Investing/ Markets

The Value of HSAs

June 30, 2021 by Hans Blake, CFA, CPA

Reading Time: 2 minutes On today’s Intelligent Money Minute, we’ll interview Larry Swedroe on the value of HSAs. HSAs are becoming more popular as people grow to understand them. Multiple benefits come when utilizing an HSA. First, there’s an upfront tax deduction. The second benefit is using the HSA as a way to fund medical expenses. Larry suggests to those who have sufficient taxable dollars to pay their medical bills without an HSA. They should treat the HSA as an investment account. The benefit is that it’s never taxed. As Larry and I mentioned, there are a lot of benefits to using an HSA if you qualify. We’ve written a comprehensive blog on this topic on our website. At Intelligent Investing we strive to minimize fees and we think of taxes as another fee that we try and minimize for our clients. We’d love to have a complimentary coffee or virtual meeting with you to discuss ways in which we may be able to serve you and your family. To simply get started, click here. Schedule a short discovery call or meeting We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.

Larry Swedroe Bio

Since joining the Buckingham Strategic Wealth in 1996, Chief Research Officer Larry Swedroe has spent his time and energy educating investors on the benefits of evidence-based investing. In his role as chief research officer and as a member of the firm’s Investment Policy Committee and Board of Directors, Larry regularly reviews the findings published in dozens of peer-reviewed financial journals, evaluates the outcomes and uses the result to inform the firm’s formal investment strategy recommendations. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television shows airing on NBC, CNBC, CNN and Bloomberg Personal Finance. Larry is a prolific writer, contributing regularly to multiple outlets, including Advisor Perspectives and ETF.com. Before joining Buckingham, Larry was vice chairman of Prudential Home Mortgage and senior vice president at Citicorp. Larry holds an MBA in finance and investment from NYU and a bachelor’s degree in finance from Baruch College.

Why You Shouldn’t Check Your Portfolio Daily

June 10, 2021 by Hans Blake, CFA, CPA

Podcast: Play in new window | Download

Reading Time: 2 minutes During this episode, Larry gives multiple reasons why you shouldn’t check your portfolio daily. There’s a good bit of science surrounding this topic, yet many still misbehave. The research shows that investors are highly risk-averse. Investors feel the pain of a loss twice as much as the feeling you get when a portfolio gains. The larger the dollar amount, the higher that ratio is. On a daily basis, Larry says the stock market goes up or down about 50% in either direction. As you extend the maturity or the length of time, the odds start to favor the market going up. The more days you watch the market the more likely there will be a negative emotional toll. Your much more likely to stay in the joy territory if you don’t check frequently. Larry offers some good advice and reasons why you may not want to check your portfolio frequently. At Intelligent Investing, we firmly believe in the value of understanding behavioral finance, which is the school of thought that describes how investors actually act. We try to understand how men and women think to minimize the irrational decisions we make from our own emotions and inherent biases. Schedule a short discovery call or meeting We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.

Larry Swedroe Bio

Two Key Elements of Retirement Success and Happiness

May 27, 2021 by Hans Blake, CFA, CPA

Podcast: Play in new window | Download

Reading Time: 2 minutes On this episode of Intelligent Money Minute, we interview Larry Swedroe on the two key elements of retirement success. There’s more than just numbers when creating a financial plan. During this episode, Larry breaks down key elements that are important to consider in a retirement plan. He stressed the importance of having a life in retirement. Many gain their sense of worth and satisfaction from their everyday work. Retirement can is a drastic shift. There are a lot of unexpected emotions and challenges that come with this change. According to Larry, you need two key elements for retirement success. First, you need depth and breadth in social relationships. Second, you need a sense of worth and accomplishment. At Intelligent Investing, we want to minimize your financial stress to maximize your life. We believe that every person is called to a specific mission in life, and we have a limited amount of time to accomplish this mission. Our goal is to minimize financial stress to maximize your life. In doing so, you’ll be better positioned to accomplish your goals. We’d love to take the first step in a professional relationship with you by having a virtual meeting or a complimentary coffee. Visit investedwithyou.com and click on the “Get Started” button to learn more. Schedule a short discovery call or meeting We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.

Larry Swedroe Bio

The Value of a Written Financial Plan

May 6, 2021 by Hans Blake, CFA, CPA

Podcast: Play in new window | Download

Reading Time: 2 minutes On today’s Intelligent Money Minute, we interview Larry Swedroe on the value of having a written financial plan. A written financial plan helps one avoid glaring holes that may not be apparent before writing it down. Also, studies show that those with a written financial plan tend to stick it far more than those who don’t. During this episode, Larry gives multiple examples of how some avoided financial disaster with a written financial plan and some who experienced financial disaster due to not having one. Many people plan more for their summer vacations and weddings than then do their retirement. Studies have shown that people are more committed to a written financial plan. At Intelligent Investing, we guide our retirees into and through retirement, and one of the ways we do that is through creating a comprehensive written financial plan. We review your retirement concerns and risks, and we dive deep into your spending needs, wants, and wishes. Typically, we review the financial plan annually with you and update it as needed for life events as life changes. If you are interested in having an independent professional guide you in creating a comprehensive written plan, please go to “Get Started.” Schedule a short discovery call or meeting We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.

