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Investing Archives | Page 7 of 8 | Wealthspire Advisors

“How Am I Doing?” and the Complexity of Returns

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“How am I doing?” In today’s world, people want answers, and they expect incredible speed and simplicity. It now takes 10 seconds to get an Uber (assuming it doesn’t cancel on you), a few minutes to book a flight, and no time at all to self-diagnose our minor aches and pains into WebMD-induced nightmares. So it is understandable that investors want answers to the question, “How am I doing?” with the same speed. Returns are often considered the answer. In theory, a net-of-fees return figure is the great equalizer: reported on every site at the click of a button, simple…
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A Brief Guide to IRAs, Individual 401(k)s and Self-Employed SEP IRAs

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During the tax filing season we get a lot of questions concerning how much individuals can contribute to different types of retirement savings accounts. While we always recommend that you check with your accountant before making contributions, you can use this article as a brief guide to some of the finer points of making and deducting contributions to IRAs, Individual 401(k)s and Self-Employed SEPs. We have specifically limited our discussion to retirement vehicles that are available either to all individuals or self-employed individuals with no employees. Individual Retirement Accounts (IRAs) You have until your tax return filing deadline, not including…
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yield curve

The Many Uses of Margin Loans

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Margin refers to an investor’s use of leverage relative to his or her own assets. In other words, it’s “borrowing from your broker,” with your portfolio assets serving as collateral for the loan. How it Works Per the Federal Reserve's Regulation T, each marketable security in your investable account is given a “maintenance rate” which stipulates the maximum borrowing rate. For example, a maintenance rate of 50% indicates that an investor can borrow up to half of the security’s value. Note that retirement accounts are not eligible to be margined. Once you have activated the ability to take margin on…
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investing mistakes

What Should I Do With My Old 401(k)?

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It’s a question that comes up often – what should I do with my old 401(k)? There is no one-size-fits-all answer, and responses provided by financial advisors will be increasingly scrutinized if the Department of Labor’s (DOL) fiduciary rule is enacted. The rule mandates that advisors providing retirement advice act in the best interest of the client, which is called a fiduciary responsibility. The purpose is to protect retirement funds from professionals looking to profit at the expense of investors’ interests and ensure that the advice investors receive is right for them. Sontag Advisory, which has been a fiduciary since…
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tax-loss harvesting

A Closer Look at Tax-Loss Harvesting

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Tax-loss harvesting (TLH) is an important practice that can improve the after-tax returns of investors’ portfolios.  Below, we discuss the benefits, best practices, and limitations of TLH. What is it? Tax-loss harvesting is the process of selling a security at a loss, then using the proceeds from that sale to purchase a similar security.  The realized loss can now be used to offset existing or future realized gains as well as a limited amount of what is considered “ordinary income” for IRS purposes.  The concept behind TLH is to generate a tax deduction without negatively impacting the returns of your…
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diversification

The Power of Diversification

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Our recent post on standard deviation discussed how volatility can negatively impact an investor‘s financial or psychological health. Financially, this occurs if an investor is “forced” to liquidate during times of heightened (negative) volatility, incurring significant permanent losses in the process. Psychologically, this occurs when an investor’s angst reaches extremes and either impacts their health, or catalyzes emotional decision making with regards to portfolio decisions. One of the ways to minimize volatility is to have an appropriately diversified portfolio. In this post, we will explain how to think about this crucial aspect of portfolio construction. Let’s start by using an…
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Demystifying Standard Deviation

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Pop quiz:  Investment X and Investment Y have each returned 10% over the last 5 years.  Which one is better? It is tempting to claim neither, as their returns are equal.  But how does your response change if we also provide this fact: Investment X went up slowly and steadily each year, while an investment in Y was a wild ride – down 10% in two of those five years.  Our guess is that most people would strongly prefer Investment X with this new information.  The moral: when evaluating investments, one must assess both returns and risk together. Standard deviation…
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Should you own bonds in this low interest rate environment?

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Recently there have been a multitude of articles concerning how low interest rates are going to negatively impact investors. The conclusion of many of these articles is that your bond holdings should either be jettisoned or drastically changed in favor of riskier bond strategies that can earn higher returns. Below, we will highlight our view on why this is the wrong conclusion. The Role of Fixed Income in Your Portfolio Please note: the following applies to investors who seek a “balanced” long-term allocation, whether it be 75%/25% equity-fixed or vice versa, and does not apply to portfolios that are equity-only.…
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fiduciary

John Oliver & The Fiduciary Standard

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In his most recent episode, John Oliver did a great job uncovering several issues that plan sponsors and participants might find in their 401k plan.  We are proud to say our approach to advising retirement plans addresses all of these issues: Fiduciary– Many “financial advisors” do not act as a fiduciary to their clients, meaning they can act in a sales-like capacity (broker) rather than acting in their clients’ best interests.  Simply put – find someone who, both in practice and by law, must act in your best interest.  Sontag Advisory acts as a 3(38) ERISA fiduciary to our corporate retirement plan clients,…
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