By Dr. Scott Brown

Let me tell you about some legal ways to avoid getting taxed on profits from the stock market. You can make a lot of money now with the stock market as low as it is at this time as I teach you in my home study course. The very best way is to buy and sell your stock through Individual Retirement Accounts (IRAs).

IRAs can help you legally avoid taxes and add a fantastic boost to your retirement plans. The IRA was originally developed in 1974 for people not covered by a company pension plan. “The individual retirement account legislation allowed the average person a chance to put money into a tax-advantaged account,” according to Bruce Grace, a Chartered Financial Analyst and Assistant Professor of Finance at Morehead State University.

This is a huge benefit to individuals, regardless of whether they have company-established pension plans or not. “The Roth IRA may be an even a better deal for those who think they will be in a higher tax bracket at retirement,” Grace added. I personally go a step further and mean it when I tell you that “the Roth Ira is literally the best thing since sliced bread” and I guarantee you is “neater than peanut butter”.

It may seem a little confusing because since the original enactment of IRA legislation, several types of IRAs have been developed with a variety of characteristics that can meet your investment and retirement needs.

The most common forms of the IRA are as follows. The traditional IRA gives you a tax deduction on all of your contributions to the account during your working years and taxes what you take out of the account in your retirement. The Roth IRA does not give you a tax deduction during your working years but you pay no taxes on withdrawals while you are retired.

The 401(K) is an IRA that your employer may or may not offer instead of a pension where, unfortunately, you are generally restricted to investing in mutual funds. The Roth 401(k) is very new and is much better than the standard 401(k) but the jury is out as to whether corporate insiders will adopt it for their employees. The SIMPLE and SEP IRAs are very nice supplemental tax shelters for small business owners and family businesses. Finally, the Education IRA gives you a way to save for a child’s college studies.

By Daniel Lamaute

A SEP is a special type of IRA. Under a SEP plan the employer creates an IRA account for each eligible employee, hence the name SEP-IRA. A SEP is funded solely with employer contributions. Employees do not make contributions to their SEP-IRA retirement account. Any money that goes into a SEP automatically belongs to the employee. Thus, the employee has the right to take his SEP IRA account money with him whenever he stops working for the company.

Any size business can establish a SEP, but the SEP retirement plan is utilized mostly by the self-employed and the small business with few employees. The SEP IRA rules dictate that if the business contributes for one employee, (i.e., the owner), then the business must contribute proportionately for all of the employees. With few exceptions, anyone who works for the business must be included in the SEP. However, you can exclude from participating in the SEP plan anyone who:

1. Has not worked for the company during three out of the last five years.

2. Has not reached age 21 during the year for which contributions are made.

3. Received less than $450 in compensation (subject to cost-of-living adjustments) during the year.

SEP IRA contributions to each employee for 2004 cannot exceed the lesser of $41,000 or 25% of pay for W2 recipients (20% of income for sole proprietors). The SEP IRA contribution limit goes up to $42,000 for 2005, and is subject to cost-of-living adjustments for later years. SEP-IRA rules do not provide for additional catch-up contributions for those 50 years old or over.

A growing number of self-employed individuals with no employees are abandoning the SEP-IRA for a newer type of retirement plan called the Solo 401(k) or Self-Employed 401(k). The two main reasons for the switch are 1) they can generally contribute much more to a Solo 401(k) than they can under a SEP IRA, and 2) Loans are allowed under a Solo 401(k), whereas loans are prohibited under a SEP-IRA.

Example: Henry, age 52, a realtor received $60,000 in compensation from self-employment income in 2004. For 2004, he could contribute a maximum of $27,152 in a Solo 401(k) versus a maximum of $11,152 under a SEP IRA.

However, the Solo 401(k) does not work for businesses with employees. Thus, if your company plans to hire employees or has a handful of employees, the SEP IRA may be your best choice as a retirement plan that is inexpensive and simple to operate.

A trading system is not needed for the long term investor or swing trader. I do believe a trading system is required for the short term day trader. This is a very tough game and I believe in order to gain an upper hand in the short term game you need to have all the right tools in place.

I’m a very visual trader, this means I like to see what is happening in the markets, and like to watch a lot of charts to catch breakouts. My system consist of 8 19″ lcds running off 1 computer. There are 4 video cards powering the system which creates one large desktop. [Read more →]

At what price to buy and when to buy is probably the hardest questions to answer for any investor. I believe that when you find a stock you want to buy and believe their is upside potential, the first question should be how many shares do I want to own. Keep in mind this is not for daytrading.