Larry Swedroe Bio

President Biden’s Capital Gains Tax Planning

April 30, 2021 by Hans Blake, CFA, CPA

In Biden’s first congressional address, President Biden called for massive government spending including $2.3 trillion in infrastructure and $1.8 trillion in family and education programs. Of course, tax hikes follow significant federal spending. During this Intelligent Money Moment, we break down the facts and impact of this new proposal while offering some practical planning ideas in response.

Facts

Currently, ordinary income such as wages or business profits is taxed at a top rate of around 41% and capital gains have a top rate of around 24% when you factor in potential payroll or investment taxes.
This week, President Biden will meet with Congress to outline a plan to help pay for several social programs
Details of the plan are being worked out, but the plan could cost more than $1T with funding for child care, paid leave, universal pre-kindergarten education and tuition-free community college.

Impact

The plan may alter a tax provision that lets investors avoid capital-gains taxes on appreciated assets if they hold them until they die. Mr. Biden’s plan is to have gains on appreciated assets be taxed at the date of death (regardless of whether they are actually sold).
The plan could increase the top capital gains rates on taxable investors at the top of the income scale.
Republicans argue that stock prices and investments could suffer, especially as these changes could come atop corporate tax increases President Biden has proposed to pay for infrastructure spending.
With a 50-50 Senate and closely divided House, moderate democrats may have a significant say in the tax proposals.

Planning Ideas

If you are a high-net-worth individual in the top tax bracket or approaching, the recent news may impact you the most, and likely to provide tax planning strategies to perhaps spread out some of your long-term-capital gains in years when your low-earning years before Social Security benefits kick in.
If you have a taxable account (revocable trust, or large taxable brokerage account), you may want to consider a gifting strategy depending on your current tax bracket and time horizon and other factors.
As a CPA, tax efficiency has been a bedrock of Intelligent Investing and historically has been one of the biggest levers of value creation.
If you’d like to learn more, please visit investedwithyou.com and click on the “Get Started” button to become the next Intelligent Investor.

Sticking to the Plan & Avoiding Behavioral Finance Mistakes

April 29, 2021 by Hans Blake, CFA, CPA

Podcast: Play in new window | Download

Reading Time: 2 minutes

On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on sticking to the plan in the midst of fear. Despite being the founder of ETFs.com, Matt isn’t unlike other investors in regards to portfolio concerns. Matt says it himself that he worries about the same things that a lot of people worry about. During this episode, he mentions the 4o year-long bond bull market and equity evaluations as personal concerns. Despite these concerns, Matt stresses the importance of sticking to a long-term investment strategy in the midst of fear. One thing will remain, the potential that humans will misbehave. That’s why it’s critical to not be fearful or greedy in finance.

When we meet with prospective clients, one of the first steps we take is to have prospects take a state-of-the-art risk questionnaire. Our approach uses a Risk Number built upon a Nobel Prize-winning framework, and every client receives a unique risk number. The risk number is a way to understand your willingness to take on risk. We also will discuss your ability to take on risk, your need for risk, and explore what your current portfolio risk is. We’d be happy to setup a complimentary call or meeting. You can book a call or meeting by clicking “Get Started.”

Matt Hougan Bio

Matt Hougan is one of the world’s leading experts on crypto, ETFs, and financial technology. He is Global Head of Research for Bitwise Asset Management, creator of the world’s first cryptocurrency index fund. Hougan is also Chairman of Inside ETFs, the world’s largest ETF conference. He was previously CEO of ETF.com, where he helped build the world’s first ETF data and analytics system. Hougan is co-author of the CFA Institute’s Monograph on ETFs. He’s also a crypto columnist for Forbes, and a three-time member of the Barron’s ETF Roundtable. For more resources from Matt Hougan click here.

