The sector selection is one of the most important performance drivers in a corporate bond portfolio. The overweighting and underweighting of different industries is a key element in a corporate bond strategy. The weighting of sectors in a corporate bond portfolio is the result of controlled deviations from the benchmark. They are based on the analysis of the operating environment of specific sectors, a bottom-up analysis of the respective companies and the risk-return profiles of bonds from a specific sector. It is advantageous to set up a corporate bond team by sectors because this structure allows an in-depth coverage of all sectors and the understanding of the competitive environment as well as the market positions and management strategies of single companies out of each sector. An industry consists of a group of firms which offer products that are close substitutes for each other.

The final item needed for this valuation method is the expected capitalization rate. The capitalization rate is determined by understanding how much of a return investors can expect to realize in a particular market. The rate will vary in different parts of the country, in different parts of a city, even in buildings within a few blocks of each other.

Additionally, residential, commercial, and industrial properties also have varying capitalization rates. Remember, because the capitalization rate measures the profitability of an investment, certain types of properties involve other risks and thus dissimilar profit possibilities.

So, for example, if you are 25 years old and want to accumulate $600,000 by age 65, you’d have to save about $175 per month (assuming 8% annual growth). Over your entire life of saving, this would translate into about $84,000 out of your pocket that grew to $600,000. Not too shabby.

But what if you wait until age 35 to start saving toward your $600,000? Then you’ll need to save about $410 per month, or more than double, to accumulate the same $600,000 at retirement. And even though you saved for retirement for 10 years less than the 25-year-old, you’ll end up dishing out about $147,000!

At age 45, your monthly savings number jumps to $1,000 per month that you’ll need to save for retirement,
or about $242,000 out of pocket. See the point? If you’re not saving toward retirement early, you will have to pay for it exponentially later.

If you are spending money instead of saving, whether it is going toward vacations or interest on your debts
and loans, there’s an opportunity cost. Getting your debts paid off as soon as possible means that you’ll be
able to put money toward these goals while they are still within reason.

You cannot beat a crook—even with a team of great lawyers, real estate agents, accountants, private detectives, and other professionals. Even if you successfully litigate, and you get what you think you are owed, the crooks will have taken something else somewhere else along the way, not to mention all the wasted time, effort, and energy that you put into dealing with these people in the first place, and then cleaning up the mess they precipitated.

There is only one solution: Deal with ethical people. You may not make money as fast, but it will last longer, and you will feel better about it.

One tremendous advantage of dealing with ethical people is that they tend to hang around with other ethical people. Your circle of acquaintances spirals into more and more enlightened levels of fairness, kindness, and awareness. Conversely, when you hang with rogues and rascals, your circle of acquaintances tends to spiral into depraved levels of increasingly severe cheating and deception.

Remember, you become the company you keep, so choose your friends and associates very carefully. John Baen is not only one of the most knowledgeable people I know concerning real estate, but he has a heart of gold. That is not to say he is weak— never confuse kindness for weakness.

Be firm about your expectations. Most disagreements come about because of a mismatch of expectations between two parties. Therefore, be aware of your own expectations and, equally important, discuss them with your associates. If you discover a chasm between your way of doing things and that of some associates, turn them into former associates. The world is too full of interesting, kind, knowledgeable, and energetic people to be bothered wasting time with takers, no matter how fancy the cars they drive or the homes they live in.

One of the aspects of commercial real estate that I particularly enjoy is that you can buy a property, have some rudimentary management in place, and then all but forget about it. In fact, you could take a six-month cruise and not worry on a day-to-day basis whether everything is all right. If you need more nail-biting, nerve-racking excitement than that, then trade stocks, where you generally have to monitor the market by the day; or trade options, where you have to monitor the market by the hour; or trade futures, where you have to monitor the market by the minute; or trade currencies or other derivatives, where you have to monitor the market by the second.

Also take note that you will not find many stock traders over 50, many options traders over 40, many currency traders over 30, or many futures traders over 25. These nail-biting, glued-toyour-screen professions burn people out. They also require that their practitioners complete another deal to earn another dollar of income.

Meanwhile, back on your cruise boat, you are reading books or mingling with people, knowing that your tenants will pay rent that month whether you have worked or not.

When officials of individual states make projections, they incorporate specific changes in spending when they are known, such as changes in debt services based on scheduled new borrowing and any repayment of old bonds. Individual state and federal projections would normally include future changes in spending patterns, such a multi-year programs to increase education quality, and future tax rate changes, such as multi-year tax reduction plans, if they have already been enacted into law. The projections made for all states in this paper do not reflect these.

For comparisons involving 50 states, considering state government in isolation from local government makes for misleading comparisons because of differences in state-local divisions of tax sources and spending responsibilities. For example, 100% of school spending in Hawaii is state-financed while only about 10% of school spending in New Hampshire is state-financed.

Some differences between state and local spending are meaningless. For example, nearly all states require a minimum tax on property to finance schools. In some states, this is a statewide property tax, in others it is a tax which school districts must levy to receive state aid. In some states, it is a mixture of the two.