We have a lot of clients that own real estate investments as another way to provide investment income and grow their net worth. I can appreciate the tax advantages and diversification of owning investment property; in fact, my wife and I have acquired a few income properties over the past ten years.
We’ve been excited about the movement toward automated, fiduciary investment advice, sometimes called robo-advice, since we saw what WealthFront.com had to offer more than five years ago. I remember looking over Joyce’s shoulder as I walked her through their site, with her jaw dropping to desktop. Now, the likes of Vanguard and Charles Schwab are taking the lead from those first-to-market robos, including Betterment and Wealthfront.
I just completed a review of how each of our Model Portfolios performed in 2016, the first full year in which we’ve used them with a majority of our clients. As some background, we use Riskalyze to determine our client’s tolerance for volatility, balanced against their desire for high returns. Once clients are assigned a Risk Number between 1 and 100, we can then match each client to one of our Model Portfolios with a similar Risk Number.
… to test how much they spin the truth. Over the past year, I’ve had a very aggressive investor ask me to help him find the “investing silver bullet,” that will make a lot of money with little risk. In fact, I’ve had many clients ask for this over the years – just none as headstrong as this one. He is convinced that there is a way to make a lot of money – likely trading options – without risk of losing principal. He was so convinced that early in the year, he gave me $500 to subscribe to a weekly options advisory that sends 2-3 daily emails with trade recommendations. The website boasted of 546% gains in a month.
A few weeks back, I attended a due diligence forum in Denver, Colorado with 361 Capital, an alternative asset manager fairly new to the mutual fund space. They currently manage five funds across three strategies: long/short, counter-trend managed futures, and “macro opportunity”. In looking over the offerings, the macro opportunity fund has been a dismal failure since launching two years ago, and was not even mentioned at the forum. That’s okay – I wasn’t planning any diligence on it given its performance history.
Joyce’s article about the estate tax initiative here in Oregon prompted me to think about ways to earn and invest money responsibly, while still avoiding increasingly overburdening taxes. There does happen to be one place where the IRS allows you to deduct money that you contribute here on your income tax return, and doesn’t then tax you upon withdrawal of those funds. This in effect gives you the anomaly of truly tax-free money: The one...the only...the Health Savings Account (HSA).