

Independent fees

Independent advisers tend to value the pursuit of client goals over product quotas and sales goals. As such, they typically operate on a fee-based compensation model, which is simple, transparent and incentivizes safely growing a client’s assets.

A fee-based model does not encourage an adviser to trade, unless doing so would benefit the client. It does not reward the adviser for choosing one investment over another. It simply rewards advisers who grow assets and penalizes those that don’t. When the client does well, so does the adviser’s business.

Fee-based advice requires an adviser to act in a fiduciary capacity under the Investment Advisers Act of 1940. This act requires advisers to operate under a different and higher standard of responsibility than any other financial adviser. They are legally obligated to act in their clients’ best interests, even if that runs counter to the firm’s own interests. According to PBS Frontline article of April 2013, only 15 percent of financial advisers were fiduciaries.

Independent custodian

Independent advisers rely on third party-custodians, such as Fidelity, LPL Financial, Schwab and others, to safeguard and report on the status of clients’ assets. By placing your assets with an independent third-party custodian, you create a firewall between your adviser and your money.

A custodian acts as a gatekeeper and watchdog for your account, allowing the adviser – by your consent – to only manage and make trades on your behalf. The adviser cannot withdraw or transfer funds to an outside account without client authorization.

For many investors, this provides a reassuring system of checks and balances. Although nothing can provide 100 percent protection from fraud, working with an independent custodian and an independent adviser acting in a fiduciary capacity can greatly reduce your risk.

Startups usually end up spending a lot of money on things that aren’t worth investing. This blog discusses top 5 tips to use startup funds wisely.

Startups are the result of great enthusiastic minds that have the courage to take calculated risks, invest money and a have lot of patience to wait to reap ROI. Those who face the challenges and struggles at the initial phase of establishment, with the right approach, see a bright future ahead.

At times, startup owners usually get influenced by suggestions of amateurs and choose the wrong method to spend their money and utilize resources. Considering the reports, statistics and success ratio of startups till date, following are consolidated 5 pointers for efficient planning of money and resources:

Do not fall in the trap of lawyers

As a startup, you may need legal assistance, but at a very basic level. You may come across law agencies and lawyers who offer packages to serve dedicatedly to your firm. You should know that your agency is not yet established in well manner and does not need dedicated law services.

Instead it is better to hire the service as and when required instead of contracting with the law agencies in advance for all types of legal assistance.

Avoid paying exorbitant ticket rates to attend conference and events

In an attempt to gain knowledge on how to groom startups, people usually end up attending a series of events and conferences. Not only is the entry ticket to these events too high but these are utter waste of time as no 2 to 3 hour session can skyrocket your startup.

One option to learn is to take advice of people you know personally and discuss your business challenges with them. Referring videos and learning from them is also a cost as well as time saving option.

Co-working office space isn’t always good option

In order to save money, startups may opt for co-working spaces. However, this may have a negative impact on your team. If the other people sharing your working space aren’t dedicated to their work, they may spoil the culture and overall working environment.

Though small in space, get your own workplace and establish a loyal, dedicated and healthy working culture. In such environment, developers can focus on their work and deliver fast outcomes.

Save on accounting and finance services

Your startup isn’t big enough to hire accounting and finance services. When you have a handsome number of people working for you, it is easy to manage their payroll on your own.

At a later stage when the strength of your company is above 30, you may look up for some cost-effective accounting and finance service provider that best suits your business requirements.

Keep a limited budget for advertising

Marketing and advertising is essential for a startup to build a good brand reputation and spread a word about its existence among target audience. Spend wisely on advertising services as this is a very vast field and there is no limit to the money you spent on different marketing mediums.

Set aside a budget for marketing to know that you are not overspending on it. Later when you have earned decent profit, you can add to this budget and take advertising strategy to a broader scale.

Wrapping it up…

Strategic planning and management of time, money and resources is the only key to a successful startup. Owners should have a broad vision as well as the talent to tackle run time challenges and dynamic problems. Stay at the forefront of technological advancements and trends and gain a competitive edge. Good luck to all startup owners!

The most surefire way to become a millionaire retiree (aside from actually starting with a million dollars) is to invest in stocks that consistently generate strong returns, and allow your gains to compound for decades. Certain real estate investment trusts, or REITs, make particularly great retirement investment. Here's why REITs are great stocks to hold in retirement accounts, and two examples that could be great investments for you, both of which are cornerstones of my own retirement portfolio.

Why REITs make excellent retirement investments

I'm a big fan of REIT investing, but this is especially true when it comes to retirement investing. Specifically, the favorable tax treatment of REITs works twice as well in retirement accounts.

In exchange for agreeing to distribute at least 90% of their taxable income to shareholders, REIT profits are not taxed on the corporate level, unlike most other companies. For example, if you own Microsoft stock, the company's profits are taxed before the company pays your dividend. This is not the case with REITs.

