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Neither Asset Allocation nor Diversification guarantee a profit or protect against a loss in a declining market.  They are methods used to help manage investment risk. Rebalancing can entail transaction costs and tax consequences that should be considered when determining a rebalancing strategy. 

 
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Financial Planning

Ever wonder about these things? That's great, because we love to help, and we answer questions like these nearly every day.

  • "Life Happened:" retirement, job change, marriage, divorce, health issue, children or grand-children; What should I be doing now?

  • Are there steps I can take to pay less in taxes? Am I investing appropriately to maximize my tax advantages?

  • What is the impact of a major purchase decision I am considering? (i.e. home, vacation home, auto, recreational vehicle, etc.).

  • I work in a profession that is a target for lawsuits. How can I balance protecting my assets and the cost of insurance with my goals and long-term investment decisions?

  • I am early in my career and would like to get on the right track. Is there an affordable, objective solution provider that's not just a robot and can actually advise me?

  • I'm a surgeon/professional athlete/pilot. Disability insurance can't protect my income adequately due to my career. What are my options?

  • How can I responsibly fulfill my fiduciary duties, having been named an executor/trustee by a parent, sibling, or friend?

  • Should I refinance or pay off my mortgage, student loans or vehicle loans, or invest that money instead?

  • How do I invest a lump sum (gift, inheritance, business proceeds, 401(k) rollover, pension)?

  • Is my portfolio appropriately invested for my goals, age and risk tolerance?

  • My children’s (or grandchildren’s) college education is important to me. How can I best help ensure their ability to attend?




 

Investment Management

There are studies that show even a bad investment philosophy executed consistently will outperform the average investor. Why? Because the average investor tends to be swept up by emotion and headlines and follows the herd. This behavior often results in buying high and selling low. 

 

What we seek, however, is a recipe for buying low and selling high. While some investment strategies can ‘beat the market’ in the short-term, we have seen no credible evidence that any strategy can do so consistently over time. 

 

To accomplish our objective, very simply put, we create three buckets of money each with a different time horizon. Money that you will need in the coming year will fall into your short-term portfolio. Assets that you will need to utilize in the next 2 to 7 years create your medium-term portfolio. And any money that you won’t need for 7 years or longer funds your long-term portfolio. 

 

Your short-term portfolio is held in (virtually no risk) checking, savings or money market* accounts. Your medium-term portfolio is typically invested in (low risk) short-term fixed income investments. And your long-term portfolio will be comprised of (riskier) equity, alternatives or fixed-income positions as appropriate for your age, risk tolerance, and goals. 

  



Why the three portfolios? By safe-siding funds you will need in the next rolling seven years, you reduce the risk of principal loss for money that you know you need to spend, and don’t want to stay up at night worrying about. The long-term portfolio, however, can afford to take more risk (resulting in higher gains or losses). In our experience, market cycles tend to be three to seven years, your long-term portfolio can afford to wait out volatility associated with higher risk investments. We view time ‘in’ the markets as more important than trying to time the markets. 

 

During the course of an economic cycle, we have observed that each asset class ‘has its day in the sun’. We don’t know, however, in advance, which day that will be. However, we do know that asset classes tend not to move together. Some will be going up while others are going down. By creating a diversified long-term portfolio across different asset classes based upon your risk tolerance, we create the opportunity to relatively buy low and sell high. When an asset class rises, we harvest gains from that asset class and redeploy that cash to an under-performing asset class. 

 

In addition to the strategy above, when markets decline, we harvest tax losses** in non-retirement accounts that will directly reduce your tax liability. We then redeploy that cash immediately back into the market in the same asset class to maintain your overall strategic asset allocation. But, you now have an additional ‘asset’ to offset future capital gains and/or up to $3,000 per year of ordinary income. And, your portfolio balance remains the same as it was before the harvesting exercise. Finally, when deploying new cash to your long-term portfolio, we seek to fund the asset class(es) that are furthest below their target allocation.

 

Of course, part of the success of this model is to be disciplined about its execution in good times and bad. Our strategy helps us and you do this by keeping the emotional brain in-check, therefore, implying the rational brain stays in-charge.


* An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

** Tax loss harvesting is not suitable for all investors. Please consult your personal tax advisor as to whether tax loss harvesting is a suitable strategy for you, given your particular circumstances. The tax consequences of tax loss harvesting are complex and uncertain and may be challenged by the IRS. You and your tax advisor are responsible for how transactions conducted in your account are reported to the IRS on your personal tax return. 


 

Defined Contribution and Defined Benefit Plans

For business owners who seek to optimize their personal and business tax efficiency, we will collaborate with you to design a defined contribution and/or defined benefit plan. The process begins with a cost/benefit analysis of the various plan opportunities and culminates in a custom program that allows your business and personal finances to enjoy lower tax liabilities. In 2017, defined contribution plans allow up to $54,000 ($60,000 for those over 50) to be saved per participant and can include a profit sharing component. Defined benefit plans can provide a larger tax deferred investment opportunity in order to provide an annual benefit to plan participants of up to $210,000, or 100% of the participants average compensation for his or her highest three consecutive calendar years (whichever is lower). 


We are happy to work with you to determine whether either of these plans might be an appropriate fit for your financial plan.