Once you have determined the number of shares you want, I suggest you buy the stock over a period of a few days. Some of my biggest wins have been through building large positions over 1-2 weeks. [Read more →]

There are hundreds are trading techniques out there and I believe the one that works best is the one you’re more comfortable with. Trying to use too many techniques at once can sometimes complicate the situation mostly with daytrading. Daytrading requires very fast decesion making and trying to formulate complicated models will just not work.

I use different techniques depending on my trading objective. If it’s a daytrade and the stock is moving fast, I do not try to research the company I will merely jump in and get out. If i’m swing trading and plan to hold for a few days I will quickly scan the headlines on the companies to make sure there’s no major bad news on the company. I don’t play into earnings anymore. This is too much of a gamble. [Read more →]

The Fibonacci retracement levels is a theory I find often works. If I miss a run in a stock I will often setup my charts with fibonacci support levels and wait for the stock to retrace, if it bounces off any of these levels I will enter. This can be used in long term and daytrading charts.

Sample: If the Nasdaq rallies 100 points and then corrects, it will often correct 61.8%. Right at, or close to the 61.8% retracement (you have heard us use this term many, many times) the Nasdaq is likely to reverse and start advancing again. Of course it is not this simple. Fibonacci support and resistance levels can fail. There are other Fibonacci levels which may turn the markets (78.6%, 127.2%, 161.8%, etc.). But the fact that it does happen is what is called a trader’s “edge.”

These levels are often used with the Elliot Wave theory that states most stocks will move in 3 and 5 waves.

IFON had a run intra-day run and bounced off fibonacci levels for quick daytrades.

The Moving Average Convergence Divergence charts, or MACD charts for short, are a technical indicator that is derived from the more simple moving average.

The MACD charts are oscillating indicators, meaning that they move above and below a centerline or zero point. As with other oscillating and momentum indicators, a very high value indicates that the stock is overbought and will likely drop soon. Conversely, a consistently low value indicates that the stock is oversold and is likely to climb.

THE 12-DAY AND 26-DAY EMAS

The MACD charts are based on 3 exponential moving averages, or EMA. These averages can be of any period, though the most common combination, and the one we will focus on, are the 12-26-9 MACD charts. [Read more →]

1. OMITTING APPROPRIATE ASSET CLASSES AND ASSET SUBCLASSES. Numerous landmark studies have concluded that how you allocate your portfolio, rather than which investments you select or when you buy or sell them, determines the majority of your investment performance over time. As a result, make every effort to allocate your portfolio to all appropriate asset classes and asset subclasses.

2. SELECTING INAPPROPRIATE ASSET CLASS WEIGHTINGS. By selecting inappropriate asset class weightings a portfolio may earn a lower return and experience greater risk than expected. Consequently, be careful not to over or under weight any asset class, thus enhancing your portfolio’s risk and return trade-off profile.

3. UNDERESTIMATING THE IMPACT OF INFLATION. Inflation can erode the real value of your portfolio over time, thus placing your future financial security at risk. As a general rule, the longer your investment time horizon, the more you should allocate to equity investments. For shorter investment time horizons, emphasize fixed-income and cash and equivalent investments.

4. NEGLECTING THE EFFECTS OF PORTFOLIO MANAGEMENT EXPENSES. Over time, the compounding effect of portfolio management expenses can be quite large, thus depriving you of better returns. For this reason, you should focus on minimizing portfolio management expenses, specifically trading costs, advisory fees and taxes.

5. MAKING INACCURATE RETURN FORECASTS. Forecasting is the single most difficult task with designing portfolios. Although not a perfect solution, using historical returns rather than making forecasts is generally considered more appropriate for individual investors.

6. OVERESTIMATING THE LEVEL OF PORTFOLIO DIVERSIFICATION. Diversification is one of the ten cornerstone principles of asset allocation and is key to reducing risk, namely company-specific risk. To properly diversify, you should hold sufficient quantities of not-too-similar securities with comparable risk and return trade-off profiles. Consider broad-based index funds for a quick and easy solution.

7. MISJUDGING THE IMPACT TAXES HAVE ON NET RETURN. Taxes can have a severe negative impact on your net return. As a result, balance tax and investment considerations, but remember that suitability and appropriateness of an investment take precedence over tax consequences. Never hold an inappropriate investment.

8. CONFUSING DIVERSIFICATION WITH ASSET ALLOCATION. Many investors mistakenly believe that a properly diversified portfolio is a properly allocated portfolio. This is the leading misconception of asset allocation. Properly allocate your portfolio among the different asset classes first and then diversify the investments within each asset class.