Tactical Asset Allocation

By | Building Financial Independence, LFS Express, Portfolio Management
Understanding asset allocation is an important part of investing your money. With asset allocation, you can be sure that your portfolio not only holds the asset classes appropriate for the current market environment, but also that they’re appropriately proportioned for your unique financial situation. Tactical Asset Allocation describes the active management of the asset classes in your portfolio in response to changing market conditions. Read More

Press Release: Financial Literacy Education on the Rise with CalCPA State Committee

By | News | No Comments

John Lau of LFS Asset Management appointed to CalCPA’s State Committee on Financial Literacy

BURLINGAME, California–June 7, 2017–John Lau, author and advisor, has been appointed as the Chapter Co-Chair for California Society of CPAs State Financial Literacy Committee. CalCPA Institute is now collaborating with Financial Aptitude Training (FiAT, www.fiatprogram.org), a local non-profit organization, in bringing financial literacy to local youth with the Financial Literacy for Youth (FLY) Summer Camp Program.

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Risk Management Is More Crucial Now Than Ever

By | Portfolio Management

“Rule No. 1 in investing is not to lose any money; Rule No. 2 is Do Not Forget Rule No. 1.” -Warren Buffett

The U.S. equity market has been rallying since Donald Trump won the election in November, 2016. Much of the rally has been based on hope and expectations of a pro-growth environment, including corporate tax reform, infrastructure spending, and deregulation. To a large extent, the effects of these expectations have been priced in to the current market valuation; and the political v. policy gap error risk is rapidly becoming a significant factor, weighing in on the sustainability of the market. Despite chaos in the first weeks of the new administration (travel ban protests, resignation of the national security advisor, judicial ruling against an executive order, diminishing likelihood of repealing and replacing the Affordable Care Act, etc.,), the U.S. equity market continues to march forward onto positive territory, due primarily to continuing positive economic data (corporate earnings, consumer spending, housing starts, etc.,) But the market is growing wearisome, and [it] is very much looking forward to actual pro-growth policies from the administration. Absent any real pro-growth policies (within the first 100 days of the new presidency), the equity market may begin to correct. With all the mid-night tweeting and war waging against the media, the president’s efforts seem to have diverted from real policy reforms and governing; and as the political/policy gap continues to widen, so does it heighten the risk of a market correction. Other market headwinds may come from more hawkish monetary policy (Fed hiking interest rates more frequently than expected), and possible trade wars with China and other countries.

Two of the most effective risk management strategies are Position Sizing and stop losses. Investment is a game of discipline and strategies. Like all games, it has rules of engagement. To win at the game, you must know what the rules are and use them to your advantage. Read More

The Twelve Days of Christmas: Day Twelve

By | Building Financial Independence | 3 Comments

Day Twelve

Live Each Day to the Fullest – S.H. Payer

Live Each Day to the Fullest

The first time I read this poem was some thirty years ago. I don’t read many poems, but this one has stayed with me through all these years; through good times and bad, and it has been a source of inspiration and encouragement for me. I hope it will have the same effect on you as it has on me.

Merry Christmas and Happy New Year! Read More

Beware of Scams Targeting Taxpayers

By | Building Financial Independence, Tax Planning & Prep | No Comments

The IRS is warning taxpayers of a new scam using fraudulent CP2000s to solicit money from taxpayers. A CP2000 notice typically states :

The income and/or payment information we have on file doesn’t match the information you reported on your tax return. This could affect your tax return; it may cause an increase or decrease in your tax, or may not change it at all.

The fraudulent forms look convincing and show balances due that are small enough that taxpayers just might pay rather than arguing the point. However, upon closer inspection, these forms have telltale signs of fraud:

  • The instructions direct the taxpayer to make out a check to “I.R.S.” rather than to “United States Treasury”; and
  • The return address is “Austin Processing Center, P.O. Box 15264, Austin, TX 78761-5264,” which does not match the address listed on the IRS website for the Austin processing center.

What to do if you receive a CP2000 notice from the IRS?

If you receive a CP2000 notice from the IRS, it is best to contact your tax professional so that the correspondence can be verified.

