Friday Financial Five – August 31st, 2012
Friday, August 31, 2012
GDP is revised up
We received another smidgeon of good news as the 2nd quarter GDP was revised up to 1.7% from 1.5%. It’s not a huge increase and it was expected, but we’ll continue to take anything remotely positive, even if it comes in dribs and drabs. This accompanies some heartening home sales data to provide a small light at the end of a very long tunnel, despite deteriorating consumer confidence numbers for August.
The rush to give everything away
More and more of us have a story about a friend or family member subjected to a lengthy, expensive nursing home experience. A strategy that appears to be gaining traction with younger retirees is to start giving away assets in order to “protect” them from the five year look back period. The problem is, once you have irrevocably given something away, it’s very tough to get it back. You might not have any control over your estate and gifted money could get spent or lost in the recipient’s divorce. Be sure to travel down this path with extreme care.
Graduating from college does have its privileges
Investment spotlight: Floating rate funds
With the current low interest rate environment, it makes sense to have a flexible fixed income strategy. Floating rate funds take advantage of short duration banks notes with adjustable interest rates. The rationale is to avoid being stuck with long term bonds when the rates start to edge higher. However, what you avoid in interest rate risk subjects you to credit risk. Therefore, if you’re going to use this asset class, you may want to utilize bank loans issued from large, liquid issuers.
Financial aid on your student ID
You have to give it to the banking industry – they certainly are innovative when it comes to reaching young spenders. There are currently 900 schools partnering with banks to link financial aid and grants to student IDs, according to a study by the U.S. Public Interest Research Group. It sounds like a great mix of readily available cash (you don’t have to wait for a check) and convenience, but look out for reloading and ATM fees.
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