dividends Archives - Sycamore Financial Group

Volatility Since the 1900’s – Winter 2010

Hello from Sycamore,

In early fall of 2008 we sent you a brief history of the frequency and amount of market declines. Since the Dow Jones Industrial Average has declined about 3.5% this January, we thought it would be a good time to refresh history and remind us all of what to expect.

Market declines are normal and more common than most of us realize. In fact, they are so common that when we go an extended period without one, we (as your investment manager) begin to get uncomfortable.

Since 1900:

1) A correction of 5% or more occurs about three times each year* and lasts about 48 days**.
2) A decline of 10% happens about one time each year* and lasts about 115 days**.
3) A 15% drop can be expected about once every 2 years* and will likely last about 217days**.
4) A bear market is defined as a drop of 20% or more (generally a wonderful time to buy) and we should expect these about every three and one half years*. These generally will last about 338 days**.
_____________________________________
(Capital Research and Management Company is source, 3/2009)
*Assumes a 50% recovery of lost value except for the most recent decline.
** Measures market high to market low.

While we certainly do not look forward to market declines, we’ve learned that they are a regular part of investing in equities. They’ve been with us for the last 110 years and will likely be with us for the next 110.

We sometimes refer to corrections, or fast run ups in overall market value as “the emotion of the market”. Underlying fundamentals such as earnings and dividends generally are not the reason for these fluctuations. Frequently, it’s something that could only be loosely tied to your portfolios fundamental value.

While we monitor uncertainties such as market fluctuations, changing political winds and recessions (to name a few), they are not our primary focus. We cannot predict or control their occurrence. We choose instead to concentrate on items where we have some control. One of our main goals is to have your portfolio invested in companies that tend to do well through bad times as well as good.

The last two years or so have been a very strenuous time. It’s difficult to not allow short term memory to override our long term perspective.

Thanks for your business and trust,

Sycamore Financial Group

_________________

Past performance does not assure future results. Investors cannot invest directly in the stock market indexes such as the S&P 500. Invest return and principal value of an investment will fluctuate. Investor value, when sold, may be worth more or less than their original cost. The material in this presentation is for illustrative purposes and does not reflect any particular investment.

Tax Increase Prevention – Summer 2006

Hello from Sycamore,

Tax Increase Prevention and Reconciliation Act of 2005

We all received some good news on the tax front recently when president Bush signed the Tax Increase Prevention and Reconciliation Act of 2005 into law. This tax law basically extends the current tax advantages given to stock dividends and realized capital gains for two additional years through December 31st 2010.

As you are likely already aware, stock dividends and capital gains are taxed at a reduced rate from ordinary income. If you are in the 10% or 15% marginal tax bracket, your dividends and capital gains are currently taxed at 5%. This is a substantial savings (66% less) from the tax rate on your ordinary income. If you are in the 25% marginal bracket or higher your dividends and capital gains are taxed at 15% a savings of 10% to 20% depending on your bracket. The new law extends these lower rates for dividends and realized capital gains through 12/31/2010.

Additionally, if your dividends and capital gains would ordinarily be taxed in the 15% bracket (the 5% tax rate as described above), they will be tax free for the years 2008, 2009 and 2010.

These reduced tax rates do not apply to fixed investments such as Corporate Bonds,CD’s or Savings Accounts.

As interest rates rise and start to compete with stock returns, this tax advantage should continue to give equity investors a significant tax advantage. This could help support stock prices relative to other investment options.

If you have been wanting to convert your regular IRA to a ROTH but your taxable income is too high, there is some (deferred) good news for you in this new law. Starting in 2010 the $100,000 modified AGI limitation no longer applies. Additionally, income created by the Roth conversion can be spread over tax years 2011 and 2012.

Another change in the new law is an increase in the exemption amounts for AMT (Alternative Minimum Tax). In 2006 (only in 2006) the exemption amounts are $62,550 for Married Filing Jointly,$42,500 for Single filers and Head of Household and $31,275 for Married Filing Separate.

Finally, more than a few of you will be interested to know that the “Kiddie Tax Law” now applies to children under the age of 18. The previous law applied only to children under 14 years old.

If you have any questions about the new tax law or it’s effect on you, feel free to drop us an e-mail or give us a call. Kokomo 765-455-1554 Anderson 765-643-9333.

Thanks for your business and trust,

Sycamore Financial Group

_________________