Our Blog

DWM is committed to learning for its team, clients and friends. In this changing world, it’s extremely important to stay current in all areas impacting your financial future.

We encourage all of team members to “drill down” on current topics important to you and contribute to our weekly blogs.  Questions from our clients and their families are often featured in our blogs.  

Financial literacy for clients and their families is very important to us.  We generally hold an annual wealth management seminar for all of our clients.  We encourage regular, at least semi-annual, meetings in person with our clients to review family updates, progress on financial goals, asset allocation and performance of investments.  We’re happy to assist younger members of the family as part of our total wealth management program.

Here’s our latest blog:

 

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Focusing on Football and Finances

Written by Ginny Wilson.

 

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We started an activity in our office recently that we call “reverse-mentoring”. Historically, of course, the mentoring comes from the most experienced on down to the least experienced and the teacher and the student do not often change places. However, this informal program allows our youngest team members to teach the older team members what the world looks like from a Millennial perspective. We get to hear how the world looks through the kaleidoscope of a post-911 and post 2008 recession view. The impact of the explosion of internet and social media influence is something the younger generation can’t necessarily comprehend – they have always just had it. It seems all the older generation can do is play catch up and learn all they can from the younger crowd. The reverse-mentoring helps us look through a new and changing lens and we all enjoy hearing about the different generational perspectives.

The most significant difference in generational experience is the impact of the speed of information access and communication. It is mind-boggling how quickly news spreads, how widely social, political or economic information will travel. It is the age of near-constant distraction. We have hundreds of cable channels, apps on your phone with real-time sports scores, stock market quotes or breaking weather and news. We are constantly interrupted by texts, emails or alerts. My favorite example of over-the-top multi-tasking is the NFL Red-Zone cable channel. They move from game to game, finding the games with teams that are currently in the “Red Zone” or 20 yards from a scoring opportunity. They will sometimes show a split screen with several games at the same time so you don’t miss the exciting plays from every NFL game currently being televised! It will give you a headache trying to watch all of the action at once.

A Wall Street Journal article recently talked about how information “overload” is “leading us to make bad choices about our money”. The article suggests that our shortened attention span prevents us from fully digesting all of the pertinent information we need to make informed financial decisions. As much as we are now bombarded with data and information, if we can fully concentrate on the task at hand, we can also use some of these information tools to enhance our decision-making! Our smart-phones or IPads offer convenient ways to manage our banking, credit and investments. Here are some of the tips from the article to help you avoid the pitfalls of making poor financial choices.

Avoid multitasking: Multitasking can lead to ineffective completion of any of the tasks you are trying to accomplish. One business journal recently advised business owners that multitasking in the workplace should be discouraged and instead task completion should be the focus in order to have a successful business. As the article points out, trying to multitask makes us worse at most tasks!

Pick the Right Time of Day: Be sure that you have enough time to analyze information or make decisions. