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V IEWPOINT

August 2011

Taming the Bear: Are Bonds A Safe Place to Be?

About Clear View

Steve Stanganelli, CFP®, CRPC®

By Steve Stanganelli, CFP®

For nearly thirty years, investors have benefitted from a bull market in bonds. Andwith recent and continuing turmoil in global financial markets, investors have gobbledup Treasury bonds as a perceived safe haven. This high demand has pushed upprices and lowered interest rates. But interest rates can’t remain low forever.

Whether you believe rates are poised to rise because of the Fed’s monetary policy ofloose money or quantitative easing (QE1 and QE2) or sovereign debt crises here orin the Eurozone or just as a natural outgrowth of an expanding economy, rates willrise. It is a matter of when not if.

As an investor you need to be prepared to act when rates rise: For example, a onepercent rate hike could drop the value of a 30-year Treasury bond by 14.5%.

Generally, investors tend to think that bonds are less risky than stocks. In reality,bonds can be impacted by the same factors: inflation, economic uncertainty, credit.

Bond Risks

Treasuries in particular and bonds in general decline in value with interest rate in-creases. As yields rise, the price (or value) of bonds will fall and this increases theinvestor’s risk of holding a bond.

Possible Solutions

Do Nothing: If you hold your bonds to maturity, you will get paid your principalassuming that the issuer does not default or go bankrupt.

Reduce Duration: Duration is a measure that summarizes the impact of interestrate changes on bond prices. A low duration number means a lower potentialprice change. An investor can reduce exposure to long-term fixed income securi-ties that are more sensitive to interest rate changes by rotating out of long-termbond issues or buying more short-term maturities to create a “bar bell.”

Buy individual bonds ( see Building Your Bond Ladder, July 2011)

Buy shorter-term Exchange Traded Funds

Consider Hybrids: One option isto consider adding hybrid securi-ties to your mix of bonds. As not-ed in the October 2010 View-Point Newsletter and free whitepaper Using Convertibles toProtect & Grow Wealth, adding

“Using Convertibles to Protect & Grow Wealth”

Amesbury * Wilmington * Woburn

FREE White Paper

Clear View Wealth Advisors, LLC

Viewpoint is produced by Clear View Wealth Advisors, LLC for the benefit of its clients and allied professionals. Although the information here is gathered from reliable sources, readers should notact upon it without professional advice. Past performance is no guarantee of future results. Examples with hypothetical returns illustrated are not representative of a specific investment. Clear ViewWealth Advisors, LLC 12 Amidon Ave., Amesbury, MA 01913 & 25 Lowell St., Wilmington, MA 01887 Tel: 978 388-0020 Email: Steve@ClearViewWealthAdvisors.com

August 2011Page 2

It may be worthwhile to refinance if you can loweryour monthly payment by a significant margin and youplan to stay in your home long enough to recoup thecost of refinancing.

To Refinance or NotConsider this example: If you had a $200,000, 30-year mortgage with an 8% interest rate, your monthlypayment would be $1,468. If you refinanced at 6%,your new monthly payment would be $1,199, a sav-ings of $269 per month. Assuming your new closingcosts amounted to $2,000, it would take eight monthsto break even. ($269 x 8 = $2,152) If you planned tostay in your home for at least eight more months, thena refinancing would be appropriate under these condi-tions. If you planned to sell the house before then, youmight not want to bother refinancing.

All Mortgages Are Not Created Equal

When considering whether to refinance, don't choosea mortgage based only on its note rate or stated an-nual percentage rate (APR), because there are manyother important variables to consider. The term of the mortgage: Shorter terms can re-

sult in significantly reduced interest costs overtime. On the other hand, they may require highermonthly payments.

The variability of the interest rate: An adjustablerate may be lower initially when compared with afixed rate, but adjustable rates are likely to moveupward over time. With a fixed rate, there is great-er certainty regarding your monthly payment overthe life of the mortgage.

Points (also known as origination fees) are paid toa lender or mortgage broker at closing. One pointusually equals one percent of the loan's value.Mortgages described as "no-cost" or "zero points"do not carry this upfront cost but may charge ahigher interest rate, which may add to the long-term cost of the loan.

