While I favor "active management", the use of mutual funds that are actively-managed per research and/or rules-based methodologies, there are sensible uses for "passive management" also. So Potomac Wealth Strategies offers both. The Strategic and Flex portfolio models use actively-managed mutual funds, and the Schwab Index funds use passively-managed "index funds" for the stock portion and an actively-managed tax-free (federal) bond mutual fund.
The Strategic models are best for long-term investors who don't mind occasional capital gains taxes being part of their overall financial picture, and they are ideal for use in tax-deferred accounts (IRAs, 401k-type accounts, and variable annuities).
The Schwab Index models are suitable for taxable accounts (individual and joint brokerage accounts), and for folks who just are not sold on "active management".
For more on the pros and cons of active vs. passive, here is an article from Hartford. Best-known as an insurance company, Hartford also has a family of mutual funds, some of which are excellent.
Please contact me with any questions about the portfolios I manage for you, or if you want to know more about how I may be able to help you organize, save, and invest in pursuit of your long-term financial goals.
Thank you.
--Gary Partoyan
Financial Advisor
Potomac Wealth Strategies, LLC
An investing and financial strategies blog offered by Gary Partoyan, veteran financial advisor and owner of Potomac Wealth Strategies, LLC.
Thursday, March 31, 2016
529--How Do Grandparents Give to Grandchildren?
(This comes right from the www.SavingForCollege.com site)
For grandparents
Instead of opening my own 529 accounts, can I just make contributions to the 529 accounts my children have already established for my grandchildren?
If the 529 plan used by your children accepts “third-party” contributions, then you may simply make your contributions to their accounts and not have to worry about opening and maintaining your own accounts. Of course, you will no longer have access to these funds since you will not be the account owner, but for many grandparents that is an entirely acceptable consequence.To make contributions to an account owned by someone else you will need to know the account number and indicate that number on your check. For most 529 plans you should also use the contribution form that is either pre-printed than sent to the account owner or perhaps can be downloaded from the 529 plan’s web site. It would be a good idea to call the plan’s toll-free number and make sure you are following the appropriate procedures in making your contribution.
A very small number of 529 plans may not accept third-party contributions. If the parents have their own accounts in these particular 529 plans, your options are to open your own accounts or give the parents cash with the request that they place your gifts into the 529 accounts for your grandchildren.
You should be sure to understand the gift-tax consequences of your contributions to the 529 plan. Whether you contribute to accounts owned by you, or to accounts owned by the parents or someone else, your contributions are a gift from you to the account beneficiary (and a generation-skipping transfer if the beneficiary is your grandchild). For large contributions (over $14,000) you may elect on a gift-tax form to treat up to $65,000 of the contribution as made over a five-year period. This election allows you to frontload more contributions into a 529 plan without exceeding the $14,000 annual gift exclusion.
Caution: The IRS has not yet indicated whether a contribution you make to a 529 account owned by someone else will be treated as two gifts, the first from you to the account owner, and the second from the account owner to the beneficiary. Most tax practitioners believe there is only a single gift—from you to the account beneficiary—but the answer remains a bit uncertain.
State tax deductibility of your contributions is another issue you should understand. Many states provide their residents with a deduction for at least some of their contributions to the in-state 529 plan, but in several of these states you must also be the account owner in order to claim the deduction. And just because you cannot claim the deduction, as a “third-party” contributor, it does not mean that the account owner can claim the deduction.
Wednesday, January 6, 2016
Portfolio Model & Index Performance Through December 2015
Happy New Year, and here is to a great 2016 for us all!
2015 was a down-year for the stock markets and some bond markets. Here is how the six major indexes fared last year:
So, instead of comparing performance just to the Dow or the S&P 500, or to a bond index, we should use a "blended benchmark" suitable to our risk profile. For example, investors with a moderate to aggressive risk tolerance should have at least 60% of their portfolios in stocks, and up to 100%. Meanwhile, a retiree who needs investment income and should not be much exposed to stock market volatility should be mostly in bonds and cash, with about 20% in stocks.
