Starting in 2010, investors who own traditional IRAs will be able to do a Roth IRA conversion regardless of their income level or tax filing status. Additionally, investors who convert in 2010 have the option to delay their tax payment for a year and spread their payment over the 2011 and 2012 tax years. Please consult with your tax professional to determine if a conversion makes sense for you.

In 2010, there is a home buyers tax credit available. One is the $8,000 “first time” home buyer credit and the other is the $6,500 “move-up/repeat” home buyer credit. April 30, 2010 is deadline for these tax credits. Please consult with your tax professional for details and to determine if you would qualify.

Investment advisors provide value to their clients by identifying mutual funds that are doing well on an absolute basis relative to their index or on a risk-adjusted basis. These advisors have the tools and the dialogue with mutual fund managers. They get to know the decision makers in charge of the mutual fund, the analysts, their expenses and how they do business. Once you have the specialty nailed down, you’re better positioned than the average investor.

One of the most popularly sited benefits of an index fund is their low expense ratio. However, one of the downsides is that they are joined at the hip to an index fund, which can raise your transaction cost. Our financial advisory team recommends a healthy balance of index and actively managed funds. Putting clients into some index funds and some actively managed funds allows them to get the best of both worlds. For someone putting all their “eggs” into exclusively managed funds, we would advise against that.

Want more information? Access the article where Anthony Diaz, CFA and vice president of investments, provides insight on index funds and actively managed funds. Also, feel free to contact our financial advisory team, we’re here to help!

1. Get Your Emergency Savings Account Ramped Up. Ensure you have 6 months of living expenses saved up in a liquid savings instrument (e.g. checking account, CD, or interest-bearing savings account).

2. Focus on Debt Reduction. Reduce your highest interest debt as much as possible. Start with your highest interest-bearing liability, usually that’s your credit cards.

3. Do a Top Down Re-evaluation of Your Investment Portfolio. Consider each individual holding (e.g. stocks, bonds, mutual funds) and reduce your exposure among the more exotic, alternative riskier investments.

Just like your grandmother used to say, “It’s important to have savings, don’t take on too much debt, and be careful of what you invest in!”

The Faster Times quoted Anthony Diaz, CFA, financial advisor and vice president of investments at IFC Advisory for his insight and expertise on financial planning in the upcoming year. Feel free to check out How to Get What You Want in 2010 and let us know what you think!

If a company with a solid history of good financials is being overlooked by the market, or if it is being beaten down by the market for temporary reasons (e.g. a new product launch is receiving tepid consumer reaction, a new movie is bombing at the box office, the CEO is undergoing heart surgery), a value investor regards this as a buying opportunity with the expectation that their prices will eventually rise to their true worth when the market adjusts or after the company’s temporary issues or problems are remedied. It is critical to understand the following about value investing:

• Be patient. This can take weeks or years, but it is at that time when you have the potential of a capital gain.
• Be willing to research your investment candidates and their industries thoroughly.
• Be willing to stand your ground when the pundits and the stock market in general say otherwise.
• Be able to let a stock go when you find that its fundamentals have changed significantly.

Most value portfolio managers screen first for fundamental measurements such as price-to-earnings (P/E) and price-to-book (P/B) that are lower than the S&P 500, and then analyze each company’s financial statements. The key is not to invest in cheap stocks necessarily, but in those whose companies are currently undervalued by market over-reaction, misperception, and short-term focus, and whose stocks have catalysts for potential, long-term capital appreciation. This only comes from companies on a sound financial footing with a good track record.

From this short list of undervalued, financially sound companies, conduct a thorough qualitative evaluation by reviewing annual reports, SEC filings, press releases, and web sites. Talk to suppliers, customers, and competitors with the goal of truly understanding the companies—their management in particular—and the industries in which they operate.

It is preferable to invest in companies whose management has demonstrated long-term competency and integrity, and whose top executives have been in place a long time. Researching what suppliers, customers, and competitors have to say about a company can be particularly revealing. If a company is on solid ground with their suppliers and customer base, this can be an advantage against their competitors.

In contrast, if a company is constantly having difficulty with key suppliers or distribution channels, this could spell trouble going forward. Similarly, if customers are constantly complaining, or worse, defecting to the competition, this would not bode well. Interviews with the competition can be a sign of their shifting competitive landscape in terms of changes in market share, target market, pricing power, and geographic penetration.

Bottom Line: Value investing is very methodical, requiring equal doses of quantitative rigor and qualitative insight, and a great deal of patience. It’s challenging to identify these companies and can take 3-5 years or longer before the market “bids up” a value stock to its true worth. However, value investing can be well worth the effort and the rewards can be great to those who commit the time and refuse to pay retail.

Our Los Angeles based investment advisory team has been assisting clients with financial planning and wealth management for more than a decade. Please call us at (800) 632-2463 if you have any questions!