Insights

Third Quarter 2015|Jim Williams| We have always used an individually designed Investment Policy Statement (IPS) to govern the management of each client’s investment portfolios. The IPS documents and formalizes a meeting of the minds between you the client, and us the investment advisor. Why is an Investment Policy so important? When markets turn down, the advertisers come out of the woodwork screaming and braying that the only way to make the pain of the downturn go away is to subscribe to their high cost solution. This taps into the normal fear reaction which carries with it the urge to “do something”. We are serious skeptics regarding those who sell or promote market-beating strategies. Most of the strategies are no more than kabuki; designed to make you believe your advisor is really working hard for you. In reality, most of the kabuki works against you.

First Quarter 2015|Jim Williams| Whether your personal goal is to expend all your funds in retirement, leaving nothing, or to continue to grow the portfolio to accumulate funds for your heirs, or something in between, the withdrawal rate is the only one that we can directly and affirmatively control. The question is how much and where from?

Third Quarter 2014|Jim Williams| The recent volatility in stocks around the world seems to be fear-driven. Fear of Ebola. Fear of Isis. Fear of the Fed. Fear that the market will go down. My own limited understanding of brain functioning and chemistry is that the fear reaction originates primarily in the part of the brain called the amygdala. The amygdala is involved in memory, decision-making and emotional reactions. The amygdala is sometimes referred to as the lizard-brain. An intense emotional fear reaction in the lizard brain can hijack all brain function in a millisecond (limbic hijack) and cause a person to act without thinking (jumping out of the way of a snake) or act irrationally and destructively. If we get the sense that our investment program is going off-course, there may be an impulse (from the lizard brain) to “grab the wheel” and do something. This impulse is futile at best and destructive at worst. Abandoning a carefully constructed and well thought out investment plan because our lizard brain tells us to is a mistake. We can choose what we fear and what we will worry about. It’s probably best to focus on the things we can control. If your lizard brain is acting up, give us a call. We believe we have the cure.

Second Quarter 2014|Jim Williams| An Important Change to the IRA 60 Day Rollover Rules The statute governing IRA accounts allows the owner to take money out of the account and as long as the money is restored within 60 days, the transaction is treated as a "rollover" and not taxed. The longstanding IRS position is that a taxpayer can only complete one rollover per year on an account-by-account basis. A recent Tax Court opinion, Bobrow v. Commissioner, T.C. Memo. 2014-21, held the once-per-year limitation applies to a taxpayer's IRAs on an aggregate basis. In advice issued subsequent to the Bobrow decision, the IRS has announced that...

First Quarter 2014|Jim Williams| The recent release of the book Flash Boys by Michael Lewis has stirred some amount of curiosity and concern about the fairness of the financial markets. Lewis’s story creates the impression that all who participate in the stock market are being victimized by the firms that do High Frequency Trading (HFTs). He has been promoting the book on various media (including a recent 60 Minutes segment), claiming that the stock market is “rigged” in favor of HFTs. After reading the book, I needed to get a better understanding of how our primary mutual fund companies view the impacts of HFT and the environment for trading in general. I spoke with our Vanguard rep and with one of the traders at Dimensional Funds (DFA).

Fourth Quarter 2013|Jim Williams| 2013 will be remembered as the year the sky stayed aloft, despite all predictions. With all the bad things that were supposed to happen and that were supposed to drive the financial markets into a tizzy; or a series of tizzies, who would have thought that the equities markets would produce the best year in 16 years? It's probably best not to expect another year like 2013 anytime soon. What are the lessons we learned?