Other mortgage-related fees: When you refinance,you may pay a mortgage broker fee (assumingyou do not go directly to a bank or other lender), atitle insurance premium, a commitment fee, attor-ney or settlement fees, an appraisal fee, and othercosts that add up quickly.

The amount of money you may save and howlong you plan to live in your home are key varia-

ASK THE ADVISERHow Can I Tell Whether It’s A Good Time to Re-finance My Mortgage? by Steve Stanganelli, CFP®

bles that influence whether you should refinanceyour mortgage.

How Much Could You Save by Refinancing?

A homeowner with a 30-year, $200,000 mortgagecharging 8% interest would pay $1,468 each month.This table illustrates the potential monthly savings andthe various break-even periods (assuming $2,000 inclosing costs) that would result from refinancing atdifferent rates.

Source: Financial Planning Association, ChartSource, Standard &Poor's. Months to break even rounded up to the next highest month.Does not consider the impact of taxes.

Looking to Refinance? Looking for a Mortgage?

Clear View Wealth Advisors can help you or someoneyou know who is looking at buying or refinancing a home orreal estate investment.

Don’t just borrow money. Get a plan to borrow smart andrepay smart.

With the help of a qualified planner, you can have an actionplan that compares your borrowing options and provides arepayment plan that pays off the loan quicker and still fundyour other goals for college, retirement or whatever is im-portant to you.

We use specialized software tools to help look at your cashflow and your big picture—not just your loan.

We can work with you, your Realtor® and mortgage lenderto analyze different options to find the one that makes themost sense for your situation.

Before you spend thousands on interest, talk with the ClearView team. For less than the cost of a property appraisal,you can have a plan … and peace of mind.

Mortgage Helpline …978-388-0020 or 617-398-7494

Clear View Wealth Advisors, LLC 978-388-0020 or 617-398-7494

Viewpoint is produced by Clear View Wealth Advisors, LLC for the benefit of its clients and allied professionals. Although the information here is gathered from reliable sources, readers should notact upon it without professional advice. Past performance is no guarantee of future results. Examples with hypothetical returns illustrated are not representative of a specific investment. Clear ViewWealth Advisors, LLC 12 Amidon Ave., Amesbury, MA 01913 & 25 Lowell St., Wilmington, MA 01887 Tel: 978 388-0020 Email: Steve@ClearViewWealthAdvisors.com

August 2011Page 3

Convertible Bonds (continued):

convertible bonds to a portfolio may help reduce therisks from rising interest rates.

Convertible bonds have a solid performance recordduring rising interest rates when Treasuries and high-quality corporate bonds suffered. During two of thelast 4 major Fed tightening cycles over the past 22years according to the Convertible Bonds index(Merrill Lynch V0A0), convertibles had a positive re-turn. In a third cycle convertibles were competitiveand there was a slight loss in only one cycle.

(For more details request a copy of my White Paper).

Use ETFs to hedge: Inverse ETFs are a tool thatcan be used to protect a particular long position ina security. There are a number of Exchange Trad-ed Funds that are designed to go up when the un-derlying index goes down.

Unlike a mutual fund, an ETF can behedged like an individual stock.

Instead of using a more complex and cost-ly option hedging strategy, an investor canpurchase an inverse ETF to accomplishthe same type of hedging.

There are specific ETFs that seek dailyresults corresponding to the inverse of thedaily change in the index they track. So ifthe index goes down, then the fund is de-signed to go up that amount, before fees

TAMING THE BEAR:Are Bonds a Safe Place To Be?by Steve Stanganelli, CFP®

and other costs. Some examples:

• Direxion Daily 7-10 Year Treasury Bear1x Shares (TYNS): inverse exposure to theNYSE 7-10 Year Treasury Bond Index;• Direxion Daily 20+ Year Treasury 1xShares (TYBS): inverse exposure to theNYSE 20+ Year Treasury Bond Index;• ProShares Short 7-10 Year Treasury(TBX): inverse exposure to the BarclaysCapital 7-10 Year U.S. Treasury Index;• ProShares Short 20+ Year Treasury(TBF): inverse exposure to the BarclaysCapital 20+ Year Treasury Index.

