Are portfolio manager fees “the only reliable predictor of performance”? “The lower the fees, the higher the returns realized by investors.”[1] It depends. In a pooled investment vehicle, where the client is merely a creditor of the real owner of the investment, perhaps. For separately managed accounts made up mostly of individual common stocks, probably not. The difference between an active management fee of 100 basis points on a $1 million account and an average 35-basis-point fee for most passive investment vehicles is substantial. Some passive vehicles have lower fees and some predict we will see 10-basis-point fees or lower as investment firms race to lower fees.

Although high inflation, high interest rates and incessant recession predictions have cast a shadow over the economy the past year, a sudden increase in innovation has provided some much-needed hope and a glimpse into a brighter future. Recent advancements in artificial intelligence and weight-loss pharmaceuticals threaten to shake up their respective industries. While the major players—Microsoft, Alphabet and Eli Lilly—will all likely benefit, these innovations will also provide an opportunity for new, smaller companies that can lead across these technological changes.

The quick rule of thumb about what the Internal Revenue Service (IRS) is likely to want to look at or to audit, if so inclined, is the current year plus the prior three years. These are called the “open years.” If fraud may be involved, it is the current year plus six prior years. The timing schedule is called the statute of limitations. It is meant to help compliant taxpayers trying to do the right thing from being subject to audit beyond a reasonable period, hence three open years. However, if items are omitted from a filed return, making the return “false, fraudulent or otherwise represents a willful attempt to defeat or evade tax, the statute of limitations doesn’t start running.”[1] These rules apply to taxes due, interest and penalties.

Woodstock uses pooled investment vehicles for client cash, so we’re watching money market funds. We’re interested to see that of all the categories of investments in the endowment model, private equity seems to be taking an outsized share. And we like to tell Woodstock’s story.

The stock market roared ahead in the first half of 2023, returning +16.9% and defying predictions for another difficult year. The stock market sailed through the demise of four medium-sized banks, a Congressional debt ceiling showdown, higher interest rates, and widespread calls for a recession.

AI has been gradually permeating many aspects of our daily lives. For instance, recommendation engines use AI to suggest merchandise, movies, and music based on what service providers know we already like and what we share in common with other users. AI is used for word suggestion, dictation, language translation, GPS navigation, facial recognition, and fraud detection, to name a few applications. It can read and process forms.

To keep a steady stream of income coming into the US Treasury, your “partner” probably shouldn’t change the rules of the game too many times, should probably be polite and civil, and should probably be fairly clear about what they expect.

We are pleased to shine a well-deserved spotlight on our colleague Julie Phippen, Executive Assistant at our sister company Agawam Trust Company. Julie was recently recognized by the Women’s Federation for Peace USA with their “Her Story Award,” bestowed on her in recognition of her good works with Sewpportive Friends,

Psychology has brought many ideas to financial analysis, but two that stand out are confirmation bias and myopic loss aversion. Confirmation bias is the tendency to find or accept only research that mainly supports an existing thesis.[1] “The more often one looks at a financial account, the more likely one is to see a loss and, since losses bother us more than gains, they spur turnover.” This is called myopic loss aversion.[2] Combatting these two tendencies is important for investors and their advisors to do, especially in volatile times.

A year removed from the Russian invasion of Ukraine and three years from the start of the Covid-19 pandemic, supply chain disruptions and bottlenecks have eased, remote working is on the decline, travel and entertainment businesses are seeing a strong recovery, consumer spending is steady, and inflation is beginning to come down—a return to some sense of normalcy. The equity markets have been aligned with the recovery and, perhaps hoping for a soft landing, have come back strongly for the past two quarters. Investors returned to growth stocks in Q1 following a surge by value stocks in Q4, providing a remarkably balanced positive swing to equity portfolios over the past six months.