To that end, I create and manage several portfolio models and use them for most of my clients' investments. Below are the performance data through 12/31/2015 for the models we use most. NOTE: this data does not reflect any client's specific returns; it illustrates how a model would have done over time.
Please contact me with any questions about your portfolios, accounts, and/or personal financial strategy. Thank you, and happy new year!
--Gary
2015 was a down-year for the stock markets and some bond markets. Here is how the six major indexes fared last year:
- Dow Jones Industrial Average -2.2%
- S&P 500 -0.7%
- MSCI EAFE (developed-market stocks outside the USA) -3.3%
- MSCI EM (emerging-market stocks) -17.0%
- Barclays US Aggregate Bond index +0.6%
- Citi WGBI nonUSD bond index -5.5%
So, instead of comparing performance just to the Dow or the S&P 500, or to a bond index, we should use a "blended benchmark" suitable to our risk profile. For example, investors with a moderate to aggressive risk tolerance should have at least 60% of their portfolios in stocks, and up to 100%. Meanwhile, a retiree who needs investment income and should not be much exposed to stock market volatility should be mostly in bonds and cash, with about 20% in stocks.
To that end, I create and manage several portfolio models and use them for most of my clients' investments. Below are the performance data through 12/31/2015 for the models we use most. NOTE: this data does not reflect any client's specific returns; it illustrates how a model would have done over time.
Please contact me with any questions about your portfolios, accounts, and/or personal financial strategy. Thank you, and happy new year!
--Gary
| US and Foreign Indexes | 3 mo | 1 yr | 2 yr | 3 yr | 5 yr | 10 yr | 2008 | |
| Stock Markets (72-21-7) | 5.7% | -0.5% | 3.6% | 10.9% | 9.2% | 6.1% | -38.5% | |
| S&P 500 | 6.5% | -0.7% | 5.2% | 12.7% | 10.2% | 5.1% | -38.5% | |
| Dow Jones Industrial Avg | 7.0% | -2.2% | 2.5% | 10.0% | 8.5% | 5.0% | -33.8% | |
| MSCI EAFE | 4.4% | -3.3% | -5.4% | 2.3% | 0.7% | 0.2% | -45.1% | |
| MSCI EM | 0.3% | -17.0% | -11.0% | -9.0% | -7.2% | 1.2% | -54.5% | |
| Barclays Agg Bond--US | -0.6% | 0.6% | 3.2% | 1.4% | 3.3% | 4.5% | 5.2% | |
| Citi WGBI nonUSD (foreign bonds) | -1.4% | -5.5% | -4.1% | -4.3% | -1.3% | 3.1% | 10.1% | |
| Aggressive (90% stocks-10% bonds) | 3.1% | -3.7% | 0.1% | 6.2% | 5.4% | 4.0% | -36.0% | |
| 95 Flex V | 4.2% | -4.0% | -0.8% | 6.4% | 5.7% | -19.1% | ||
| 95 Strategic II | 4.0% | -2.7% | 1.2% | 9.5% | 9.2% | 8.0% | -35.9% | |
| 95 Schwab index | 4.6% | -0.9% | 1.4% | 9.9% | 8.3% | 5.9% | -37.2% | |
| Confluence Value Opportunities | 2.2% | 2.3% | 16.0% | 21.2% | 17.6% | 12.3% | -22.3% | |
| WealthFront 9 | 3.1% | -4.5% | -0.7% | 5.0% | 4.8% | -38.0% | ||
| American Funds Growth Port | 5.3% | 1.4% | 3.6% | 11.7% | 9.0% | 6.9% | -40.8% | |
