According to the IRS:
* The top 1% of income-earners ($380,354 and up) earn 20% of income; they pay 38% of all income taxes.
* The top 10% ($113,799 and up) earn 46% of income; they pay 70% of the income taxes.
* The bottom 90% (earning below $113,799) earn 54% of the income; they pay 30% of the income taxes.
* The bottom 50% earn 13% of income; they pay 3% of the income taxes.
An investing and financial strategies blog offered by Gary Partoyan, veteran financial advisor and owner of Potomac Wealth Strategies, LLC.
Friday, December 17, 2010
Active Management CAN work!
Despite what we read in the press almost every week, there are plenty of mutual funds and some money managers that, after fees and costs and expenses, have outperformed their benchmarks both purely and adjusted-for-risk for long and consistent track records.
Even in bonds, where the margins are probably a lot thinner than with equities.
I don't know how to do it myself, so I am not a fund manager. But I know how to separate managers like we are warned warning against from those with track-records worthy of my clients' and my own money.
The minute I lose confidence in my ability to discern between the consistently worthy managers and the rest, we'll all be using index fund portfolios, and I'll be shifting from being an investment advisor to being a financial planner.
But that's not happening yet. No way!
Here's an example of how my mutual fund portfolio for "moderate" investors compares to the U.S. stock market and to a portfolio of low-cost index funds from Fidelity that represent a similar 60% stocks, 40% bonds portfolio:
Average Annual Return Comparison
Time Frame PWS' 60 Flex S&P 500 Index Funds 60/40
1 yr 14.10 16.52 11.31
3 yr 7.04 -6.49 -1.88
5 yr 10.47 1.73 4.30
10 yr 11.06 -0.02 3.71
*Data is through 10/31/10; volatility (Standard Deviation) for mine is lower and Alpha his higher, too.
Even in bonds, where the margins are probably a lot thinner than with equities.
I don't know how to do it myself, so I am not a fund manager. But I know how to separate managers like we are warned warning against from those with track-records worthy of my clients' and my own money.
The minute I lose confidence in my ability to discern between the consistently worthy managers and the rest, we'll all be using index fund portfolios, and I'll be shifting from being an investment advisor to being a financial planner.
But that's not happening yet. No way!
Here's an example of how my mutual fund portfolio for "moderate" investors compares to the U.S. stock market and to a portfolio of low-cost index funds from Fidelity that represent a similar 60% stocks, 40% bonds portfolio:
Average Annual Return Comparison
Time Frame PWS' 60 Flex S&P 500 Index Funds 60/40
1 yr 14.10 16.52 11.31
3 yr 7.04 -6.49 -1.88
5 yr 10.47 1.73 4.30
10 yr 11.06 -0.02 3.71
*Data is through 10/31/10; volatility (Standard Deviation) for mine is lower and Alpha his higher, too.
Where Do Millionaires Get Their Money?
Most get their money by working, earning and saving.
80% of US millionaires are the first-generation of their families to get to that level.
Only a very few of them are celebrities and athletes and Wall St all-stars. Most of them are just like you and me, but with a bit more luck, or a better idea, or a better work-ethic. Or a better savings/investment plan...
If you save 5% of your income, you'll have some extra money in retirement to supplement Social Security and any pension you might have. If you save 15%, there's a very good chance you'll be a millionaire.
Talk to me about your strategy. It's what we do, and it works.
80% of US millionaires are the first-generation of their families to get to that level.
Only a very few of them are celebrities and athletes and Wall St all-stars. Most of them are just like you and me, but with a bit more luck, or a better idea, or a better work-ethic. Or a better savings/investment plan...
If you save 5% of your income, you'll have some extra money in retirement to supplement Social Security and any pension you might have. If you save 15%, there's a very good chance you'll be a millionaire.
Talk to me about your strategy. It's what we do, and it works.
Thursday, December 2, 2010
The Financial Crisis Was Worse Than We Thought
Per the information released this week by the Federal Reserve, there was a lot more scrambling, perhaps panicking, in the financial markets that most even know. And we knew it was bad. Cases in point:
1) The Federal Reserve has released details on the $3.3T (TRILLION) it extended via more than 21,000 transactions during the financial crisis. The extent of the Fed's aid included help to foreign firms
2) The Fed's Primary Dealer Credit Facility was tapped 84 times by Goldman Sachs, 212 times by Morgan Stanley, and almost daily by Citigroup through April 2009. And most of us know about Bear Stearns and Lehman Brothers.
3) The Fed lent cash to more than a thousand companies, including McDonald's, GE, and Harley-Davidson. Those companies are extremely sound financially, or maybe they weren't. All say they have paid-back their loans.
4) UBS, a Swiss bank whose retail brokerage unit is one of the biggest in the US (comparable to Morgan Stanley, Merrill Lynch and SmithBarney), borrowed a total of $74.5B. Barclays borrowed $47.9B.
5) Nine of the ten largest money-market fund companies, including BlackRock, arguably the best in the business for that ultra-conservativ-but-not-government-guaranteed cash management stuff, turned to the Fed for support.
6) Foreign central banks received nearly $600B of credit.
Say what you want about the politics and economics of the rescue and recovery plans, but the whole entire "city" was on fire, and wondering how to pay the water bill was, at the time, a bit beside the point.
WHAT DO WE DO? Live within or even below your means, have an emergency reserve fund, prioritize your priorities (saving for college is great, but are you on-track for at least a half-decent standard of living in retirement, and do you have life and disability insurance policies that will provide enough to your family if you die or can't work?), and invest around the globe in diversified and nimble portfolios.
1) The Federal Reserve has released details on the $3.3T (TRILLION) it extended via more than 21,000 transactions during the financial crisis. The extent of the Fed's aid included help to foreign firms
2) The Fed's Primary Dealer Credit Facility was tapped 84 times by Goldman Sachs, 212 times by Morgan Stanley, and almost daily by Citigroup through April 2009. And most of us know about Bear Stearns and Lehman Brothers.
3) The Fed lent cash to more than a thousand companies, including McDonald's, GE, and Harley-Davidson. Those companies are extremely sound financially, or maybe they weren't. All say they have paid-back their loans.
4) UBS, a Swiss bank whose retail brokerage unit is one of the biggest in the US (comparable to Morgan Stanley, Merrill Lynch and SmithBarney), borrowed a total of $74.5B. Barclays borrowed $47.9B.
5) Nine of the ten largest money-market fund companies, including BlackRock, arguably the best in the business for that ultra-conservativ-but-not-government-guaranteed cash management stuff, turned to the Fed for support.
6) Foreign central banks received nearly $600B of credit.
Say what you want about the politics and economics of the rescue and recovery plans, but the whole entire "city" was on fire, and wondering how to pay the water bill was, at the time, a bit beside the point.
WHAT DO WE DO? Live within or even below your means, have an emergency reserve fund, prioritize your priorities (saving for college is great, but are you on-track for at least a half-decent standard of living in retirement, and do you have life and disability insurance policies that will provide enough to your family if you die or can't work?), and invest around the globe in diversified and nimble portfolios.
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