The potential downside is that REIT dividends generally don't qualify for the lower "qualified dividend" tax rates and are instead taxed as ordinary income. This still tends to work out favorably for shareholders, but it is a consideration for income investors.

Here's the point. In a retirement account such as an IRA, you don't pay taxes on the dividends you receive. You only pay income tax when you withdraw your money (traditional IRA) or when you contribute to your account (Roth IRA). This double tax benefit of holding REITs in retirement accounts can give you a big advantage over the long run.

The digital economy is growing -- here's how to invest in it

Data center REIT Digital Realty Trust (NYSE: DLR) could be a great way to invest in the growing need for data storage, a market whose growth rate isn't expected to slow down anytime soon.

Simply put, a data center is a building designed to house servers and network equipment in a reliable and secure environment. Digital Realty provides a wide variety of data center solutions to clients, both big and small. Top tenants read like a who's who of major tech and financial companies -- IBM, Oracle, Facebook, JPMorgan Chase, Verizon, and Amazon are all among Digital Realty's top 20 tenants. Tenants sign initial lease terms of 11 years, on average, which minimizes turnover and vacancy risk in any given year.

Once the acquisition of DuPont Fabros Technology is finalized later this year, Digital Realty will have 157 data centers in its portfolio with 26 million rentable square feet. The properties are located in 12 countries around the world, but international expansion remains a key area of potential growth going forward.

Perhaps the most important reason to consider data center real estate as an investment is the growing need. According to Cisco, global IP traffic is expected to grow at a 22% annualized rate through 2020, and global data center traffic is expected to grow even faster, at a 27% rate per year.

Furthermore, this steadily growing demand offers protection against recessions. In fact, Digital Realty has achieved 11 consecutive years of positive growth, including during the financial crisis. As you can see, most other leading REITs cannot say the same.

Shareholders have been handsomely rewarded, as Digital Realty has increased its dividend at a 12% compound annual rate since 2005, and the stock has generated total returns of 1,570% for shareholders -- that's an annualized return of 26%.

Healthcare real estate could be a trillion-dollar opportunity

This isn't an exaggeration. The healthcare real estate market is about $1.1 trillion in size now, and the portion of the population that uses healthcare most, senior citizens, is expected to roughly double in size by 2050. When combined with natural growth in real estate values over time, it's fair to say that the market value of healthcare real estate could easily double, or much more, in the next three decades or so.

There are a bunch of REITs focused on healthcare, and HCP (NYSE: HCP) looks particularly attractive from a long-term perspective. The company owns properties, most of which are senior housing, life science, or medical office buildings. 95% of the property's revenue comes from private-pay sources, which is more stable and reliable than healthcare revenue dependent on government reimbursements.

HCP should be a big beneficiary of the aging population, as senior housing makes up nearly half of its portfolio, and demand is expected to grow by more than 600,000 units over the next 15 years alone.

Yet another potential growth catalyst for HCP is the current fragmentation in the healthcare real estate market. Only about 15% of the $1.1 trillion in properties are REIT-owned (compared with 40% or more for properties like hotels and shopping malls), and HCP is one of the largest. As the industry undergoes REIT consolidation, large, financially flexible players like HCP should have an advantage. In fact, between its three core property types, HCP estimates its investable universe to be $710 billion in size.

Aside from 2016, during which it spun off certain assets, HCP has an excellent history of dividend increases. In fact, the company was a member of the S&P 500 Dividend Aristocrats index and has handily beaten the S&P's return over the past quarter-century.

There are at least three ways, though only one of them looks rational today. First, you could mine your own bitcoins. Second, you could buy some from an exchange. Third, you could buy shares in a fund that has invested in bitcoins.

Please note that answering your question is not a recommendation, and I am not qualified to give advice on investments. However, as electronic payments expert Dave Birch put it to me on Twitter: “one doesn’t invest in bitcoin, one gambles on bitcoin”.

The problem is that people can make money by buying things that are essentially worthless, such as used postage stamps, Beanie Babies, and (historically) tulip bulbs. Tulipmania operated on the “bigger fool” theory, also known among stock traders as “momentum investing”. For example, tulip bulb prices may be insane but they keep going up. I may be a fool to buy them, but I expect a bigger fool to buy them from me. Simply replace “buy low, sell high” with “buy high, sell higher”. This works until you run out of fools.

However, you can buy things that don’t depend on bigger fools appearing, such as land and gold. Their prices may vary dramatically, but over the long term, they retain real value. When tulip bulb prices were tumbling, everyone wanted to sell. When gold prices tumble, people with money look forward to an “investment opportunity”.

Does Bitcoin have value?