Good luck.

The Twelve Days of Christmas: Day Eleven

By | Building Financial Independence, Tax Planning & Prep | No Comments

Day Eleven

“We have what it takes to take what you have.”

–Suggested IRS Motto

The best time of the year to start tax planning is at the beginning of a new year when you will get the benefit of the whole year to implement the plan.

Tax planning is more than accumulating deductions. While deductions do help, but they are not the only game in town. You can save money on taxes even if you do not itemize.

Some of the more frequently overlooked planning attributes include: Read More

The Twelve Days of Christmas: Day Ten

By | Building Financial Independence | No Comments

Day Ten

Never depend on single income. Make investment to create a second source.

Financial tip: Turning an Old Annuity into a Family Fortune

Many people purchase annuities for their perceived safety, simplicity, and tax deferral. Yet, annuity owners risk losing much of their account value when their beneficiaries cash in the annuities upon their death.

Let’s take a look at how this can happen: Mary, age 55, purchased a fixed annuity for $50,000. Over the years the interest accumulated nicely, and it has now doubled to $100,000. Mary is very happy with her annuity. Say all Mary wanted is to pass a nice estate to her beneficiary when she dies. Since an annuity is an income in respect of a decedent item, the deferred income is all taxable to the beneficiary upon withdrawal at Mary’s death. Assuming a combined Federal and state income tax rate of 30%, the total tax on her $100,000 annuity account could be around $15,000 (30% x $50,000 deferred income), netting $85,000 to her beneficiary. Read More

The Twelve Days of Christmas: Day Nine

By | Building Financial Independence, Tax Planning & Prep | No Comments

Day Nine

“Every good act is charity. A man’s true wealth hereafter is the good that he does in this world to his fellows.”

-Moliere

Financial Tip

Looking for last minute deductions? Look no further than giving to charitable causes. If you donate noncash items, you’d need to prove “good used condition or better” of your donated items. A detailed statement, complete with pictures, will better represent the gifted item. Most phones take great pictures, and a picture is worth a thousand words. By the way, don’t just rely on receipts from the Salvation Army or Goodwill, especially if they contain vague descriptions. They will not be enough substantiation for a $1,000 or $2,000 (for example) noncash contribution. For your year-end substantiation needs, a Charitable Contribution Substantiation cheat sheet is provided here.

The Twelve Days of Christmas: Day Eight

By | Building Financial Independence, Exit Planning for Retirees | No Comments

Day Eight

“A fine is a tax for doing something wrong. A tax is a fine for doing something right.”

-Anonymous

IRA RMD

If you are over 70-1/2, remember to take your required minimum distribution (RMD) before the end of the year, or you may face a 50% penalty. The RMD amount is calculated using the IRS Uniform Life Expectancy table. The table provides a factor by age, beginning with age 70. The factor is the denominator used in the computation. The numerator is the previous year’s year-end account balance. If the beneficiary is your spouse and s/he is more than ten years younger, you may use the IRS joint life expectancy table instead. It may work out to your tax advantage. Read More

The Twelve Days of Christmas: Day Seven

By | Building Financial Independence | No Comments

Day Seven


“In a hospital, they throw you out into the street before you are half cured; but in a nursing home, they don’t let you out until you are dead.”

-George Bernard Shaw.

Risk Care Management – Long Term Care Insurance

Risk management should be an integral part of personal financial planning. One such strategy is Long Term Care insurance (LTCI), which helps pay the cost of care if you are no longer able to perform certain activities of daily living (ADL), such as bathing, dressing, eating, toileting, transferring, and maintenance continence.

LTC insurance can be either tax qualified or non-qualified. Tax-qualified means that the insurance contracts conform to the 1996 Health Insurance Portability and Accountability Act (HIPAA) as well as IRS rules. Qualified policies are given favorable income tax treatments — it allows a tax deduction for premiums up to a certain limit based on one’s age. All Tax-Qualified LTC policies are activated once the policy holder needs assistance either with two of six ADLs or with a cognitive impairment (Alzheimer’s Disease, for example) due to an illness, injury, or cognitive disorder. Read More