CAUTION: Like a loaded gun in the hands ofa toddler, these types of investments must behandled with care and proper professionalguidance helps. These types of ETFs are notmeant for buy-and-hold strategies.

To explore how you can protect your portfoliomore efficiently, call 978-388-0020.

Clear View Wealth Advisors, LLC 978-388-0020 or 617-398-7494

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Introducing Personal Financial Index™

Planning your future should be more than just guess-work.

Clear View now offers an integrated diagnostic tool thatyou can use that provides your own personal bench-mark.

The Personal Financial Index™ is much like your creditscore: You have a simple to understand number andvisual tool that tells you how well you are doing in keyareas that you can track:

Savings Positioning Yourself Toward Your Goals Retirement Major Purchases or College Funding Protection

Try out this complimentary service by visiting the ClearView website or by using the URL below:

www.personalfinancialindex.com/c/clearviewwealthadvisors

^ŵĂƌƚ�D ŽŶĞLJ�D Žǀ ĞƐ�Θ��ĞƩĞƌ��ŽƩ Žŵ�>ŝŶĞƐ�̂ ƚĂƌƚ�, ĞƌĞ

Viewpoint is produced by Clear View Wealth Advisors, LLC for the benefit of its clients and allied professionals. Although the information here is gathered from reliable sources, readers should notact upon it without professional advice. Past performance is no guarantee of future results. Examples with hypothetical returns illustrated are not representative of a specific investment. Clear ViewWealth Advisors, LLC 12 Amidon Ave., Amesbury, MA 01913 & 25 Lowell St., Wilmington, MA 01887 Tel: 978 388-0020 Email: Steve@ClearViewWealthAdvisors.com

August 2011Page 4

529 Plans: Do the Numbers Add Up? (by Steve Stanganelli,, CFP®)

Clear View Wealth Advisors, LLC 978-388-0020 or 617-398-7494

Special points of interest:

There are two varieties of Qualified Tuition Plans: Prepaid Tuition

Program and College Savings Plans (commonly referred to as

529 Plans).

Funds can be withdrawn for eligible school expenses tax free.

There are limitations on investment choices.

Assets in plans may limit eligibility for some financial aid pro-

grams

Call the Clear View Financial Planning Helpline for help with edu-

cation funding strategies at 978-388-0020 or 617-398-7494.

Created under the Small Business Job Protection Actof 1996, qualified tuition savings plans (QTP) include anumber of options that provide tax incentive savingsfor college savings.

The most popular of these options is the 529 Plan(named after the section of the code where they ap-pear). But there are two varieties of these plans andunderstanding the differences may help you avoidsome costly mistakes.

Generally, a QTP is an investment vehicle that allowssomeone to set aside money that can be used towardsthe expenses incurred at an eligible school or college.It can be used to cover the tuition and fees of a under-graduate degree or vocational program.

Two Options

There are two key options: a prepaid tuition plan or aninvestment plan.

Prepaid Tuition Program

With this option, you can set aside a predeterminedamount that the program manager agrees to use tocover the expenses for a particular time period. Theseoptions are limited to certain schools. And the schoolcontractually accepts the amount set aside to cover theexpense with the funds set aside. If a participantchooses not to attend, then the market value may bewithdrawn (subject to limitations) and used at anotherschool. But the value of the account may not beenough to cover the actual expense.

College Savings Plan

This is the classic version of a QTP. Money is invest-

ed for a particular beneficiary but can be used at any eligi-ble school or program. The biggest difference is that theinvestment burden falls on the shoulders of the participant.

The Upside

Investing in a 529 means that your student-beneficiary canwithdraw the funds tax-free when it comes time to pay col-lege costs. In some cases states offer a tax deduction forsetting money aside (but not in Massachusetts).

Problems to Consider

A common complaint: It limits withdrawals to cover onlyeligible expenses. The money invested into the account isrestricted to “qualified” expenses specific to your educa-tion. While this list is broad, certain school-related expens-es may not be eligible.

If money from a 529 account is used on something notqualified, the investor is subject to income tax and a tenpercent early distribution fee.