Bitcoin is a digital currency. If you want to buy a camera for £250, then you need a way to transfer £250 to the seller. In theory, it doesn’t matter if you pay cash, write a cheque, email the money via PayPal or use bitcoin. In reality, you have to balance a range of factors including convenience, security and transaction costs. I’d use a credit card, if possible, because bitcoin payments are not reversible and offer no consumer protection.

But if you are investing, does bitcoin have an intrinsic value, like gold? To me, bitcoins look more like tulip bulbs.

The price of a bitcoin may increase because, for example, it is attractive to technology enthusiasts, and because we are all reading stories about how people made – or failed to make – fortunes. But, like tulip bulbs, bitcoins could be worthless when the bubble bursts.

As Henry Blodget told CNBC: “Look, this is a perfect asset for a speculative bubble. There is a finite supply. There is no intrinsic value. If anybody is persuading you that it should somehow be related to some GDP or gold … put down the Kool-Aid and back away.”

You could argue that banknotes don’t have any intrinsic value either. However, banknotes are backed by governments that have a strong interest in keeping their value relatively stable. Governments don’t (yet) care what happens to bitcoins.

Mining for money

Bitcoins are “mined” by people solving problems with computers. In the beginning, the best way to make money from bitcoins was to mine them with a home PC. However, bitcoin mining becomes more difficult the more miners there are. Today, you need specialized hardware, and you need to join a “mining pool” where large numbers of miners work together and share the results. Coins are not pure profit because of the cost of the hardware and the electricity consumed when mining. Also, you don’t know what bitcoins will be worth when you start mining them.

However, there must be dozens of digital currencies besides bitcoin, and the CoinChoose website lists a Top 20. Well known alternatives include Ethereum, Litecoin, Dogecoin and Bytecoin. You might find one that is still worth mining, or that might represent a better gamble than bitcoin. CryptoCompare is another useful website.

Ethereum is interesting because it’s backed by an alliance that includes JP Morgan, Microsoft, Intel, Banco Santander, Credit Suisse Group, UBS and BP. It’s designed to perform transactions very much faster than bitcoin, and its hashing system is decentralised by design. It favours individuals, not mining pools.

Buying bitcoins

You can buy bitcoins from a bitcoin exchange or online broker, directly from another individual, or from an ATM. Coin ATM Radar lists about 50 bitcoin ATMs in London, many of them in convenience stores. As when buying foreign currencies, there’s a fee, which can range from 3.1% to 17.6%. The website covers 56 countries and you can search for an ATM near you.

A bitcoin ATM usually takes cash from your bank card, though some only accept banknotes. It sends your digital currency (bitcoin, litecoin etc) to your wallet, which could be a smartphone app, or to your email address. Some ATMs can print “paper wallets” that you can scan later.

If you buy a digital currency from an exchange, it may well offer you an online wallet, but your money is at risk unless you have the keys. When the Mt Gox bitcoin exchange was hacked, around 850,000 bitcoins went missing. It was a $450m loss at the time, but at today’s exchange rate, it would be $2bn.

Wallets

There are dozens of different wallets for different purposes, with “hot” wallets on smartphones and “cold storage” wallets held offline on paper, on hardware devices (cards, thumbdrives etc) or on separate PCs. These are equivalent to your spending money and your savings account respectively.

You will need to research wallets. However, We Use Coins has a decent guide, and it recommends BitPay’s Copay to beginners. It’s easy to use and it runs on iOS, Android, Windows and Windows Phone, MacOS and Linux. It can also handle shared accounts.

I used my Android phone to search for “bitcoin wallet” on Google Play, and gave up when it produced around 200 results. Copay was near the top. It only took two minutes to create a wallet, and it prompted me to make a backup: “Watch out! If this device is replaced or this app is deleted, neither you nor BitPay can recover your funds without a backup.”

It also warned me that “Anyone with your backup phrase can access or spend your bitcoin”. I dutifully wrote it down.

Once the wallet is set up, you can use the app to buy bitcoins from Coinbase in 33 countries, and from Glidera in the USA. It can take several days to buy or sell bitcoins via Coinbase.

Alternative strategies

Some investors – presumably ones who do not have teenage children – think bitcoin is “for the tech-savvy, difficult to buy and perhaps even harder to store safely”. This has given rise to funds that buy bitcoins or related assets such as mining companies. Last month, The Motley Fool described one ETF as The Worst Way to Buy Bitcoin. At the time, the story said, shares in the Bitcoin Investment Trust cost about twice as much as the bitcoins it owned, but typically they “have traded at an average premium of 39% to underlying value of the bitcoin”.

You could buy dollar bills for $1 each, so why would anyone pay $1.39 to invest in a $1 bill … which is actually worth less than $1, because of the 2% annual management fee? Answer: “the laws of supply and demand”.

