What You Don’t Know About Social Security Could Hurt You
In discussing various tax advantaged programs with the next generation there is nothing as important as their understanding the US social security program. A recent article discussed what most Americans don’t know about social security.[1] The key idea is that you need to work to benefit: “monthly benefits are calculated based on your 35 highest years of earnings”.
There is current interest in the effect of the new tax law changes on investment fees. Before discussing deductibility, investment fees have always had to be justified. For assets managed at a firm like Woodstock, the ownership of individual equities, not in a pooled investment structure, allows the investment manager to use asset allocation, tax considerations and turnover, in other words use the levers available, to effectively save as much as the management fee might be.
Woodstock Quarterly Newsletter / Summer 2018
The S&P 500 Index returned 2.65% through mid-year, recovering from its modest loss in the first quarter and remaining below its January high. Large capitalization internet and technology shares continued to dominate performance, with Alphabet, Amazon, Apple, Facebook, Microsoft, and Netflix accounting for 99% of the S&P’s modest gain.[1] Seven of the S&P 500’s current eleven sector classifications were down through mid-year.
Why Woodstock Holds to the “Real” Fiduciary Standard
We like to watch trends. The fundamentals of the work done at Woodstock is not following trends, however, but following actual companies and how we expect their managements to respond to change with the “tools” they have within their companies to continue to produce profits. After doing that work, we like to point out why you, our clients, should be at Woodstock. We believe that you are best served here.
Woodstock Quarterly Newsletter / Spring 2018
One of the things the new tax bill didn’t lower is the percentage of the income tax paid by the highest earners. In fact the very “progressive” income tax became more so. According to Congress, the income tax is expected to raise 50% of the total federal revenue in 2018, which is the largest source of US revenue.[1] The highest earning 20% of taxpayers, those expected to earn $150,000 or more, will pay 87% of the income tax, up from 84% in 2017.
Woodstock Quarterly Newsletter / Spring 2018
The bull market just passed its ninth anniversary and most investors have to be amazed at the 331% run in the S&P 500 from 667 (3/9/09) to 2,873 (1/26/18). This near 18% compound annual total return (CATR) performance is reminiscent of the spectacular back-to-back decade performances of 18% that occurred in the 1980’s and 1990’s. But just as that period was followed by a lower return decade – the 2000’s -1% CATR, a bit of late cycle planning is prudent today.
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Woodstock Quarterly Newsletter / Spring 2018
As a client sometimes we have to reassure our investment adviser that yes, we understand the risks in the present market but we are still committed to the investment strategy we have agreed to. In the investor guide, Winning the Loser’s Game, the ideal client/advisor meeting begins with reaffirming the existing strategy.[1] There may be reasons to change, but client and advisor should discuss and, if needed, spend the rest of the meeting getting to agreement on the change.
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Woodstock Quarterly Newsletter / Winter 2018
2017 was a phenomenal year for stocks, with the S&P 500 Index returning 21.8%. The NASDAQ Composite Index returned 29.6%, and the Dow Jones Industrial Average returned 25.1%. Internet stocks drove the market, but the Dow’s cyclical stocks also performed well. Many international markets had strong double-digit gains in US Dollars as well, helped by a 10% decline in the currency over the year. The S&P 500 Index has generated positive returns for fourteen months in a row, the longest such stretch since 1959.[1] Stock market volatility also has fallen to the lowest level we have seen in years. This strong, consistent performance has buoyed sentiment and fostered some level of speculative interest.
Woodstock Quarterly Newsletter / Winter 2018
Woodstock sits both in the larger financial industry of banks, insurance companies, broker dealers and investment management firms, and amongst our competitors in the investment management world. In the larger financial industry, who gets to keep the difference between a historic 8% return on equities, an “equity-like return”, and a historic 4% return on “risk free” investments, such as government bonds? Currently government bonds are at 2% while stocks have kept up their 8% average return, so the question is even more important now. Also, as interest rates rise above 2%, a bond originally bought yielding 2% will lose market value.[1]
Woodstock Quarterly Newsletter / Winter 2018
Over the next few months, analyses of the new tax law, the Tax Cuts and Jobs Act of 2017 which is generally effective starting January 1, 2018 will be forthcoming. Most of the tax return preparation for the year 2017 will be under the old law and planning for 2018 and beyond will be under the new law, a dual mandate for tax departments this year.