We prefer investments that are low-cost tax efficient, diversifiable easy to liquid and simple. A lot of investors get into problems when they invest in investments that don’t possess these five qualities. These five traits have proven to be successful over time, but generally, they aren’t very interesting. They are not usually a “hot tale that you must to get involved in now!” connected with these types of investments. The financial services industry does not generally like these kinds of investments as they earn the least amount of profits from them. We’re focused on helping to increase the wealth of our clients and not the financial services industry. Be aware the following list of investment attributes is not exhaustive. Other qualities to look for in investments include good value, low correlation with your other investments or other investments, a good return on interest or dividends, or a lean toward areas of the market which have yielded better returns, such as values stocks, a suitable level of risk for you as well as other factors.
Low Cost. We generally invest in low cost index-based funds as well as ETFs. (ETF’s). These funds typically have an annual expense of only.30 percent annually. The most common Equity mutual funds that are actively traded have an cost ratio that is 1% or higher. For investment funds, the most reliable gauge of future performances is an expense rate of the fund. The lower , the more favorable. The majority of hedge funds have annual expenses of 2% and 20% of the profits made. Certain variable annuities and life insurance “investments” could have annual costs of more than 2. By keeping an eye on the cost for our investment portfolios, we are able to reduce our clients’ expenses by huge amounts of money each year, and assist them in achieving greater returns over time (all other things being equally). In the case of investments, you won’t achieve better results with an investment product that costs more In fact, you usually have lower performance.
Tax Efficient. Our investments (index fund as well as ETF’s) are tax efficient , and allow investors to have some control on the timing of taxation. They have very low turnover (trading activities) that is the norm for tax-efficient investments. We advise against mutual funds that have high turnover because of the tax equity they lack. In the wake of the recent massive increase on stocks in U.S. stock market, several open equity funds boast “imbedded” profits that range from 30% to 45 percent. If you purchase these mutual funds today, you could be required to pay capital gains tax on these gains, even though you didn’t have the fund at the time of the price increase. ETFs usually do not produce short- and long-term capital gains distributions at the end of the year. Also, they don’t contain capital gains that are imbedded like actively-operating mutual funds. The majority of hedge funds are tax-efficient because of their high turnover. Apart from investing in tax-efficient investments, we additionally do other things to ensure that our clients’ tax burdens down, including tax loss harvesting to keep our turnover/trading costs at a minimum, placing the right kind of investments into the correct type of account (tax location) and using loss to compensate capital gain making use of holdings that have large capital gains to make gifts or making investments in municipal bonds that are tax free and so on.
Diversified. We prefer to invest in funds that are diversified because they decrease your specific stock risk and increase the general potential risk to your portfolio. A bad news story regarding one particular stock could cause it to fall 50 percent, which is terrible news if it’s just 20% of your portfolio, yet it is very little seen in a fund with 1,000 positions in stocks. We generally prefer funds with at least one hundred stocks and typically several hundred or more. These funds offer a an extensive view of the entire category of assets you want to invest in without exposing you to specific risk of stocks. We’re not going to invest in the most recent Solar Energy Company Equity Fund that has 10 stock positions as an example. We aren’t averse to taking on any risk (such as stock-specific risk) that you don’t receive a greater expected returns.
Liquid. We prefer investments that you can sell in a matter of minutes or a day if you decide to do so and ones that you can sell for a price that is near the current market value. When you invest in liquid funds, you will always (daily) are aware of the exact value and price of your investment. The investments we recommend are in line with the requirements of this standard. We don’t recommend investments remain in place for many years with no chance to recover your investment in any way or pay massive fees to exit. Some examples of such investments are include hedge funds Private equity funds, hedge funds, annuities Private company stock, tiny publicly traded stocks startups company stock or debt, obscure bonds that aren’t liquid as well as structured products, of the life insurance “investments,” private real estate partnerships as well as private real estate partnerships. We recommend funds for investment which have been around for a while, have a large size, and have large average daily volumes of trading.
Simple. We favor investments that are straightforward to understand, transparent and easy to comprehend. If you’re not sure what it is do not make a decision to invest. Our investments are clear and simple We know precisely the amount we own. Complex investment products are created to benefit the seller and not the buyer and often contain high-cost hidden charges. Examples of complex and opaque investment options that we usually avoid include hedge funds Private equity funds, hedge funds, structured products, certain products for life insurance “investment” products Variable annuities, stock of private companies startups company stock or loans or loans.
“Make everything as easy as is possible, yet not necessarily simpler.” -Albert Einstein.
We believe that most buyers should keep the bulk of their portfolios invested in items that possess these five wonderful qualities. If you do this, you’ll stay clear of many errors, negative surprises and risk along the way. Additionally, we believe the returns you earn after tax will be greater for long time periods. However, not every investment that is smart and good will possess all these qualities. For instance, income-producing real estate is not liquid (and typically not well-diversified) however, it is an excellent investment over the long term if it is properly managed and purchased. Running your own business is not liquid and does not have diversifiable, but it can be an excellent opportunity to create wealth. We believe that these five investment traits become more essential as you reach retirement because when you reach that stage, you’ll be more concerned with the reduction of risk and conserving your wealth, rather than creating it. You may also require liquidity to invest and donate a part of your assets in retirement. These five great investment attributes could be a useful screening tool for potential investment options and are good things to consider when making investments.
