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The good news is you are taxed once on the front end, and then later when you remove the money, you won't owe the government any taxes. When you combine the two, you should be able to invest into your 401k with after tax dollars, and as it grows, and you retire, when you remove the funds, they will not be taxed. Article: There’s a new retirement plan soon to be available. It’s styled a Roth 401k. President Bush brought this far and wide in his 2001 tax cuts. This is a magma of two retirement funds – a 401k and a Roth IRA. But what does it mean? Your 401k plan is pretax money set tossing-in to grow as an investment. Your employer takes pretax money out of your curb bit and allows you to direct the funds usually into mutual funds. 401k’s have other than seasonableness – since it’s pretax money you take out of your check, your net pay is lowered, reducing the volume of taxes you pay. When you retire, then you draw out of your 401k what little you need and pay the taxes on it. When you retire, your income stream is gone, and so is your tax bracket. As you draw out your money from your 401k, then you hopefully enter a relatively low tax support and pay little on the proceeds. Enter the Roth IRA. A Roth IRA is funded by sequent tax dollars. something put into this recounting will never be taxed again. You can open up your own Roth IRA knowledge anywhere – even at a bank. Since the money is by virtue of tax, its just like you cashed your paycheck and are going shopping. The good news is you are taxed once on the front end, and then later when you remove the money, you won’t owe the government any taxes. When you connect the two, you should be able to invest into your 401k with answerable to tax dollars, and as it grows, and you retire, when you remove the funds, they will not be taxed. 31% of employers who have 401k plans say they plan to add this option for their employees. The bad news – your employer doesn’t have to add this as option. Why wouldn’t I just go open my own Roth IRA and direct the funds in a mutual fund? Good question. The real advantageousness to the balance worker is that money is taken out of your plate and you won’t see the money. Makes it easier to invest. You don’t see the money as it’s taken out or ever they deposit your check. The #1 rule is to put money into your 401k no matter what options they give you. This new Roth 401k will start January 1st, 2006. Someone who reads the blog sent me an email asking about a specific Japanese net-net. Rather than trying to choose the best net-nets from among the entire hoard in Japan, I would suggest doing one of two things:
In my own portfolio, I went with option #2. I bought 5 Japanese net cash stocks last year. I've since sold one of them. I have some cash. And am looking to add a couple more Japanese net cash stocks. Right now, they make up 30% of my portfolio. Again, I'm willing to go as high as 50% in Japan. We'll see what happens. But that's me. What would I suggest for others interested in Japanese stocks? Here's how I would look at Japan. If you can find stocks selling for less than net cash with few/no operating losses in their long-term history, buy them. Don't so much look for net-nets in general. Start with an even higher standard. Start with profitable, net cash companies. They are close to non-existent in the U.S. But not Japan. After that, I'm not sure I would necessarily just look at net-nets. For example, there are some cheap Japanese gas companies that are not net-nets (most of their assets are PP&E) but are super reasonably priced on an EV/EBIT basis. To me, it is more important to find totally obvious bargains than to get caught up in the definition of what a net-net is or isn't. Totally obvious bargains fall into a few categories. Here are 2:
In fact, if you really look, you may find some gas companies, grocery stores, etc. that are very cheap on an EV/EBIT or EV/EBITDA basis that you like better than some of the net-nets. That’s fine. Buy the most obvious bargains. The things that are clearly selling for less than they are worth. If you're only going to buy half a dozen Japanese net-nets, you should look for net cash bargains. Once we are talking about receivables, inventory, etc. you need to know more about the business. So it needs to be a simple business or a business you can learn about. That's harder. For me personally that means it makes sense to buy net cash bargains in Japan and look for net-nets on the basis of receivables, inventory, etc. in the U.S. Because in the U.S., I have a better chance of knowing the difference between a predictable business and an unpredictable business. If I could find 10 consistently profitable companies selling below net cash in the U.S., I wouldn’t buy any Japanese stock. Because I understand American businesses better. But I also understand that a consistently profitable company selling for less than net cash will work out as an investment regardless of how well I understand the business. And, of course, the idea is to buy a handful of these companies. Not just one. Talk to Geoff about Japanese Net-Nets Article Index: | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 |
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