Taxes

Cryptocurrency & How It Works

January 27, 2021 by Hans Blake, CFA, CPA

Reading Time: 2 minutes

On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on cryptocurrency and how it works. During this episode, Matt pulls back the curtain and sheds light on the nuances of cryptocurrency. According to Matt, cryptocurrency is the first native way that money can move over the internet. For example, if you go online today and pay your internet bill, it could take multiple days for that money to transfer. Contrast that with a Bitcoin transaction. Matt gives an example of a billion-dollar transaction that settled in less than 10 minutes with a fee of .0007%. There are many misconceptions regarding cryptocurrency. Simply put, it’s a new rail for the modern transfer of money.

I recently read a quote, “Knowledge acquired by reason will dispel ignorance and thus destroy the greatest evil—fear.” As Matt points out, when you hear of something new, it is best to do some research in order to gain knowledge and a better understanding. We think the same holds true of cryptocurrency, blockchain, and alternative asset classes. Just because something is new, doesn’t make it wrong. At the same time, just because it is new, doesn’t mean it’s better. To learn more about our philosophies, go to our philosophy page.

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 Dangers of Commission-Free ETF Trading

January 14, 2021 by Hans Blake, CFA, CPA

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On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on the dangers of commission-free ETF trading. Recently, custodians have been offering commission-free trading on ETFs, but many believe this can encourage misbehaving. Matt lays out the big picture in regards to the market and the opportunity. During this episode, he highlights the benefit and the behavioral risk of commission-free trading. The benefit is that those paying commissions will experience a leveling of the playing field. On the flip side, the behavioral risk is resisting the temptation to trade more frequently. Just because you can trade something doesn’t mean you should.

The adage, “There’s no free lunch” continues to ring true today. Custodians will make money somehow, and it is important for you to understand that. Investors should be grateful for the recent drop in commissions, but there is a behavioral risk that is attached to commission-free trading. You can learn more about these dangers and the need for having an investor behavioral coach by visiting our philosophy page.

Matt Hougan Bio

Lessons Learned From The ETF Flash Crash

December 2, 2020 by Hans Blake, CFA, CPA

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On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on lessons learned from the ETF flash crash. You’re right to realize that ETFs have different risks than mutual funds. Unlike mutual funds, ETFs trade like stocks so like all equities that day, ETFs traded down during the Flash Crash. There are ways to protect against those sharp downturns by avoiding sleeping limit orders which is true for stocks at ETFs. Once again, Matt Hougan reiterates that ETFs can have a lot of unique advantages compared to mutual funds, but it still requires sensible practices.

There will always be trade-offs in life, and the same thing is true when it comes to trading, risk, and your financial plans. At Intelligent Investing, we have the ability to show you your financial plan and let you choose some of the trade-offs to see how it impacts your plan. For example, what if you were to retire a few years early, what if you wanted to increase your spending in retirement, or perhaps you want to leave a larger bequest as a lasting legacy. We have the ability to show you how changing each of these factors will impact your financial plan’s success rate, and we’d be happy to have a coffee or call to discuss this in detail.

Matt Hougan Bio

Reasons Mutual Funds May Make Sense in Your Portfolio

November 11, 2020 by Hans Blake, CFA, CPA

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On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on whether mutual funds make sense in your portfolio. Despite being the Chairman of Inside ETFs, Matt Hougan still believes mutual funds have great value in portfolios. For example, mutual funds can be great investments in the retirement space. His reasoning is due to the fact that tax efficiency isn’t as important during retirement and more privacy than ETFs. The inherent transparency of ETFs presents multiple trade-offs like less liquidity and the risk of daily disclosing of one’s portfolio. Some non-transparent ETFs exist, but they are relatively new.

At Intelligent Investing, we currently use mutual funds and ETFs in our portfolios. Since we are independent, we are able to build our own portfolios which drives out a lot of costs. One of our unique factors is to minimize fees, especially portfolio costs. To learn more about our firm and philosophies, visit here and consider scheduling a complimentary coffee or meeting.

Matt Hougan Bio

The Creation and Redemption Process of ETFs

October 21, 2020 by Hans Blake, CFA, CPA

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On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on what ETFs are and how the ETF creation and redemption process works. ETFs have a unique creation and redemption process that differs from mutual funds. An ETF publishes a list of all the securities it wants to own at specified desired weights. A group of authorized participants will go into the market and buy all the desired stocks the ETF has listed at the desired weight. The beauty of this from an ETF perspective is that it essentially sits still with effective little effort and still receives the desired outcome. According to Matt, It’s an efficient batch process with potentially less risk.

Matt said you don’t need to know how wifi works, as long as it works. However, you may be the “engineering” type who likes to dig into how things work. At Intelligent Investing we work with engineers and other executives and professionals who take time to understand our philosophy and processes. We’d love to let you open up the hood so we can show you exactly how our Intelligent Investing engine runs and how we’ve integrated over 30 technologies into the firm. To learn more, go here to schedule a complimentary call or meeting. We are excited to be interviewing Matt Hougan, and we have several more episodes where we explore the ins and outs of ETFs, bitcoin, and blockchain, so be sure to subscribe to our podcasts to hear all the interviews.

