Richmond, Virginia (Thomas P. Marshall) – As some people return to the investing market, many are seeking ways to spread their risk.

With individual stocks, investors are obviously tied to the fate of a few companies. Also, some individual investors have found they don’t want to be playing the market, trying to time increases and decreases and earning more gray hair than money during prolonged downturns.

Some might turn to mutual funds, which would pool huge sums of money and invest it across many industries and types of investments. One fund can include stocks and bonds. Another type is a subcategory fund that might only have stocks and maybe even only focus on a particular industry. Individuals have a vast universe of funds to choose from to match their risk tolerance and investment preferences.

Some people might like the idea of the mutual fund but not the lack of control. They don’t want to just set it and forget it.

For them, exchange-traded funds offer an acceptable hybrid. ETFs can be thought of as a mutual fund that trades like a stock. Like an index mutual fund, an ETF represents a basket of stocks that reflect an index such as the S&P 500. But it can be traded on a stock exchange, just like a company. ETFs combine the benefits of a mutual fund’s investment diversification and low operating costs with the trading flexibility of individual stocks. Investors can short-sell ETFs, buy them on margin and purchase only one share, just like a stock.

ETFs have grown in popularity very quickly since they were introduced in the early 1990s. The first successful one was an SPDR fund, managed by State Street Global Advisors. The acronym came from the first fund, the Standard & Poor’s Depositary Receipts (SPY), which is also reportedly the biggest ETF in the United States. State Street now manages many SPDRs.

Now hundreds of ETFs are trading on the market, tracking a wide variety of sector-specific, country-specific and broad-market indexes. Some investors also like ETFs for their transparency; they are required to reveal their holdings on a daily basis, unlike mutual funds, which only do so periodically.

Whatever the reasons, it is clear that people like them, because ETFs have grown tremendously during the recession. ETFs now have more than $1 trillion invested in them, according to a BlackRock report in January. The assets under ETFs’ management worldwide grew by 45.2 percent in 2009 alone. That momentum does not appear to be slowing down this year.

Richmond, Virginia (Thomas P. Marshall) – As tax time approaches, many people really appreciate how complicated the tax code is and how there has got to be a simpler way to do it.

Those people would have plenty of company in that line of thinking. President Barack Obama has said the code needs to be streamlined and created a task force to recommend changes. He named as its chairman Paul Volcker, who, as the former head of the Federal Reserve, has been credited with taming another monster – the roaring inflation rate of the late ‘70s.

Although that group has not come up with recommendations, a couple of senators put forward a proposal in February that would significantly affect the code. Sens. Judd Gregg, R-N.H., and Ron Wyden, D-Ore., introduced the bill, which goes by the modest name of the Bipartisan Tax Fairness and Simplification Act of 2010. It would cut the number of income tax brackets in half and flatten the corporate tax rate.

There would be just three tax rates: 15 percent, 25 percent and 35 percent. The bill would also eliminate the alternative minimum tax, which threatens to ensnare middle-income taxpayers each year unless legislators pass a “patch.” Also, most taxpayers would be able to use a one-page form to submit their taxes, the senators said.

The law would almost triple the standard deduction and reduce taxes for those earning less than $200,000, Wyden said. It would still allow deductions for mortgage interest, charitable contributions and child tax credits.

The corporate income tax would have a single rate of 24 percent but allow small businesses with receipts of up to $1 million to expense equipment and inventory costs.

The capital gains tax also would be changed. The law would exempt the first 35 percent of capital gains income from the tax. The first $500,000 of investment would be considered long-term capital gains income after six months rather than a year.

The House of Representatives is expected to offer its own version of tax simplification.

Richmond, Virginia (Thomas P. Marshall) – Amid the debate about health care reform, some employers are already taking steps to control costs and at the same time improve productivity with wellness programs.

The idea is in the Senate version of the health care reform bill, and some people have criticized it because they say it penalizes people for lifestyle choices. Generally speaking, the programs would set certain goals, such as cutting smoking, dropping weight and reducing high cholesterol, and tie them to reductions in health care premiums. Some programs even offer a cash reward.

And what has some critics concerned is that some programs charge penalties if people do not meet the criteria. The Senate bill would allow insurers to penalize subscribers at a higher rate, even thousands of dollars, for not meeting the wellness targets. The idea has support among Democrats and Republicans, who have been proposing a version of this for the past few years.

But, controversy aside, it is clear that more companies and other entities are interested in the programs for controlling costs and boosting morale.

At Florida Health Care Plans, 93 percent of the employees qualify for wellness benefits, according to The Daytona Beach News-Journal. The insurer pays 80 percent of Weight Watchers dues, access fees to area gyms and 100 percent of any health care premium increases for eligible employees, who are nonsmokers with a body mass index less than 27.5.

Hudson Technologies, a company covered by the insurer, said between 75 and 80 percent qualify for the company to pay an extra 10 percent of employees’ health care premiums. The company’s program started slowly, with one success at a time.

“One person’s success just snowballs,” said Pam Price, Hudson’s human resources director. The company found absenteeism dropped substantially and has noticed that employees are more engaged.

Roy Braddy, Hudson’s director of supply chain management, used to be a 325-pound smoker of up to two Marlboro packs a day, the newspaper reported. He was able to get rid of blood pressure medicine, inhalers and the breathing machine he needed just to be able to sleep.

“To be rid of that shame (of being overweight) is so liberating,” he said. “It brings out a new part of your personality and it’s really cool.”

The legal and tax information contained in these articles is merely a summary of our understanding and interpretation of some current provisions of tax law and is not exhaustive. Consult your legal or tax advisor for advice concerning your particular circumstances.

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