In This Issue
Featured Article
Your New Health Care Partner
Curt's Quick Comment
Understanding Hedge Funds
From the Financial Presses
Quick Links
Featured Article
For those of you who are MOAA members, make sure you check out the February issue of Military Officer.  I have a featured article in the issue.  Some ideas you've probably already heard here are in the article, but it might be a good reference for you as well. 
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Financial Strategies
Planning Techniques, Procedures and Guidance for Military Professionals

Happy New Year!  I hope you had a great holiday season and are ready to start the New Year.  I've got some what I think are pretty interesting things for you in this issue.

To start with, we'll talk about the Brave New World we're entering with ObamaCare.  The inspiration for this article came in a notice from TRICARE.  The notice said essentially, To comply with the ACA we will allow the IRS to have access to DEERS to verify you have required insurance coverage.  Wow.  The first article covers how you will interact with your new healthcare partner.

The Second article talks about Hedge Funds.  I'm not a big fan.  But, if you hear about them on the news or from friends you should understand the basics.

I wrap up with a couple of articles I found interesting.  The first is about Master Limited Partnerships an investment class that can provide good returns and tax deductions.  The second reminds you to ignore CNBC.

My Packers made the playoffs again.  You've got to love a comeback!

Curtis L. Sheldon, EA, AIF®
C.L. Sheldon & Company, LLC
(703)542-400 or (800) 928-1820
Say Hello to Your New Health Care Partner:

I was recently at a two day session on tax preparation for the upcoming year(s).  I know...I know, who would willfully do that?  One quarter of the instruction covered the tax implications of the Affordable Care Act (ACA) also known as ObamaCare.  That is how big a presence the IRS will have in enforcing this law.  I know a lot of the readers of this newsletter have TRICARE or other government coverage and don't need to worry too much about ObamaCare.  But, a lot of us have relatives (like kids) who will be affected.  A lot of this is still being determined, but here is what I've learned so far.  In no particular order...

  • There are new forms to fill out for some of us. Those with earned income in excess of $200,000 (Married or Single) will have to complete a new Form 8959.  Those with total income (AGI) in excess of $250,000 ($200,000 Single or HoH) and investment income will need to complete a Form 8960. This applies now, as in the 2013 tax year.
  • Families who purchase insurance on the exchanges that want to qualify for subsidies will have to calculate a new income.  This will include the income of all individuals listed on the Form 1040 (i.e. dependents).  So if Junior has a summer job, his income will be counted towards family income.  If things line up just right (or wrong, depending on your point of view) Junior's income could cause a family unit to lose subsidies.
  • When applying for insurance on the exchange you can receive a subsidy (if qualified) for insurance.  This subsidy is paid directly to the insurance.  To receive the subsidy, the taxpayer will need to estimate income for the upcoming year.  If the income is estimated too low, then when taxes are filed the taxpayer will need to pay back the "undeserved" subsidy.
  • You are required to have qualifying coverage.  If not, the taxpayer will be subject to a fine (I mean tax, according to the Supreme Court).  Everyone has been talking about the $95 per adult penalty (it is also $47.50 for children, max of two).  BUT, the law also states the fine is 1% of Family Income whichever is GREATER.
  • There are requirements to prove that you have insurance.  For those with insurance provided completely by their employer, insurance coverage will be documented on the W-2.  For those that pay for insurance themselves there will be yet another form to get prior to filing your taxes.  The form should be called a 1099-HTC.  Finally, for those who receive coverage from the government (TRICARE, MEDICARE) I think the IRS will go into your electronic records to verify coverage.
  • The IRS has no authority to levy to enforce the penalty.  They can only withhold penalties from refunds.  So, in other words, if you never have a refund due, you'll never have to pay the penalty.  However, the penalty will incur interest and they may eventually get you with your final tax return.

Those are some of the big things.  I'll keep an eye on this for you.  I wasn't a huge fan of ObamaCare, but as the instructor at the tax course said, "The ACA will mean a lot more income for all of us."  Maybe I'm starting to like it...just kidding. 

