The financial markets are now closed for the year and with all of the theatrics the verdict is in. Those investors with the following five characteristics prevail over those who fall victim to a host of mistakes and unsuccessful approaches:
- Investing from a superior position of financial strength.
- Being well prepared for a range of possible outcomes.
- Having an investment philosophy and approach you can confidently stick with and win with through thick and thin.
- Tuning out the noise, taming the emotion and focusing on what you can control.
- Investing for long-term success and, in the process, avoiding anxiety-toxic predictions, moves, comparisons, concentrations and traps.
Nearly eight weeks after his election, emotions about President-elect Donald Trump continue to run high.
There’s no doubt that Trump was a divisive candidate, and he is already saying and doing things that have pleased some and discouraged others. But as investors contemplate the next four years under this president, they should pay attention to facts and numbers and be on guard against emotional decision-making.
It’s common for investors to overestimate the impact that Presidential election results have on investment markets. Prior to the election, many commentators predicted a market crash in the event of a Donald Trump victory. That didn’t happen, of course; to the contrary, the market has risen. That’s an example of the strength and adaptability of the markets: They have a long history of digesting jarring and unforeseen events, and then moving forward.
It’s not happiness that brings us gratitude; it’s gratitude that brings us happiness.
At this special time of the year, we at Janiczek Wealth Managements seek to express the profound sense of gratitude we feel for the many blessings we have received. This year many team members have spent their free time volunteering in the community and organizations that are close to their heart.
Pam Dorn has spent the year mentoring a group of young athletes from ages 5-16. She works with them on goal setting and affirmations. In the last year she has been amazed by the goals that the children have set. Pam worked with a five year old on long terms goals. A five year old mapped out how she wanted to be a Disney princess; brave, kind, smart, humble, pretty and loving. The passion that the young kids have hold a special place in Pam’s heart.
The challenge of performance measurement
Periodic reviews of an investor’s portfolio helps ascertain whether the investment process is working, but more importantly, whether it’s on the right course for the individual investor.
The Beardstown Ladies was a 12-woman investment club that gathered monthly and managed their own stock portfolio. They became celebrities in the mid-1990s when news of their track record went viral: since their 1983 inception, The Beardstown Ladies claimed their portfolio had returned 23.4% versus the S&P 500’s 14.9% return. But in 1998, an audited performance record was released showing the club’s actual returns were actually 9.1% per year.
There are few things that we Americans get worked up about as much as presidential elections.
One candidate, some of us feel, would be a disaster for the country, while the other would lead it in the right direction. That seems to hold true every four-year cycle, but this year emotions are pitched especially high. Spurring us along is the financial news media, which breathlessly advises us about how to invest for a Clinton presidency, or a Trump presidency.
On October 20th, Brian O’Neil spoke on a panel discussion in front of roughly 75 attendees at the Grand Hyatt Denver. Brian spoke with four other business planning, legal and finance professionals to discuss the next steps for business owners. The goal of the panel discussion was to provide relevant and actionable advice on how to handle the next stages of their company’s progression.
What are tactical adjustments? In their 1986 asset allocation research, Brinson, Beebower, & Hood defined tactical asset allocation as:
“…strategically altering the investment mix weights away from normal in an attempt to capture excess returns from short-term fluctuations in asset class prices (market timing);”
Investors in the U.S. are keenly aware of how managing taxes can help to build wealth—as evidenced by the trillions of dollars that we’ve invested in IRAs, 401(k)’s and other tax-sheltered accounts.
What too many of us fail to consider, however, is the need to remain tax-conscious even after we’ve built our wealth. For retirees seeking to preserve and appreciate their wealth, tax-savvy decisions are especially important.
One of retirees’ key tools for tax management is known as retirement withdrawal sequencing. In plain English, this refers to the order in which you make withdrawals from various account types to fund your retirement.
Those who have saved successfully often have a combination of taxable, tax-deferred and tax-free accounts. When that’s the case, proper planning about which accounts to tap first can allow you to defer a substantial amount in taxes while maximizing the opportunity for the remaining accounts to appreciate.
On September 20th, our Chief Investment Officer, Jim Callahan, spoke on a panel in front of roughly 100 attendees at the Denver Athletic Club. Along with investment executives from four other wealth management firms, Jim was invited to discuss the topic of “Advanced Asset Allocation”.
The role of tax strategies in trading and managing investment portfolios
Certain tax strategies can add a meaningful boost to portfolio performance because taxes are an explicit cost to any portfolio and, therefore, a detractor from performance. Although tax situations are unique to each individual, any strategy that limits or delays the tax bill and retains more after-tax return for investors will face little argument.
“Avoidance of taxes is not a criminal offense. Any attempt to reduce, avoid, minimize, or alleviate taxes by legitimate means is permissible. The distinction between evasion and avoidance is fine yet definite. One who avoids tax does not conceal or misrepresent. He shapes events to reduce or eliminate tax liability and upon the happening of the events, makes a complete disclosure. Evasion, on the other hand, involves deceit, subterfuge, camouflage, concealment, some attempt to color or obscure events, or making things seem other than what they are.”— Internal Revenue Manual Code 220.127.116.11.2.1 (05-15-2008) 26 USC §7201 – Avoidance Distinguished from Evasion
Assuming all investors pay taxes either now or later, the chart below illustrates the benefit of delaying taxes. We assume a portfolio of 60% stocks, 40% bonds that is rebalanced every year. The solid line depicts the growth of the 100% taxable portfolio, while the dotted line shows portfolio growth in a 100% tax-deferred portfolio. Of course, the taxman arrives eventually, so we show the hit (a worst-case all-at-once tax consequence) to the tax-deferred line when withdrawing at ordinary income tax rates.