If you missed our webinar earlier this month, you’re in luck! Click this link for playback of the Preserving, Protecting, and Enhancing Wealth in the New Normal webinar. Slides, audio, and tips.
Sorry you missed the ‘live’ webinar, we’ll let you know when our next one will be. In the meantime, do you have any questions or feedback for us?
Below is another very helpful tax missive from our friends at Kovarik and Kim CPAs detailing many of the anticipated tax changes coming our way at the end of this year. You might remember that the Bush-era tax cuts will be expiring on 12/31 if Congress doesn’t act before then. In addition, the new Healthcare Reform legislation signed into law by President Obama will also usher in another slew of tax changes (read “increases”). The real impact will be on the higher income and wealthier individuals.
The high points in summary are as follows:
It’s the third Friday, which means it’s our third and last guest sports blog!
Guest post by Daniel McGilvray, vice president of investments, Highland Capital Management
During the U.S. Open at Pebble Beach a month or so ago, Dustin Johnson lost a three shot lead going into the final round on Sunday and actually ended up outside of the top 10. Justin Rose followed the week after at the Travelers Championship by blowing a three shot lead over the rest of the field and did not end up even coming in the top five. Both of them seemed to lose the strategy that got them to the top of the leader board in the first place. They went from making great shots to getting cautious to making horrible shots to try to make up for the cautious shots and losing the lead. Contrast that with what happened this past weekend with a virtual no name in golf: Louis Oosthuizen. He went into the final day of the British Open at St. Andrews leading by four strokes and actually EXTENDED his lead by a few strokes on the final day. While he adjusted his strategy to be slightly less risky, he stuck with his overall game and did not get too cautious.
It can be the same way at times in investing…we stray from our originally intended strategy because things get “too bad” or there’s a new “normal” or new “paradigm”. At Highland, while we make tactical over weights or under weights at certain times, we work hard to come up with the right strategic targets for clients as the anchor to ensure that the underlying investments do not stray too far from target (high or low) and get too far away from the originally intended strategy. Without those “anchors” to make sure you don’t stray too far from the original strategy, you could easily end up losing all the gains you’ve made and possibly even going below what you originally had if there is no process to assure some money is taken off the table and gains are harvested (or that funds are added to those areas that underperform over an extended period of time).
In this manner, an investor can ensure that they do not lose the lead (or are unable to ever get back losses). An obvious example of this is the advisor/investor who gets conservative near the bottom of the markets or aggressive near the top of the markets. Bad timing in either account can cause losses to persist. So remember, stay anchored to your long-term strategy.
It’s Friday, which means we’re bringing you part two of our three part guest blogging sports series!
Guest post by Daniel McGilvray, vice president of investments, Highland Capital Management
While watching the U.S. soccer team in the World Cup, it was interesting to note that essentially every single game (with the exception of Algeria which should have had an early goal, but their shot hit the cross bar), the U.S. got behind within the first 10-15 minutes and were playing from behind the rest of the game. I’m 100 percent sure the U.S. did not come out with a plan to get behind right away, but it did seem to me that for some reason they played MUCH better when they were behind. I’m not sure if it was just a greater sense of urgency, or what, but either way, the coach obviously did not do what he needed to do to get the team to come out ready to play from the moment the game started.
I think that it’s the same way at times in investing. Until people lose a certain amount of money in their portfolio or are really “forced” to have to do something with their money, at times, they would prefer not to think about it and just “let it ride”. It’s important to take into account all of your investment psychology, history, thoughts, goals, dreams, needs, wants, etc. before setting up your long-term strategic asset allocation targets and work with you to determine the right set of parameters. While we also remain “in the game” after strategic targets have been determined by making tactical moves in/out of certain investments or over/underweighting certain asset classes, the overriding principle of the portfolio is the strategic asset allocation.
Do you know what your long-term strategy should be? Are you comfortable with being “in the game”? If not, maybe you don’t have the right plan, or need to collaborate more with your investment advisor to come up with the right one.
A few people have recently expressed concerns to us about market volatility and where the economy is heading. Other people have asked us what options are available to help drive portfolio returns in the midst of such low yields on bonds (the two year Treasury yield recently hit its lowest point ever at 0.6 percent and the 10 year yield is now below three percent). Alternative assets, which we have built into client portfolios over the past few years, are a natural solution for reducing portfolio volatility and boosting returns. As a firm, Highland now has approximately 20 percent invested in alternative assets and even our most conservative clients generally have 10 percent or more of their portfolio exposure in alternative asset classes. Over the past quarter in fact, most of the alternative asset classes were down ½ or less than the equity markets and some (specifically gold and certain hedge funds) were actually up.
We wrote a white paper as a primer on alternative assets, which generally help mute portfolio volatility due to their low correlations with traditional asset classes. As mentioned, they can also help bolster returns. Alternative assets do have some drawbacks: namely, they tend to have longer investment horizons, involve higher risk at times, and have less liquidity than traditional asset classes. In the past the cost of participating in alternative investments was prohibitively high, however, there are now more options that allow investors to participate at lower dollar amounts. If you’re curious about alternative asset classes and what role they play in your portfolio, the white paper is a good introduction for how these asset classes behave and a description of the mechanics for making investments.
If interested in the white paper, shoot me an email (info@highlandcm.com) and I’ll send it to you for free.
It’s Friday, which means we’re bringing you part one of our three part guest blogging sports series!
Guest post by Daniel McGilvray, vice president of investments, Highland Capital Management
Many of you may have seen a portion of, or at least heard about the longest match in tennis history, which was played a few weeks ago at Wimbledon. Unless you are a tennis player however, you may not realize exactly how in the world this happened.
Basically, each of the players had a great serve and not a very good return of serve so neither could ever beat the other one on their serve. In fact, there were 215 aces in the match with each player serving over 100 aces! With a typical game being the first one to get four points and a typical set being the first one to get 6 games that means both John Isner (who finally broke serve in the 138th game of the 5th set to win it) and Nicolas Mahut each won over four sets on aces alone! In fact, this match could have gone on forever if it weren’t for exhaustion because without a tie breaker in the 5th set if someone doesn’t break the other persons serve the match would literally go on forever and no one would ever lose (or win).
There is a term and strategy in investing which is very similar to holding serve in tennis; it’s called passive investing. With it, you will never underperform the benchmark (assuming the investment vehicle you use tracks the benchmark closely), but you also will sacrifice any opportunity for outperformance. This is precisely why we, and many other investment firms, have a “core” holding in passive indexes for one, or many, asset classes to provide the “beta” in the portfolio. The strategy allows you to at least meet the benchmark on a portion of your portfolio at virtually no cost.
To win a tennis match, however, one has to break serve. Similarly, to beat the benchmark, a portfolio has to take some deviation from the benchmark. This is commonly known as active investing or providing “alpha” to the portfolio. At Highland we do this by trying to pick the best active funds over both a long period of time and recently and those that have a fairly consistent history of beating the benchmarks in their respective categories. We also watch our funds closely for any changes in management, changes in strategy, weakening returns, etc. to make changes if/when necessary. So, while everyone hopes to win the match (beat the benchmarks), there is some comfort, as Isner had in this match, of holding serve.
