Invest in Clean Energy With This ETF

Last week I wrote about Matthew Simmons. He’s been talking for years now about the end of easy oil. Relentlessly, he’s been calling for alternative energy solutions. In my last article I talked about his take on ethanol.

I knew the article would create some subscriber feedback… little did I know the variety of questions I’d receive.

I thought you’d write in with comments about oil. I thought you’d question my controversial view of ethanol. Nope. We didn’t get a single question on those topics.

I did however field a number of questions about alternative energy.

In my career I’ve been asked a lot of questions. I’ve been quizzed on everything from general thoughts on alternative energy to specifics about membrane based fuel cells. I’ve been asked about solar, nuclear, wind, geothermal, even fuel cells.

I’ll tell you more about these in a second.

For those of you who don’t know, I spent the better part of a decade working in Investment Banking.

I wasn’t the guy calling you at dinnertime trying to sell you stock. I didn’t peddle the latest Collateralized Debt Obligations (CDOs) destroying our banking system.

I worked with the CEOs, CFOs, and Board members of small companies. I helped them raise money through private placements and IPOs. I prepared them for meetings with investors who managed billions of dollars. I helped these companies raise millions, and sometimes hundreds of millions, to grow their business.

The money I raised expanded manufacturing facilities, created new jobs, and added rocket fuel to company growth.

I started working with technology companies. I worked in several industry verticals including software, semiconductors, and telecommunications. I was based in the Silicon Valley area. And I witnessed first-hand the dot-com boom, and the subsequent bust.

The last half of my career was focused on alternative energy companies.

You name it – I worked on it. Solar, alternative fuels, ethanol, biodiesel, wind, geothermal, clean coal the list goes on and on.

I even branched out into environmental areas.

I worked with companies that helped clean the air, water, and earth. I caught the first wave of “green Investing.”

I even worked internationally. I was part of a team who launched the first financing for a US fuel cell company on the London AIM stock market.

All I did was breath, eat, and sleep alternative energy for years.

I have lots of opinions. Some technologies are so far from commercial development it’s laughable. Others are commercially viable now… and investors don’t know it yet. These technologies will be part of the solution to reducing our dependency on oil. Other alternative energy technologies are pure bunk.

I’d love to get into all the details about each area. Unfortunately I only have so much space today. In the coming weeks I’ll look in detail at many of these industries. I’ll share with you my insider view and comment on the best (and worst) companies.

For now, let me leave you with a simple thought.

The “Green” wave is here. You can’t go 100 yards without bumping into a recycle bin. Advertisements tout “green” businesses and activities. It’s now become economically feasible to use alternative energy… especially with oil over $100 per barrel.

This is a multi-decade trend. It has legs that’ll run for a long time. Each industry will have its share of winners… and there will be losers (there always are). The key is to recognize this trend now and ride it for all it’s worth.

Knowing where to invest can be a challenge. You might not have the time to research and study hundreds of small companies. The easy way to invest in this trend is through managed funds. There’s a number of mutual funds focusing on the green theme and alternative energy. But as always, I like ETF’s when they’re available.

Barclays recently introduced the iShares S&P Global Clean Energy Index Fund (ICLN). It’s a focused ETF holding 30 of the largest alternative energy companies from around the globe. It holds companies from 9 different countries. It’s a quick and easy way to get exposure to the next big driver in the markets.

Go green now. Before long you’ll be filling your wallet with another kind of green.

Interpreting the Business Alphabet Soup

Everyday, you come into contact with a variety of businesses and the products they create. Most of us do not even think of what type of business we are dealing with, but it can be an important thing to know. Understanding the abbreviations of business tells you what type of company with which you are dealing; for entrepreneurs, knowing the basics of each type can aid you in dreaming up your own company.

INC. Inc. is the standard abbreviation for an incorporation. There are two types of corporations, S and C. Both S and C corporations have several benefits. First, they have the ability to be a publicly traded company. Thus, some companies prefer working with corporations rather than businesses that cannot join the stock market. Of course, there are disadvantages to corporations as well. C corporations might be double-taxed, while S corporations can only have a limited number of shareholders.

Because a corporation can be traded on the stock exchange, there is a strict requirement for keeping track of paperwork and logs of meetings and decisions for an incorporation.

LP. A Limited Partnership is abbreviated as an LP. Limited partnerships differ from regular partnerships in the fact that there is at least one general partner and a minimum of one limited partner. The general partner invests much more in the partnership and can be held for more liability than a limited partner, who is only responsible for the smaller, limited amount they invested. LPs are typically used for partnerships that do not expect to go public, or even last a long time.

LLP. LLP denotes a Limited Liability Partnership. The main benefit of an LLP is that one partner is not held responsible for the conduct (negligence, etc.) of another limited partner. So, owners get offered some protection, but not as much as with a corporation. A problem with an LLP is that some states limit the usage of the LLP type of business, and some countries do not even recognize LLPs. Be sure to check with your state’s requirements for an LLP before trying to start a limited liability partnership.

