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Wall Street’s Yachts: Still Floating Finely

Thursday, June 18th, 2015

By J. Haden Werhan, CPA/PFS

Wall Street’s excess is certainly not breaking news. In the 1940s, Fred Schwed Jr. published his wickedly accurate exposé “Where Are the Customers’ Yachts?” based on his experiences as a professional trader during the Great Depression. His point was, while Wall Street’s biggest brokers seemed to be doing quite well for themselves, with the local harbors filled with their high-end yachts, evidence of their customers’ wealth was far less apparent.

Naming Trusts as Beneficiaries of IRAs

Thursday, March 12th, 2015

By Barry W. Oliver, CPA/PFS

One of the most important estate-planning decisions for investors is how to properly designate beneficiaries of their retirement accounts. In most scenarios, the logical choice is to designate individuals as beneficiaries—as opposed to the estate—to allow for the IRAs, once inherited, to “stretch” the distributions for as long as possible. The longer the IRA is sheltered from taxes, the more potential it has to grow and accumulate wealth. Naming an individual is a simple and strategic method to stretch an IRA. However, the real world is not always simple, and there are often other factors to consider when determining beneficiaries.

Many times, it is in the account owner’s best interest to name trusts as beneficiaries of IRAs. If done correctly, this can preserve the stretch capabilities for the beneficiaries and allow the account owner to have control over the ownership and distributions after he or she is deceased. If done incorrectly, this can “kill the stretch” and force distributions to be made—and taxes to be paid—more quickly than what was intended.

As a result, it is critical that a competent attorney and tax professional be directly involved when deciding whether to name a trust as a beneficiary. An advisor may offer guidance by identifying potential issues for an individual to share with his or her team of professionals.

How to Avoid Outliving Your Savings

Tuesday, February 17th, 2015

By Brent P. Thomas, CPA/PFS

Seventy-two percent of Americans are saving something every year, according to a recent Capital One study. The average saver sets aside 6.4% of their income. Less than 20% are saving more than 10%, and 25% save nothing.

That is a pretty dismal savings rate, especially when actuary studies show that for every 65-year-old married couple living today there is a 47% chance that at least one of them will be living at age 95.

Tracking Error Regret: Is It Really an Error?

Thursday, January 22nd, 2015

By Steve Leininger, CPA/PFS

Every now and then the markets teach us an unpleasant lesson: Not all stocks or types of stocks (e.g., domestic or international) go up and down at the same time. We design portfolios with that in mind to try to avoid perfect correlation. When the stocks we own go up, especially in relation to stocks other people own, we call that being smart and savvy investors. But when the stocks we own do worse than stocks owned by others, we may get upset. We may even be tempted to make big changes to our portfolio in an attempt to get the better returns that others seem to be enjoying. But making investing decisions based on what’s happening in the short term is a bad idea.

Baseball, Investing and Hindsight Bias

Thursday, January 8th, 2015

By Jay W. Wirig, CPA/PFS

Back in October, many of us in the Bay Area were celebrating the San Francisco Giants’ World Series win. Game seven of the World Series may have happened a few months ago, but today I’d like you to rewind your memory to that night at Kauffman Stadium in Kansas City. So far, the most exciting story of the series is the performance of the Giants’ starting pitcher, Madison Bumgarner. He’s already posted two wins in this series, including a complete game shutout two days earlier. He has come into game seven on two days’ rest to protect the Giants’ one-run lead in the fifth inning. The question everyone is asking: “Will he be able to continue his dominant pitching performance?”

Thumbs-Up on CalPERS’ Thumbs-Down to Hedge Funds

Thursday, December 11th, 2014

By J. Haden Werhan

For more than a decade, the California Public Employees’ Retirement System (CalPERS) has invested a modest portion of its plan assets in hedge funds. “Modest” for CalPERS, anyway. As the nation’s largest pension fund, it currently manages nearly $300 billion in assets, approximately $4 billion of which had been allocated to hedge fund investments. The allocation also represents a minuscule drop in the hedge fund market ocean, where investments are measured in the trillions of dollars.

Still, presumably because of CalPERS’ strong reputation among pension plan providers, even small changes in its investment strategy have a way of looming larger than life, in California and nationwide. That’s why we were particularly gratified when CalPERS announced its decision to eliminate all of its hedge fund investments, including 24 hedge funds and six hedge fund-of-funds.

Are Preferred Stocks a Good Choice for Fixed Income?

Friday, September 19th, 2014

By Dave Harlow, CPA/PFS

Some portion of almost any balanced portfolio will be allocated to fixed-income investments. Among the options for executing a fixed-income strategy are bond funds, individual bonds and preferred stocks. Let’s take a moment to look at preferred stocks as a choice for the fixed-income portion of your portfolio.


Insurance Needs vs. Insurance Wants

Thursday, August 14th, 2014

By Jared Nelson

I remember lying awake in bed one night several years ago, tossing and turning. There was something on my mind that I just couldn’t resolve. My wife had recently given birth to our fourth child and I just couldn’t shake the weighty feeling of financial responsibility. Then it hit me. As the only wage earner for my family, I had a moment of sudden clarity. My family was wholly dependent on me for financial support and I didn’t have a backup plan. I needed life insurance! I had a very pressing insurance need.

While there are certainly a lot of opinions about life insurance, there is a methodical way to approach the topic. To begin, you need to separate the various reasons to purchase life insurance into two categories: needs and wants. The act of dying itself does not create a need for insurance, but depending on your own unique individual circumstances, your death may indeed produce the need for those you care about.

$1 Million Doesn’t Go as Far as It Used To

Thursday, July 17th, 2014

By J.P. Wirig

A right-handed pitcher from my hometown earned a $1,860,000 signing bonus in the 2001 draft. That is a phenomenal amount of money for a young man to receive! Many of us would think that ought to be enough for just about anybody to live off of for the rest of his or her life.

I wasn’t so sure, and I quickly ran some calculations to see how long this bonus would really last. The answer may surprise you.

Ignoring the Siren Song of the Market

Thursday, June 19th, 2014

What causes market prices to change? It begins with the never-ending stream of news informing us of the good, bad and ugly events that are forever taking place. For example, when there are reports that a fungicide is attacking Florida trees, orange juice futures may soar as the market predicts that there’s going to be less supply than demand. But what does this mean for you and your investment portfolio? Should you buy, sell or hold tight? Before the news tempts you to jump into or flee from breaking trends, it’s critical to be aware of the evidence that tells us the most important thing of all: You cannot expect to consistently improve your outcomes by reacting to breaking news.