| Moderately Aggressive (75-25) | 2.5% | -3.1% | 0.3% | 5.2% | 4.9% | 4.1% | -31.0% | |
| 80 Flex V | 3.8% | -3.6% | -0.3% | 5.8% | 5.5% | -16.9% | ||
| 80 Strategic II | 3.2% | -2.8% | 0.8% | 7.4% | 7.7% | 7.4% | -30.2% | |
| 80 USA tilt | 3.0% | -2.8% | 1.3% | 8.2% | 8.0% | 7.0% | -28.5% | |
| 80 Schwab index (muni) | 4.1% | -0.1% | 2.3% | 8.7% | 7.8% | 5.7% | -32.3% | |
| Money 75 | 3.3% | -1.2% | 2.1% | 7.9% | 7.2% | 6.2% | -32.7% | |
| American Funds Growth+Inc Port | 3.7% | -1.0% | 2.5% | 7.5% | 7.3% | 5.9% | -29.6% | |
| Moderate (60-40) | 2.0% | -2.5% | 0.6% | 4.2% | 4.5% | 4.1% | -25.6% | |
| 60 Flex V | 3.2% | -3.0% | 0.2% | 5.0% | 5.5% | -13.1% | ||
| 60 Strategic II | 2.4% | -2.4% | 1.0% | 5.7% | 6.7% | 7.0% | -23.0% | |
| 60 Schwab index (muni) | 3.6% | 0.9% | 3.7% | 7.7% | 7.6% | 5.7% | -26.4% | |
| American Funds Balanced Port | 3.7% | 0.6% | 3.1% | 7.8% | 7.5% | 6.0% | -28.3% | |
| Moderately Conservative (40-60) | 1.2% | -1.7% | 0.4% | 2.9% | 3.6% | 3.9% | -17.4% | |
| 40 Flex V | 2.9% | -2.6% | 0.7% | 4.5% | 5.6% | -10.4% | ||
| 40 Strategic II | 2.5% | -1.7% | 1.6% | 6.0% | 6.7% | 7.1% | -18.0% | |
| 40 Schwab Index (muni) | 2.8% | 1.6% | 4.5% | 6.1% | 6.9% | 5.3% | -19.7% | |
| Goldman Sachs Income Builder | 0.3% | -3.6% | -0.1% | 5.2% | 6.6% | 5.6% | -23.3% | |
| Conservative (20-80) | 0.2% | -1.4% | 0.3% | 1.0% | 2.5% | 3.6% | -8.4% | |
| 20 Flex V | 2.0% | -1.9% | 1.1% | 3.3% | 5.3% | -5.2% | ||
| 20 Strategic II | 1.8% | -1.5% | 1.5% | 4.3% | 5.3% | 6.6% | -11.1% | |
| 20 Schwab index (muni) | 2.1% | 2.3% | 5.2% | 4.5% | 6.2% | 4.8% | -13.7% | |
| NOTE 1: Past performance is no guarantee of specific future results. This data is presented by Potomac Wealth Strategies, LLC. This data is from Morningstar and should be accurate, but it has not been independently verified. | ||||||||
| NOTE 2: "Flex", "Strategic", and "Index" models are crafted/run by Potomac Wealth Strategies. They show history of better returns, lower volatility, or both--or, with the Index models, closer tracking--vs benchmarks and competitors. | ||||||||
| NOTE 3: "XX Schwab index" models are low-cost portfolios. They are comprised of index funds available free of transaction charges to my clients at Schwab. This is what many might recommend due to low-costs and portfolio efficiency. | ||||||||
| NOTE 4: Nothing on this blog post represents investment advice to any individual or organization. If the information hereon is of interest to you, please contact me at Garo.Partoyan@PotomacWealthStrategies.com for a consultation. | ||||||||
Thursday, December 10, 2015
Year-End Tips for Investors
Retirement Savings
529 college savings plans...
Employee Benefits
Review Investments
Taxes
Planning Ahead
Be well and make time to enjoy the holiday season even as you work hard at the office and/or home here at the end of the year.