Curt's Quick Comment
Just a reminder that I do tax preparation.  I'm able to complete taxes in all states.  Readers of this newsletter receive a 5% discount.  Contact me if you'd like more information.
Understanding Hedge Fund Styles


Hedge funds are a diverse class of investments that use aggressive investment strategies to seek greater-than-average total return with lower levels of risk.1 Hedge funds may use many investment tactics not ordinarily available to the managers of regulated mutual funds, including unlimited short-selling, margin trading to leverage price movements, and the unfettered use of derivatives as direct investment vehicles.


There are over 8,000 hedge funds -- they come in all shapes and sizes. The multitude of recognized hedge fund investment styles and variants may appear confusing to the uninitiated. However, you may find it much simpler to think of funds as falling into one of four major groupings: event driven, market neutral, multinational, and niche.

  • Event-driven funds follow investment strategies designed to profit from a known or forecasted event, such as distressed securities and merger and value opportunities.

  • Market neutral funds generally attempt to neutralize investors' exposure to significant changes in portfolio value caused by market risk. These funds divide their assets among investments with complementary risk characteristics so that any force that drives some portfolio assets in one direction will drive other portfolio assets in the opposite direction.

  • Multinational funds invest in non-U.S. stocks and bonds using strategies such as fundamentals and technical indicators, global macroeconomic or financial market trends, and top-down and bottom-up considerations.

  • Niche funds follow narrowly defined styles, including sectors, short-selling, and market timing. They can also invest in listed futures and options to benefit from expected trends in commodity prices, interest rates, or currency exchange markets.


Fund of Hedge Funds


Through a fund of hedge funds, investors can gain access to a number of hedge funds with a relatively smaller investment. For example, investing in five hedge funds with $1 million minimums would require $5 million. Investing in a fund of hedge funds that invests in those same underlying funds may require just $1 million.


Factors to Consider


When considering the differences among these styles you should also keep in mind other common terms relating to hedge fund investing.

  • Individual risks include bankruptcy, the effects of competition, and changes in technology, among other things.

  • Market risks indicate the possibility that an entire broad category of assets will gain or lose value simultaneously.

  • The value of a hedge fund's assets can sometimes be difficult to ascertain. As some hedge funds invest in highly illiquid securities, they may be hard to value.

  • Hedge funds do have higher fees than many other investments. Managers typically charge 1%-2% in fees, plus a "performance fee" of up to 20% of its profits.

  • Many hedge funds restrict the opportunities to redeem shares and often impose a "lock up" period of one year or more after your initial investment.

If you are contemplating the use of a hedge fund in your portfolio, consider that hedge funds are complex investments with limited liquidity compared with stocks and bonds or mutual funds. Work with your financial professional to determine whether they may be right for you.




1Hedge funds often engage in speculative investment practices that may increase the risk of investment loss. Hedge funds can be highly illiquid; are not required to provide periodic pricing or valuation information to investors; may involve complex tax structures and delays in distributing important tax information; are not subject to the same regulatory requirements as mutual funds; and often charge high fees.

Required Attribution

Because of the possibility of human or mechanical error by S&P Capital IQ Financial Communications or its sources, neither S&P Capital IQ Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall S&P Capital IQ Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.


© 2013 S&P Capital IQ Financial Communications. All rights reserved.


From the Financial Presses
A New Asset Class to Watch - Carefully

For the five-year period that ended September 30, 2013, four of 12 major asset classes lost value while eight posted positive total returns. Master Limited Partnerships, an asset class that did not exist a decade ago and mainly invests in oil and gas companies, trounced all asset classes in five-year cumulative returns. What are they? (Read More Here)

Don't Chase After The Market News

Did you read the newspaper today or check the news online? Invariably, the stock market will be heading up or down, with the movement triggered by anything from company earnings announcements to a change in economic indicators or even a political event such as the recent U.S. government shutdown. And, more often than not, financial pundits may respond by urging investors to buy or sell something. (Read More Here)
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC 's current written disclosure statement discussing our advisory services and fees is available for review upon request.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment).
Military Professionals have unique financial benefits and unique financial needs.  If you think you would like some help developing your Financial Strategy please give us a call at (703) 542-4000 for a free initial consultation or for more information go to our website at .