Month: November 2015

International markets can offer high potential returns, but it’s important to remember that more return potential means more risk potential: as we’ve seen in recent months, China’s currency and production challenges have had negative repercussions around the world.

Currency fluctuation is a significant risk. The value of foreign currency fluctuates with changes in the supply of and demand for both the foreign currency and the U.S. dollar. If your investment in a European security appreciated and at the same time the euro strengthened relative to the U.S. dollar, for example, your actual return would reflect both the appreciation of the investment and the strength of the euro. The strengthening of the euro is caused by changes in the supply/demand ratio for the euro, the U.S. dollar, or both. On the flip side, if the euro weakened relative to the U.S. dollar, your investment return would be affected adversely, even though your investment appreciated.

Compounding this problem is the fact that in some foreign markets, particularly small ones, it’s difficult to trade certain securities. For any number of reasons, you may experience difficulty finding buyers for a foreign security you wish to sell. You are thus forced to accept the price offered, which may wind up being less than your initial investment.

Although the risks involved with foreign investments cannot be completely eliminated, there are ways of managing those risks. Mutual funds are one: in addition to providing professional management, mutual funds enable you to diversify by investing in a portfolio representing various regions, countries, and industries (though, of course, this varies by fund.)

Investing with a long-term horizon is another way to manage risk. Overseas companies need time to adjust to rapid changes in international political and economic conditions, the pace of technological development, and global competition. Because short-term fluctuations are typical when investing abroad, it’s especially important to maintain a long-term perspective.

If you have a substantial individual retirement account (IRA) balance and intend to leave some or all of the IRA to your beneficiaries, you may want to consider splitting it into several different accounts, each with its own beneficiary.

For example, let’s say you have three children, ages 25, 20, and 15, and one grandchild, age 5, and want to name them as the beneficiaries of your $100,000 IRA. Depending on your IRA plan rules, unless you specify otherwise, the account would typically be divided equally among the four beneficiaries. But if you divide the IRA into four separate accounts, each with a different primary beneficiary, you can give half to your children and the other half to your grandchild.

Splitting an IRA into multiple accounts is advantageous if there’s a significant age difference between beneficiaries because you can enable younger beneficiaries to maximize the potential for tax-deferred growth. Upon the IRA holder’s death, each beneficiary can calculate required distributions based on his or her own life expectancy, instead of on the life expectancy of the oldest beneficiary, which would be the case with only one account. Younger beneficiaries could take smaller distributions and reduce their current taxable income, leaving more in their accounts to potentially grow tax-deferred.

You can also select different investments for each account-perhaps a more aggressive stock fund for younger beneficiaries, who can afford greater risk, and more conservative funds for older beneficiaries, who need income. Your advisor can help you decide the best way to divide your accounts.

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This Month’s Smile: Making a Great Cat Video Cat videos have the highest traffic ratings on the Internet. Maybe it’s because watching cats de-stresses us. Or it could be because cats are stubborn. Whatever. But if you want to go viral, you need to remember that your cat is the star, producer, and director of the show. You’re just the mildly entertaining human with a camera. To get your video, you’re going to need to remember these three tips inspired by Peter Gerstenzang’s How-to on catchannel.com:

1. Improvise. Your story line will be what your cat wants, not the other way around.
2. Forget linear time. See #1.
3. Shoot now, edit later. See #1 again.

Maybe cat videos go viral because getting a cat to do anything long enough to get the camera and record it is totally newsworthy!