Thank you for your business and your time!
--Gary P.
- Make sure you reach your target savings amount for your retirement plan at work (401k, 403b, TSP, etc.).
- Aim for 15% of your salary (gross pay), but do an Investment Plan with me to be more sure.
- $18k per year maximum for folks under age-50; $24k for 50+, thanks to the $6k "catch-up contribution" the IRS allows.
- If you are not there yet but can afford to reach those limits, call HR/Payroll at work and figure out how to make it happen in your final paychecks of this year.
529 college savings plans...
- Any contribution you want to count for 2015 should be made this month, before 12/31/15.
- Do NOT make check payable to the child--it messes things up; DO consult with the 529 Plan and your tax advisor for best method.
- If you give more than a certain amount per year, it can affect your estate tax deduction.
- If you are wealthy enough to have that "problem", let me help you optimize.
Employee Benefits
- Each employer offering healthcare insurance and other benefits has some schedule for renewing for next year and/or updating.
- Please make sure you are set up the way you want for 2016.
- Call HR for help (wish I could help directly).
Review Investments
- Know your risk tolerance profile, so you know how to allocate your investments strategically.
- Are you Moderate (60/40 stocks to bond), Aggressive (90+ % in stocks), Conservative (20/80)? Is that right for you?
- Are the investments good enough, or do you need to use better mutual funds?
- If you are a stock investor, please keep me in the loop, as I have access to good research.
- Change your portfolios accordingly.
Taxes
- Make sure you pay your estimated taxes on time and as accurately as possible.
- Even if you don't need to make estimated tax payments, work with your tax advisor and HR/Payroll to make sure you are withholding enough to avoid a big tax bill later on.
- If you don't have a tax advisor, contact me for referrals--I have good people.
Planning Ahead
- My most "successful" clients are those who are on track to meet their goals and understand why/how.
- It's not about how much they have so much as whether what they have is (or will be) enough to meet their personal goals.
- Most of them are using the Investment Plan my firm offers.
- It takes a little bit of extra effort (giving me statements for non-Schwab accounts, telling me about your goals/dreams for retirement...), but it's worthwhile.
- Let's schedule a call or meeting about your Plan!
Be well and make time to enjoy the holiday season even as you work hard at the office and/or home here at the end of the year.
Thank you for your business and your time!
--Gary P.
Saturday, November 7, 2015
Year-End Money Moves to Consider
(Inspired by our friends at Fidelity Investments)
Portfolio Diversification
Review your risk tolerance, then rebalance your portfolio to the right mix.
Tax-loss Harvesting
In taxable accounts, sell losing investments if you don't love them.
Charity
Tax-deductible charitable donations help others while reducing your tax burden.
Retirement Plan Top-Off
Make sure you have contributed the minimum necessary to get the maximum free money from your employer, then max-out your Roth IRA or do a Roth Conversion, and then finish maxing-out your retirement plan at work.
Flexible Spending
Use it or lose it? Use it! Carry-over? Double-check and make sure that's offered.
Beneficiaries
Your IRAs, 401(k), TSP, and insurance policies rule. Whatever your Will or Trust says about who gets your money is trumped by what is designated on your actual accounts and policies. Make sure it's all in sync.
RMD
Required Minimum Distribution from your IRA, inherited IRA, or employer-sponsored retirement plan. DO NOT forget this--it will cost a 50% of the RMD in penalties, in addition to the taxes you already have to pay on the RMD.
Open Enrollment
If you have healthcare and other benefits at work, now may be the time to update/confirm your selections for the coming year.
College Savings
Review your 529, ESA, UGMA/UTMA accounts and make sure you know which to contribute to before year-end and in the coming year.
Financial Check-up
Review your investment/financial plan. Are you on-track to meet long-term goals? If not, what changes can you make now to help things work better down the road?
Portfolio Diversification
Review your risk tolerance, then rebalance your portfolio to the right mix.