The Four Horsemen of the Retirement Apocalypse

April 15, 2021 by Hans Blake, CFA, CPA

Podcast: Play in new window | Download

Reading Time: 2 minutes On today’s Intelligent Money Minute, we interview Larry Swedroe on the four horsemen of the retirement apocalypse. Larry explains the importance of investors not using historical returns for blindly forecasting the future. On the contrary, Larry explains the need to understand how the returns earned value. During the episode, he goes through misconceptions about equity evaluations, optimistic forecasting, and bond yields. Larry explains in detail the four horsemen of the retirement apocalypse:

Equity evaluations are much higher
Bond yields are lower
Longevity risk
Long-term care risk

As Larry mentioned, the Four Horsemen of the Retirement Apocalypse can seem scary and produce fear in your hearts. As you approach or if you are in retirement, there are some ways to plan for such events. At Intelligent Investing, we minimize financial stress to maximize lives. Our goal is to create a written financial plan and stress test your plan and portfolio for these types of events. We’d love to sit down with you over a complimentary coffee or virtual meeting to discuss how we may serve you and your family. Don’t face retirement alone…let us be your financial accountability partner and we can face the future together. Schedule a short discovery call or meeting We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.

Larry Swedroe Bio

The 3 Solutions to the Biggest Financial Problems HENRYs Face

April 7, 2021 by Hans Blake, CFA, CPA

Reading Time: 3 minutes

First of all, nobody likes to be labeled, and there are always exceptions to the rule, but HENRY is an acronym that stands for High Earner Not Rich Yet (coined by Fortune in 2003). HENRYs are young doctors, lawyers, engineers, or other top-earning professionals who have a high salary but don’t have time to manage investments. They are in the process or have finished paying off student loans and are beginning to accumulate a nest egg. They may have a young family and are becoming an expert in their professional field. Essentially HENRYs are young professionals who have a high salary but don’t have time to manage investments.

A couple of quick stats: Many HENRYs are Millennials who like control and technology, and make up the largest generation. They have the highest number of billionaires and are digital do-it-yourselfers. 25% aren’t sure how their retirement savings are invested, and 80% are concerned Social Security won’t be there for them when they retire.

People make money in many ways, but often don’t know what to do with it after they’ve made it. In a prior blog, we wrote about some of the biggest financial problems a HENRY faces: The 4 Ds. To quickly summarize, they are: Debt, Direction, Discipline, and Digital Dangers

Sometimes HENRYs fool themselves into thinking they can just “Google” their financial or investment questions. Unfortunately, it’s not that easy. Market conditions and economic forecasts change constantly. Technology can beat humans at computations, but I also believe it is best to receive wisdom from a human who understands investor behavior and who leverages integrated technologies.

So, now that we’ve covered some of the biggest financial problems a HENRY faces, How do we overcome them? Three Ps

Have a Plan, Be Patient, and Form a Financial Partnership

First, Have a written plan

Only 30% of Americans have a long-term financial plan. “If you don’t have a plan, you’ll be part of someone else’s.” Terrence McKenna
Start by writing out your long-term goals (5-10 year). Then, write out the big stepping stones (say, your 1-year goals) that will help you get there. Then write out the action steps to get you to those stepping stones. (breaking it down into quarters, months, and even weeks)
Remember, “A goal without a plan is just a wish.”

Second, Be Patient

Warren Buffett’s favorite holding period — forever — has few fans these days.
The length of time that investors hold shares has been shrinking for decades but the trend has been exacerbated due to COVID-19. People have too much time on their hands, they have been given stimulus checks and told to stay at home. This is a recipe for disaster, and has caused people to become nervous about sitting on investments for too long. The average length of time shares spend in a portfolio hitting record lows this year as investors surf wild market swings for quick gains.

Third, form a financial partnership

I often see young professionals partner with an inexperienced or wrong advisor. Perhaps they use a buddy they went to school with who took a 40 hour class that taught them how to sell a certain financial product such as whole life insurance. So, Be sure to check his or her credentials.
Be sure to understand the financial advisor’s conflicts of interest. Many times brokers make money based off of transactions, so they are motivated for you to buy and sell, which can cause unnecessary expenses in your portfolio.
There are many good financial advisors out there, and our firm, Intelligent Investing is a fee-only independent fiduciary firm. A fiduciary means we must do what is best for our clients at all times and strive to put you into a portfolio that matches your willingness to take on risk. Perhaps look for an advisor who does not sell any financial products such as insurance or annuities, and is incentivized to have your portfolio grow. Fear and Greed are everyone’s two biggest enemies when it comes to money, so ideally, look for a financial partner, who can provide a trustworthy lifelong human relationship and financial accountability.

Many HENRYs and millennials agonize over making decisions–such as choosing a financial advisor. However, they ignore the opportunity cost of our time. For instance, if you spend months thinking about whether to make a career change, you will have lost time that you could have spent actually building your new career. Instead, set a time limit for any decision you face and consider outsourcing to other professionals who are experts in their respective fields. You may enjoy running the numbers, but you need a financial accountability partner as a second pair of eyes to ensure you are on track.