Matt Hougan Bio

An Introduction to ETFs with Matt Hougan

October 14, 2020 by Hans Blake, CFA, CPA

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In this episode of Intelligent Money Minute, we interviewed Matt Hougan, Chairman of Inside ETFs on the definition of ETF and how they compare to mutual funds. An Exchange Traded Fund (ETF) is a type of security with a collection of securities like stocks and typically tracks an underlying index. Although there are similarities to mutual funds, ETFs have distinct differences that may provide strategic advantages to a portfolio. Matt calls ETFs the modern version of mutual funds and highlights their potential tax advantages. The most significant difference between mutual funds and ETFs is ETFs trade like stocks. During this episode, Matt reveals what he coined the “hidden secret” of ETFs and why they don’t return capital gains.

At Intelligent Investing, one of our four unique factors is to minimize fees, and we believe taxes are another fee that should be minimized. You can learn more about what makes us unique by going to What Makes Us Different. We are excited to be interviewing Matt Hougan, and we have several more episodes where we explore the ins and outs of ETFs, bitcoin, and blockchain, so be sure to subscribe to our podcasts to hear all the interviews.

Matt Hougan Bio

Nonrefundable Tax Credits for Exceptional SC Donations

June 26, 2018 by Hans Blake, CFA, CPA

Reading Time: 2 minutes

What is Exceptional SC?

The Exceptional SC scholarship fund (a 501(c)(3), also known as the Educational Credit for Exceptional Needs Children or ECENC) was created by the South Carolina Legislature. The fund is made up of tax-deductible donations that serve as scholarships for tuition for exceptional needs students in South Carolina to attend an approved independent school that best serves their needs.

Applications and eligibility information are available at ExceptionalSC.org. The Exceptional SC board reviews applications and awards scholarships based on a number of criteria. Students who are awarded the scholarship must attend a school that the Education Oversight Committee has approved for program participation.

Exceptional SC begins accepting donations on July 2, 2018 at noon.

Available Tax Credits for Donors: $12,000,000.00

Anyone can donate to the Exceptional SC 501(c)(3) scholarship fund, which provides scholarships to exceptional needs students. Individuals and corporations who pay South Carolina taxes can make a donation to Exceptional SC and claim a dollar for dollar tax credit against their overall South Carolina income tax liability (personal corporate income tax). Donors can deduct contributions made to Exceptional SC on their federal income taxes under IRC Section 170.

A taxpayer may not claim more than sixty percent of his total South Carolina tax liability for the year the contribution was made. If a taxpayer deducts the amount of the contribution on his federal return and claims the nonrefundable credit, then he must add back the amount of the deduction for South Carolina income tax purposes.

Donors are:

Eligible to claim a dollar for dollar credit on state income tax liability;
Not allowed to designate a specific student or school as beneficiary;
Limited by a first come, first served annual statewide cap of $12 million.

Please visit ExceptionalSC.org/donate for more information and to make a donation. §12-6-3790 provides that South Carolina tax credits for donations to Exceptional SC may not exceed $12 million for 2018.

Please check with your CPA or tax preparer if you have additional questions.

What are the Differences between a Revocable and Irrevocable Trust

February 26, 2018 by Hans Blake, CFA, CPA

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Ever wonder what are the differences between a revocable trust and an irrevocable trust? Listen to Chad Groover, elder law attorney from Upstate Elder Law, talk about the differences between a revocable and irrevocable trust on our latest podcast. Consider joining us at our next First Friday Networking at Noon event (FFN@N) to hear Chad speak on this and other topics.

You may have seen our prior article and podcast about the probate process. Or perhaps you read our post and heard our podcast on ways to avoid probate. Whether you’re seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility–many types of trusts exist, each designed for a specific purpose. Although trust law is complex and establishing a trust requires the services of an experienced attorney, mastering the basics isn’t hard.

What is a trust?

A trust is a legal entity that holds assets for the benefit of another. Basically, it’s like a container that holds money or property for somebody else. You can put practically any kind of asset into a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. The assets you choose to put in a trust depend largely on your goals. For example, if you want the trust to generate income, you may want to put income-producing securities, such as bonds, in your trust. Or, if you want your trust to create a pool of cash that may be accessible to pay any estate taxes due at your death or to provide for your family, you might want to fund your trust with a life insurance policy.

When you create and fund a trust, you are known as the grantor (or sometimes, the settlor or trustor). The grantor names people, known as beneficiaries, who will benefit from the trust. Beneficiaries are usually your family and loved ones but can be anyone, even a charity. Beneficiaries may receive income from the trust or may have access to the principal of the trust either during your lifetime or after you die. The trustee is responsible for administering the trust, managing the assets, and distributing income and/or principal according to the terms of the trust. Depending on the purpose of the trust, you can name yourself, another person, or an institution, such as a bank, to be the trustee. You can even name more than one trustee if you like.

To learn more, consider downloading our Trust Basics Article

Intelligent Investing does not provide any tax, legal, or accounting advice. Any material in the email or attachments has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.