Financial Architects
Financial Planning & Wealth Management
I used this example in classes for financial advisors back in the day: Client gives you $100,000 and it goes up 100% in period 1 so the balance is $200,000. Client is excited then and gives you $1,000,000 more so the account has $1,200,000. Account then goes down 25% in period 2 so $1,200,000 becomes …
I had a conversation recently with a young adult who was focused on buying a home. It got me thinking about priorities, and while it was on my mind I wrote some general advice for young people: While individual situations will vary, as a young adult there are some basic financial milestones that I think …
My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Spring 2024
A while back the topic of “Investment Rules” came up in an email exchange, and I wrote a quick list of mine. These are just my simple, and perhaps arbitrary, rules. I’m mostly trying, as Charlie Munger said, to not be stupid: “It is remarkable how much long-term advantage people like us have gotten by …
A while back I was thinking about advice for younger professionals so I read a few networking books. (I thought I had read them a long time ago, but apparently I picked up the essence without ever actually reading the books. I corrected that.) Anyway, I highly recommend, Give and Take. A related book is …
My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Winter 2024
I touched on this previously, but I want to address it again. There is widespread belief in what is sometimes called “time diversification.” The question is really: is there mean reversion in the equity risk premium (ERP) over time? If so, if you have a bad ERP experience early it reverses later so that if …
I’ve written about portfolio risks, insurable risks, silly risks, etc., but I thought I’d spend a few minutes here on a few other things you can do to reduce other types of risk. Here are a few things that all of us here at Financial Architects do personally that we think many (most?) people probably …
My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Fall 2023
I read an excellent post last year, There will Always Be Sorcerers. I have written on forecasts before, here for example, and at that link, I included some good quotes on planning and prognosticating. Howard Marks came out with a memo (here) which gave me a few more: There are two kinds of forecasters: those who …
A fellow advisor wrote in a professional online forum last year, “[I]n rocky times I turn off dividend reinvestment and let the cash build so if they need money from me, we don’t have to sell principal.” I want to comment not only on that, but also on so-called bucket strategies that I don’t think …
My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Summer 2023
A newer advisor on a financial planning message board wanted to know (spelling/grammar/punctuation corrected): As an aspiring financial planner, I am curious to know: in your professional experience as a financial planner, have you found that investments are an essential part of growing one’s wealth, or can someone achieve financial success without investing and just …
I rant talk a lot about the importance of maxing out contributions to tax-advantaged accounts (IRAs, 401(k) plans, Roths, etc.). Since you can’t “catch-up” later, anytime you don’t contribute the maximum (or if you withdraw more than required) you are reducing the benefits of these accounts. (It’s one of my four rules for guaranteed financial …
My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Spring 2023
The topic of “Investment Rules” came up in an email exchange a while back, and I wrote a quick list of mine. These are just my simple, and perhaps arbitrary, rules. I’m mostly trying, as Charlie Munger said, to not be stupid: “It is remarkable how much long-term advantage people like us have gotten by …
The short paper here is about what “loopholes” should be closed to raise revenue. Consequently, it is also a great guide to those perfectly legal strategies. Many of these may be closed eventually, but until then it’s a good guide. Here’s the list of strategies: Zeroed-out GRATS IDGTs Minority interest discounts Gifts over bequests (tax …
My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Winter 2023
The recent higher inflation has dampened enthusiasm for this somewhat, but I hope with a short explanation to drive a stake through its heart. (If you have no idea what this is, see this and this – or just go and enjoy your life!) This is a very simple explanation that glosses over a little …
Imagine I have 1,000 shares of stock with a price of $20/share; a basis of $4/share; and a marginal tax rate (now and forever) of 25% (just for simplicity). I can think of that as a combination of: A stock position worth 1,000 * $20 = $20,000 A liability of ($20 – $4) * 1,000 …