It’s Not Easy, Investing in Green

There is no question that it is always difficult to decide how to embrace attractive ideas that may prove to be passing fads rather than solid new pathways into the marketplace. Green investing is one of those. Investors with long memories may remember that when 1990 arrived, it was proclaimed by some to be the advent of a “green decade.”

Instead, “green” became best known as the color of Kermit the Frog. Environmental concerns were discussed in the media, but soon, sport utility vehicles took to the roads in large numbers, drivers forgot the oil crises of the 1970s and the housing debacle of the 1980s, and the economy barreled ahead, pushing through environmental concerns and leaving them in its wake.

Well, green is here again. This time, the playing field seems to have changed. SUVs sit on car dealers’ lots as customers clamor for hybrid or electric vehicles the car makers are competing to produce. Lipstick is being packaged in biodegradable tubes and even underwear is suddenly eco-friendly, with retailers promoting soy clothing products and fashion houses selling intimate garments made of bamboo and cotton blends.

Green Forever?

Is the turn to green real this time?

Will the United States and Europe as well as developing countries push ahead in developing energy alternatives?

Will the companies involved in making compact florescent light bulbs, and the alternative energy producers of solar electric systems, wind power, biofuels, fuel cells and other energy sources become mainstays of the energy scene?

Or will consumers adjust to permanently higher gasoline prices, forget their resolutions to save on energy and reverse climate change and, instead, repeat the past, gradually shedding "green" as costly and inconvenient? No one can predict the future of green investing any more than anyone can predict the markets, but there are positive signs.

Inflation’s Toll

For one thing, demand seems strong. Clean Edge, an environmental research and consulting firm, reports a 40.5% increase in revenue last year for alternative energy producers ($77.3 billion, up from $55 billion in 2006). In addition, some mainstream names are investing in the green concept. General Electric invested $900 million in clean-tech research in 2006 and reports it realized more than $12 billion in revenues from its 45 energy-efficient products. Google said it was making sizable investments in solar, wind and geothermal research with the idea of producing energy cheaper than coal “within years, not decades.” And the huge pension funds CalPERS (California’s public employees) and CalSTRS (California teachers) joined to dedicate more than $1 billion to eco-friendly investments.

A Roper survey showed green investors today tend to be sophisticated, affluent, in their 50s and early 60s, and comfortable with risk – and that may be a good thing.

If you’re interested in greening your portfolio, don’t hesitate to call me.

Look Over the Total Tax Picture in Your State of Retirement

One of the thornier questions facing retirees or those nearing retirement is whether to relocate, and if so, where. Perhaps family or personal reasons will keep you in familiar surroundings, with relatives and friends close by. But if you are preparing to move to a different climate or looking for a new location you hope will be easier on your fixed retirement income, there are several factors to consider.

Once you’ve made the lifestyle choices – beaches, mountains, small-town ambience or urban excitement – you may examine the tax situations offered by your possible choices. It’s easy to be swayed by the state’s income-tax situation. Some states – among them, Alaska, Florida, Texas, Washington and Wyoming – impose no income tax. Two others – New Hampshire and Tennessee – tax only dividend and interest income.

Other states offer enticements. Pennsylvania, for example, applies generous tax rules to retirement income, exempting Social Security benefits, public and private pensions, and IRA distributions. But that doesn’t mean it’s necessarily clear sailing. First, check the complete tax situation. If there is a sales tax, how will it affect your finances?

Finally, check out your likely property tax situation. If you look more thoroughly into the total situation of even apparently retirement-friendly states, you may find your initial enthusiasm changing. Pennsylvania, even though it offers favorable treatment of retirement income sources, ended up at the bottom of a 50-state survey of retirement tax-friendly states after property taxes were taken into account.^*

The key is to determine the total tax picture, and that means doing some calculations beyond state income or sales tax rates. Learn if senior citizens are entitled to tax relief of any kind – Kentucky and South Carolina offer retirement-income exemptions in their state income tax provisions – or if the state imposes onerous taxes on the value of cars or boats.

Before you move, look below the surface of what your chosen state’s tax situation may appear to be. If you have questions about retirement choices, please call me.

^*Source: Kiplinger’s Personal Finance magazine. August 2008.

Financial Planning:
High Dividends May Fight Inflation’s Effects – Or Maybe Not

While inflation is always of concern to investors, its relatively low levels in the United States over the past decade may have put it out of focus. It hasn’t been over 5% since the 5.4% Consumer Price Index increase in 1990.

It’s been nearly 30 years since the rampant inflation in the late 1970s and early ’80s (13.5% in 1980), a time beyond the memories of younger investors. Current inflation figures – up 4.3% through the second quarter of 2008 – haven’t reached those heights, but escalating food and energy costs, even with gasoline prices slipping, have put inflation concerns back into focus.

While there is no sure remedy, you may want to keep inflation in mind as you make investment decisions.

Investors sometimes are tempted to seek higher yields from “safe” dividends. But be cautious. Dividends will fluctuate and are not guaranteed. Government-sponsored mortgage company Freddie Mac, which not long ago was paying a dividend yielding a very attractive 13%, in August announced an 80% cut in its quarterly dividend (from 25 cents to five cents a share); recently it stood at just 2.8%, not exactly a great inflation hedge.