Limitation on investment choices: You are limited tothe plan menu offered by the state sponsor.

Limitation on investment changes or rebalancing: Youcan only switch investments once per year. Or youcan enroll in an auto-rebalancing feature (quarterly,semi-annually or annually) but there may be a cost.

Fees and expenses may be high: In addition to the un-derlying fund expenses, there is an advisor and statemanagement fee.

Financial aid eligibility may be impacted: Assets heldin such plans are assessed by financial aid. If youhave a large enough balance, you may reduce yourodds for receiving financial aid.

Improper tax planning: If you’re in a low enough taxbracket (marginal rates under 15%), you may not ben-efit as much compared to the costs of the plan.

Need Help Understanding Your Options?

COLLEGE HELPLINE: 978-388-0020 or 978-416-4107

“Your Guide to Finding Financial Aid”

Amesbury * Wilmington * Woburn

FREE GuideClear View Wealth Advisors, LLC

Viewpoint is produced by Clear View Wealth Advisors, LLC for the benefit of its clients and allied professionals. Although the information here is gathered from reliable sources, readers should notact upon it without professional advice. Past performance is no guarantee of future results. Examples with hypothetical returns illustrated are not representative of a specific investment. Clear ViewWealth Advisors, LLC 12 Amidon Ave., Amesbury, MA 01913 & 25 Lowell St., Wilmington, MA 01887 Tel: 978 388-0020 Email: Steve@ClearViewWealthAdvisors.com

August 2011Page 5

The Tax Corner (from National Association of Tax Professionals, natptax.com)

Clear View Wealth Advisors, LLC 978-388-0020 or 617-398-7494

Special points of interest:

Clear View Wealth Advisors provides tax preparation

services for individuals and businesses.

Financial planning clients are eligible for discounts on

bundled services.

Call the Clear View Financial Planning Helpline for

help in preparing your income taxes or help with a

divorce plan at 978-388-0020 or 617-398-7494.

“Divorce & Your Money”

Amesbury * Wilmington * Woburn

FREE BookletClear View Wealth Advisors, LLC

Question: Norm is a sole proprietor who is thinkingabout setting up a solo 401(k) plan for himself. Hewants to know about the maximum amount he cancontribute to the plan and how this maximumamount is determined.

Answer: The benefits available to a self-employedindividual in a solo 401(k) plan have increased.The self-employed individual can contribute to thesolo 401(k) plan two ways:

1. Through elective deferrals limited to the lesserof $16,500 or 100% of the self-employed indi-vidual’s compensation for 2011 and 2012.

2. Through employer contributions limited to 20%of the self-employed individual’s compensation.The total of all contributions cannot exceed thelesser of 100% of the self-employed individu-al’s compensation or $49,000 for 2011. An ad-ditional amount of $5,500, for 2011, can becontributed if the self-employed individual hasattained at least age 50 by the calendar year-end.

As a general rule, if the plan documentstates an owner-employee contributionpercentage of 25%, the self-employedindividual’s maximum contribution per-centage is 20%.

Therefore, after finding the self-employedindividual’s maximum contribution percent-age, using the above formula, the self-employed individual’s compensation amountis self-employment income after the deduc-tion of half the self-employment tax.

Tax Tips for Divorce

Case Study: Filing Status After Divorce

Question: Taxpayer and spouse obtained a divorce in2011. The divorce decree states that the couple have tofile Married Filing Jointly for the year of the divorce. Canthey do this?

Answer: No.

A taxpayer is only able to file Married Filing Jointly if thetaxpayer is married on the last day of the year. Since thetaxpayer was divorced prior to the end of the year, the tax-payer is ineligible to file Married Filing Jointly. The Courtshave repeatedly stated that divorce courts cannot overridethe tax laws.

Case Study: Legal Fees and Divorce

Question: Are legal fees incurred during a divorce a de-ductible expense?

Answer: No.

Legal fees relating to a divorce are not deductible, exceptamounts paid for tax advice or preparation or amountspaid in relation to collecting taxable income.

Any portion of the legal fees paid for efforts to obtain taxa-ble income such as alimony are deductible.