Tax-loss Harvesting
In taxable accounts, sell losing investments if you don't love them.
Charity
Tax-deductible charitable donations help others while reducing your tax burden.
Retirement Plan Top-Off
Make sure you have contributed the minimum necessary to get the maximum free money from your employer, then max-out your Roth IRA or do a Roth Conversion, and then finish maxing-out your retirement plan at work.
Flexible Spending
Use it or lose it? Use it! Carry-over? Double-check and make sure that's offered.
Beneficiaries
Your IRAs, 401(k), TSP, and insurance policies rule. Whatever your Will or Trust says about who gets your money is trumped by what is designated on your actual accounts and policies. Make sure it's all in sync.
RMD
Required Minimum Distribution from your IRA, inherited IRA, or employer-sponsored retirement plan. DO NOT forget this--it will cost a 50% of the RMD in penalties, in addition to the taxes you already have to pay on the RMD.
Open Enrollment
If you have healthcare and other benefits at work, now may be the time to update/confirm your selections for the coming year.
College Savings
Review your 529, ESA, UGMA/UTMA accounts and make sure you know which to contribute to before year-end and in the coming year.
Financial Check-up
Review your investment/financial plan. Are you on-track to meet long-term goals? If not, what changes can you make now to help things work better down the road?
Tuesday, October 20, 2015
Portfolio Model Performance Through September 2015
Here are performance #s for the portfolios I run for most of my clients, and some alternatives for comparison.
I recommend moving from the Flex models to Strategic models. Please contact me with any questions.
Thank you!
--Gary Partoyan
I recommend moving from the Flex models to Strategic models. Please contact me with any questions.
Thank you!
--Gary Partoyan
| US and Foreign Indexes | 3 mo | 1 yr | 3 yr | 5 yr | 10 yr | 2008 | |
| Stock Markets (50-40-10) | -8.4% | -5.7% | 7.9% | 7.8% | 5.0% | -39.7% | |
| S&P 500 | -6.4% | -0.6% | 12.4% | 13.3% | 6.8% | -37.0% | |
| MSCI EAFE | -10.2% | -8.7% | 5.6% | 4.0% | 3.0% | -43.4% | |
| US OE Diversified Emg Mkts | -15.9% | -18.8% | -4.1% | -3.4% | 3.8% | -54.4% | |
| Barclays Agg Bond--US | 1.2% | 2.9% | 1.2% | 3.1% | 4.6% | 5.2% | |
| Barclays Agg Bond--Global | 0.9% | -3.3% | -1.6% | 0.8% | 3.7% | 4.8% | |
| Aggressive | -7.4% | -4.1% | 8.2% | 8.0% | 4.9% | -36.3% | |
| 95 Flex V | -7.5% | -6.0% | 5.6% | 6.4% | -19.1% | ||
| 95 Strategic II | -8.3% | -3.1% | 9.6% | 10.3% | 7.8% | -35.9% | |
| 95 Schwab index | -9.0% | -2.9% | 9.4% | 9.4% | 5.7% | -37.2% | |
| Confluence Value Opportunities | -5.7% | 7.7% | 22.9% | 19.0% | 12.2% | -22.3% | |
| WealthFront 9 | -9.7% | -7.3% | 5.1% | 5.9% | -38.0% | ||
| Moderately Aggressive | -6.4% | -3.6% | 7.2% | 7.4% | 5.0% | -32.0% | |
| 80 Flex V | -7.0% | -5.6% | 5.2% | 6.1% | 7.1% | -16.9% | |
| 80 Strategic II | -7.4% | -3.4% | 7.7% | 8.6% | 7.3% | -30.0% | |
| 80 USA tilt | -6.7% | -2.4% | 8.2% | 9.0% | 6.8% | -28.5% | |
| 80 Schwab index (muni) | -7.1% | -1.9% | 8.3% | 8.5% | 5.5% | -32.3% | |
| Moderate | -4.5% | -2.6% | 5.4% | 6.0% | 4.9% | -23.1% | |
| 60 Flex V | -6.2% | -5.0% | 4.7% | 5.9% | -13.1% | ||
| 60 Strategic II | -6.0% | -3.0% | 6.2% | 7.5% | 6.9% | -23.9% | |