LLC. LLC stands for Limited Liability Company. LLCs are a great choice for business owners who have no interest in going public. Because of this, LLCs are allowed to be much more informally run than corporations in a way that mimics partnerships. LLCs also have the corporation-like advantage of extending liability protection to its owners or members. Unlike an Inc., an LLC cannot be double-taxed. Unfortunately, there is not a national start-up cost for an LLC or a universal tax liability. These amounts can vary state to state, so it is a good idea to check with whatever state in which you plan to have an LLC.

Basically, an LLC can function as the best of both worlds: it is a fusion of a corporation and partnership.

Once you decide what type of business you want to own or do business with, you can begin to learn the different requirements and compositions of your chosen company. For more information on business, check out the Business Directory

Roth IRA Investing Basics – Financial Planning and Wealth Building for Your Retirement

A Roth IRA is an Individual Retirement savings Account best known for providing tax free earnings growth and tax free retirement distributions. Individuals can contribute up to $4000 a year ($5000 if 50 and older) from after-tax dollars, and in return may receive tax free retirement income, provided all rules are met.

KEY POINT: In order to receive tax free retirement distributions:

1) you must be 59 1/2

AND

2) your Roth IRA must be at least 5 years old.

Hint: A Roth IRA is not an advisable investment option if you plan to retire within the next 5 years.

Roth vs Traditional: What makes the Roth IRA different from a Traditional IRA?

KEY DIFFERENCES:

Roth IRA: Pay Taxes Now, Not Later:The Roth IRA is Tax-Exempt –meaning retirement income is tax free.

  • Contributions come from After-Tax dollars (not deductible)
  • Retirement Distributions are Not Taxed (when rules are met)
  • IRA Investment Earnings Grow Tax Free
  • No required Distributions (you never have to use the money)
  • Has Income Restrictions
  • No Age Restrictions (can make contributions at any age)

The Traditional IRA is Tax-Deferred = Pay taxes later

  • Contributions come from Pre-Tax dollars (tax deductible)
  • Retirement Distributions are Taxed at a future Tax Rate (when distributions are taken)
  • IRA Investment Earnings Grow Tax Deferred
  • Required to Take Distributions by age 701/2
  • Has age restrictions (Can no longer contribute after age 701/2)
  • No Income Restrictions

2007 Roth IRA Contributions

How Much Can I Contribute to my Roth IRA?

In general, the maximum amount an individual can contribute to a Roth IRA is $4000 ($5000 if age 50 or older) in a single year. The specific time frame for making 2007 contributions is from January 1, 2007 to April 15, 2008.

You can contribute up to 100% of your earned income or $4000 ($5000 if 50 or
older), whichever is less, MINUS any other IRA contributions you made the
same year.

For instance, if you made $58,000 in 2007 and contributed $3000 to your
other IRAs (excluding any employer sponsored plans), you are now eligible to
contribute only $1000 to a Roth IRA.

Or let’s say you only made $2400 in 2007. You can only contribute $2400 to
your Roth IRA, provided you made no other IRA contributions in 2007.

Earned income: is any compensation you received for providing a service or product.
It does not include investment income from interest, dividends, or
capital gains.

HINT: Alimony that is taxable is also included in calculating earned income.

2007 Income Limits

The income guidelines for contributing to a Roth IRA are as follows:

1. To be eligible for making the maximum contribution of $4000, your modified AGI
cannot exceed $99,000 if you are single, or $156,000 if married and filing
jointly.

2. Your contribution is reduced if your modified AGI falls between $99,000 and
114,000 for singles, and between $156,000 and $166,000 if married filing
jointly.

3. If filing married with a separate return AND lived together for any part of the year, the income restriction is severely limited. The full contribution is permitted if your income is zero dollars. A partial contribution is permitted if your income falls between Zero and $10,000.

Establishing a Roth IRA

Anyone can open a Roth IRA and the process is very simple. Banks, Insurance Companies, On line Brokers, and other financial firms typically offer Roth IRAs in addition to other types of IRAs. When opening an IRA you will need to designate it as a Roth IRA. . (For more info, see “How to Set Up An IRA: A Step by Step Guide”) You can also rollover or convert your Traditional IRA into a Roth IRA.

Tax Implications: Planning for the future

There are basically two schools of thought regarding IRAs and tax consequences. The first school of thought says the traditional IRA is the way to go because when you retire you will have less income to be taxed, thus a greater tax savings. The second school of thought says hey, we don’t have a crystal ball to know what the future tax rates will be, but we do know they will be higher than they are now. These people find the Roth IRA to be the most attractive choice because paying taxes today may mean saving a bundle of taxes later, when you can least afford it.

Then there are folks who realize the world is not black and white and will seek a mixed bag of Traditional and Roth IRAs to round out the tax consequences in retirement. It really comes down to individual circumstances and personal goals.

The Roth 401k

In conclusion, let us give thanks to the late former Senator from Delaware, William V Roth. He pushed for the creation of the Roth IRA and finally in 1998 it made its first appearance. And, you guessed it, the Roth IRA has now evolved into a 401k, which was first introduced in 2006. The Roth 401k is sure to gain popularity just as the Roth IRA did when it was first introduced.