Any portion of the legal fees paid to avoid paying alimonyare not deductible. Legal fees paid for any of the followingare also not deductible: Custody of children; Breach ofpromise; Civil or criminal charges resulting from a personalrelationship; Damages for personal injury; Preparation of atitle or defense against a title; Preparation of a will; Proper-ty claims or property settlements (even if it involves therisk of losing income-producing property).

TAX HELPLINE: 978-388-0020 or 978-416-4107

Viewpoint is produced by Clear View Wealth Advisors, LLC for the benefit of its clients and allied professionals. Although the information here is gathered from reliable sources, readers should notact upon it without professional advice. Past performance is no guarantee of future results. Examples with hypothetical returns illustrated are not representative of a specific investment. Clear ViewWealth Advisors, LLC 12 Amidon Ave., Amesbury, MA 01913 & 25 Lowell St., Wilmington, MA 01887 Tel: 978 388-0020 Email: Steve@ClearViewWealthAdvisors.com

August 2011Page 6

About Clear View Wealth Advisors, LLC

Clear View is a Registered Investment Advisor providingfee-only / fee-for-service financial planning, consultingand investment management services.

We help clients make smarter money choices.

THE BOTTOM LINE

When your life savings are at stake, you want advice youcan trust and someone you can count on. You need atrusted advisor that is objective, an advisor that is notpaid more to sell you one product over another. Youneed a relationship with a firm and an advisor that prom-ises to always put your interest first, a firm with provenexperience and the right professional credentials.

To explore how Clear View and Steve Stanganelli, CFP®can help you, call 978-388-0020 today to schedule anexploratory meeting (via phone or in-person). There is nocharge or obligation.

————————————————FREE 30-Minute Money Tune-Up+ $100 Off Any Road Map FinancialPlan Program

Clear View Wealth Advisors, LLC 978-388-0020 or 617-398-7494

Primary Business Address

12 Amidon Avenue

Amesbury, MA 01913

Convenient Meeting Locations in the Merrimack Valley to Boston:

Newburyport Woburn Wilmington Lawrence Boston

Phone: 978-388-0020 or 617-398-7494Fax: 866-654-4301

Email: steve@ClearViewWealthAdvisors.com

Visit us on the Web!

More Financial Tools: www.ClearViewWealthAdvisors.com

Divorce Help: www.DivorceFinancePros.com

College Funding Help: www.CollegeCashPros.com

FREE Road Map Tool: www.BabyBoomerRetirementPro.com

Our Blog: www.MoneyLinkPro.Wordpress.com

Visit our website to find out more about our approach and services.

Specials & Coupons Available Online at Yelp.com & Google.com/

maps, Steve Stanganelli

FREE Online Planning Tool

Get Yours at www.SmartMoneyRoadMap.com

Steve Stanganelli and Clear Viewoffer help in the following services:

Retirement Income Planning IRA Rollovers Roth IRA Conversion Analysis College Funding Strategies &

529 Plans Divorce Settlement Analysis Qualified Plans for Businesses One-to-One Money Coaching Periodic or One-Time Invest-

ment Advice On-Going Investment Manage-

ment & Monitoring Financial Education Programs

for Groups

529 Plans: Do The Numbers Add Up?Part of a Series for Clear View’s Exclusive College Planning Service

As college costs continue to rise, parents continue to search for ways to lowerthe pain in their wallets from getting a college degree.

What could be better than having the money saved to pay for college? Howabout having help from Uncle Sam? But with so many choices, how can youmost effectively accomplish the twin goals of paying for college and savingyour retirement nest egg? I discuss many in my College Planning Service.Here is a little primer on some popular options.

With a qualified tuition plan, like a 529 Plan, you have a tax free incentive tosave for college. For years the investment industry has promoted the benefitsof saving for college using these qualified tuition savings plans. But are theyreally the best or most beneficial option for you and your student?

WHAT IS A QUALIFIED TUITION PLAN and CAN IT HELP YOU? (see page 4)

Check the Clear View Site

“The Money Coach Road Map Series:”

FREE WebinarsClear View Wealth Advisors, LLC