Other American investors were conned by a Ponzi scheme that offered shares in bitcoin mining machinery.

Stories like that could be signs of a bubble market, but if so, when and how it will end is impossible to say.

They’re cheap, rallying and provide diversification.

After badly trailing U.S. stocks for most of the past decade, foreign stocks are suddenly on fire. Is now the time to load up on them, or is it already too late? And what portion of your stock money should you invest overseas?

Consider recent returns. Since the start of the year, the MSCI EAFE index of stocks in foreign developed markets rose 13.3%, and the MSCI Emerging Markets index soared 17.7%. Standard & Poor’s 500-stock index, though it had a not-too-shabby return of 9.5%, is running far behind. (All returns in this article are through July 7.)

But foreign stocks’ recent performance follows a truly abysmal decade, when they returned virtually nothing. Over the past 10 years, the MSCI developed market index returned an annualized 0.8%, and the emerging-markets index returned an annualized 1.4%—even with the recent rally. Many foreign bourses have yet to climb above their 2007 pre-bear-market highs. Over the same 10 years, the S&P 500 returned an annualized 7%.

Vanguard founder Jack Bogle is one of many observers who see little or no benefit to investing in foreign stocks. Roughly 45% of the revenues from stocks in the S&P are earned overseas. Why take the currency and political risks of investing in foreign countries? And in emerging markets, particularly, companies must deal with far more government meddling and corruption than in the U.S.

But over longer stretches, foreign stocks have provided close to the same results as U.S. stocks. Plus, foreign stocks and U.S. stocks don’t move in lock step. Says Ben Johnson, a Morningstar analyst: “If diversification is the only free lunch in investing, investors are leaving a lot on the lunch table.”

From the start of 1970 through June 30, 2017, the S&P returned an annualized 11.0% while foreign developed stocks returned an annualized 9.2%. The performance gap can be almost entirely explained by foreign stocks’ recent slump. From 1970 through 2010, foreign developed stocks trailed the S&P by an average of just one-half of one percentage point per year.

Even more intriguing: Since 1970, foreign stocks and U.S. stocks have taken turns leading each other for multiyear periods. I had Morningstar look at rolling five-year returns over the years since 1970. By this I mean Morningstar computed returns from the beginning of 1970 through 1974, from 1971 through 1975 and so on.

U.S. stocks led foreign stocks over trailing five-year periods from 2011 through the present, from 1991 through 2003 and from 1983 through 1985. Foreign stocks were the winners from 2004 through 2010, from 1986 through 1990 and from 1978 through 1982.

Next, consider valuations. Partly because foreign stocks have been such abysmal performers of late, they’re cheaper on virtually every measure of value you can find—price-earnings ratio, price-to-sales ratio, price-to-book-value ratio, dividend yield and so on.

The S&P currently trades at a lofty 18 times estimated earnings for the coming 12 months. But foreign developed stocks trade, on average, at 15 times earnings, which is right in line with long-term averages. And emerging-markets stocks change hands at a mere 12 times earnings.

I don’t expect stocks in foreign developed countries, emerging markets and the U.S. to trade at the same price-earnings ratios anytime soon. Europe and Asia both face more headwinds than the U.S. Nor do I think foreign stocks will hold up as well as U.S. stocks in the next bear market.

But I do expect that valuations will grow closer to one another over time. Why? Consider some of the largest holdings in the foreign developed stock index: Nestle, Novartis, Roche, Toyota, BP and British American Tobacco. These are not so much foreign stocks as they are global multinationals. Ditto for some of the largest holdings in the S&P: Apple, ExxonMobil, Facebook, Johnson & Johnson and General Electric.

How much should you invest in foreign stocks? About 47% of global stock market capitalization is outside the U.S. Vanguard’s target retirement funds allocate almost 40% of their stock investments to foreign stocks. In a letter to shareholders, Vanguard Chairman William McNabb criticized “home bias,” the tendency of investors worldwide, not just in the U.S., to overweight their own country’s shares. “In their aversion to the unknown, investors can end up increasing, rather than lessening, their risks,” he wrote. “That’s because they’re sacrificing broad global diversification—one of the best ways I know of to help control risk.”

In my view, 40% in foreign stocks is too much. After all, U.S. investors, for the most part, spend dollars, not euros or yen. I recommend that investors put 25% to 35% of their stock money in foreign stocks in the current climate—with younger and more risk-tolerant investors skewing more toward the higher number.

What’s emotionally difficult about owning foreign stocks is that it guarantees you’ll be out of sync with the U.S. market for lengthy periods. And most of the day-to-day investing news we digest is about the U.S. market. The combination would have made it easy to throw in the towel on foreign stocks at the end of last year—which would have been precisely the wrong time.