Using “Asset Location” to Reduce Your Tax Bill

Growing your portfolio isn’t only about selecting the right investments; it’s also about maximizing how much of the gains you can keep and minimizing how much you have to give to the government. Therefore understanding the tax implications of your investments is a key part of taking control of your wealth. Fully utilizing tax-advantaged accounts (such as 401k and IRA accounts) is important, but it’s not the only step in achieving better after-tax investment returns.

Topics: Blog Taxes Asset Location

Should You Be Afraid of a Stock Market Crash?

US stocks have been on a tear over the past 6 years, with the S&P 500 index of large US stocks returning over 200% since its nadir in March 2009. Such a lengthy bull market can lead to concern about when it will inevitably end; after all, stock markets tend not to rise forever. But if such fear leads you to hoard cash rather than invest it, you’re likely making a mistake, particularly if you have a long time horizon for your portfolio.

Topics: Blog Stock Market Risk

How to Think Like a Long-Term Investor

For investors concerned about what will affect the long-term growth of their portfolio, it can be difficult to focus on the right issues. Most financial news stories are produced for traders and others in the financial industry who are interested in daily market movements. After all, their paychecks can depend on what goes up and what goes down. But for long-term investors, the implications of what’s happening can be very different. Here are a few interesting—and perhaps counter-intuitive—ideas for long-term investors to keep in mind amid the din of financial markets:

Topics: Blog Risk Volatility Valuation

What the Job Boom Means for Stocks

On Friday the Bureau of Labor Statistics announced that the economy added 257,000 jobs in January and increased its estimate of last year’s job gains. The 3.1 million jobs that were added in 2014 according to the latest numbers were the most since the turn of the century, and 2015 seems to be off to a strong start as well. So what does this job market boom mean for your portfolio? The answer, perhaps surprisingly, is “probably not much.”

Topics: Blog Stock Market Economy Jobs

The Outlook for Bonds

Prominent warnings of soaring bond yields, and therefore losses for investors who own bonds, have been pervasive since the end of the global financial crisis in 2009. Perhaps the most famous such prediction came from Nassim Nicholas Taleb, who in 2010 said, “It’s a no brainer, every single human should short U.S. Treasury bonds.” But these prognostications have so far proved wrong, as bond yields have actually fallen. The yield on 10-year Treasury bond is below 2%, not far from its all-time low set in 2012. So when will bond yields actually start to rise and bond investors start to feel the pain?

Topics: Blog Bonds Interest Rates

The Lesson of the Swiss Franc Surge

Last week Switzerland’s central bank shocked financial markets by removing the cap it had set on the value of the country’s currency, the Swiss franc. As a result the value of the franc surged more than 20% against the US dollar.

Switzerland comprises less than 4% of the global stock market, so for most American investors who aren’t currency speculators the surge didn’t directly have a large impact on their portfolios. But it was later revealed that a hedge fund, Everest Capital’s Global Fund, was essentially wiped out by the currency swing. And there were likely a number of other funds that were buffeted as well.

The travails of such funds highlight the importance of knowing what you own in your portfolio. “Knowing what you own” doesn’t mean memorizing the names of all your holdings or learning facts about each one. Instead it means having a high-level understanding of how the different pieces of your portfolio fit together: which asset classes, sectors, and regions of the world your portfolio is exposed to.

Topics: Blog Switzerland Exposure

It’s Not Too Late for a 2014 IRA Contribution

Taking advantage of tax-advantaged accounts, such as 401(k) and IRA accounts, can be one of the most effective tactics to get on track to reach your retirement goal. But if you forgot to make an IRA contribution for the 2014 tax year, it’s not too late. You actually have until tax day (April 15th) of this year to make an IRA contribution for 2014.

Like with most issues relating to taxes, the rules relating to IRA contributions aren’t exactly simple. But here are the basics:

Topics: Blog IRA Taxes

The Biggest Political Risks in 2015

2014 was filled with political risk, a concept referring to political changes that can affect the value of an investment. From Russia’s military adventurism in Ukraine to renewed US military involvement in the Middle East, headlines were filled with geopolitical turmoil. But despite all the potential political conflicts, the ones that ended up metastasizing only minimally affected most investors. Even Russia comprises well below 1% of the global stock market. Political conflicts that could have more dramatically affected financial markets—such as China’s territorial disputes in the South China Sea and Scotland’s independence referendum—mostly fizzled out without causing too much financial damage. That could change in 2015 as political risk in Europe intensifies.

Topics: Blog Political Risk Europe

2014 Recap: US Investments Shine While Commodities Lag

2014 was a year of divergence in the global economy: US economic growth accelerated, while growth in many other countries slowed or (especially in Europe) remained stagnant. Largely as a result of this trend, the US dollar increased in value against the world’s other major currencies. The implication for financial markets was a good year for US stocks and US bonds, a weak year for international stocks and international bonds, and a terrible year for commodities.

Topics: Blog Recap

When Will the Fed Start to Raise Interest Rates?

The US economy has perked up recently: an average of almost 250,000 jobs have been added per month so far this year, a substantially faster pace than any other year in the past decade. As a result, the Federal Reserve has shifted its focus away from trying to stimulate the economy and toward potentially raising interest rates. Raising rates would have some impact on essentially every investment, affecting bond prices, stock valuations, the general economic outlook, and even the how much interest your bank pays on savings accounts.

Topics: Blog Interest Rates