| 60 Schwab index (muni) | -4.9% | -0.5% | 7.2% | 7.8% | 5.5% | -26.4% | |
| Goldman Sachs Income Builder | -5.0% | -4.4% | 5.7% | 7.8% | 5.7% | -23.3% | |
| American Funds Balanced Port | -4.2% | -0.8% | 7.6% | 8.2% | 5.9% | -28.2% | |
| Moderately Conservative | -2.6% | -1.6% | 3.6% | 4.6% | 4.8% | -13.3% | |
| 40 Flex V | -5.4% | -4.6% | 4.4% | 5.9% | -13.3% | ||
| 40 Strategic II | -4.7% | -2.5% | 6.1% | 7.0% | 6.9% | -17.7% | |
| 40 Schwab Index (muni) | -2.8% | 0.8% | 5.8% | 6.8% | 5.2% | -20.1% | |
| Conservative | -0.6% | -0.7% | 1.7% | 3.2% | 4.5% | -2.5% | |
| 20 Flex V | -4.4% | -3.8% | 3.6% | 5.5% | -5.2% | ||
| 20 Strategic II | -3.3% | -2.1% | 4.5% | 5.5% | 6.1% | -10.5% | |
| 20 Schwab index (muni) | -0.8% | 1.8% | 4.3% | 5.4% | 4.7% | -13.7% | |
| NOTE 1: Past performance is no guarantee of specific future results. This data is presented by Potomac Wealth Strategies, LLC. This data is from Morningstar and should be accurate, but it has not been independently verified. | |||||||
| NOTE 2: "Flex", "Strategic", and "Index" models are crafted/run by Potomac Wealth Strategies. They show history of better returns, lower volatility, or both--or, with the Index models, closer tracking--vs benchmarks and competitors. | |||||||
| NOTE 3: "XX Schwab index" models are low-cost portfolios. They are comprised of index funds available free of transaction charges to my clients at Schwab. This is what many might recommend due to low-costs and portfolio efficiency. | |||||||
| NOTE 4: Nothing on this blog post represents investment advice to any individual or organization. If the information hereon is of interest to you, please contact me at Garo.Partoyan@PotomacWealthStrategies.com for a consultation. | |||||||
Friday, August 21, 2015
Market Decline Perspective From Gary P and Bill O'Grady
Good morning. The
U.S. stock market has declined significantly this week, reacting to several
factors. I believe the markets must
"correct" occasionally (dropping 10% or so from recent highs), and
it's been a long time since that has happened (~mid-2011). This may be the time for it, and we could be
a good deal of the way through it already.
Still, I recommend long-term
investors remain invested and diversified.
Trying to time the market is risky and the results are
usually not successful. There is Nobel
Prize-winning research supporting the "asset allocation" methodology
I employ for most of my clients' long-term money (retirement, college savings).
As is often the case, Bill O'Grady of Confluence Investment
Management offers a brief and helpful view of current conditions: http://confluenceinvestment.com/assets/docs/2015/daily_Aug_21_2015.pdf
If you have any questions, please contact me. Thank you, and happy Friday!
--Gary
P.S.--Are you prepared for financial emergencies? Let's make sure we're evaluating your cash
reserves, your Disability Insurance, your Life Insurance, and your estate
plan. I don't sell insurance and I don't
draft legal documents, but I will coach you on how to make sure you buy the
right product and have the right documents in place. No charge--it's part of the value I want to
add to the investment advice already being provided.
Potomac
Wealth Strategies, LLC
(703)
746-8195 direct
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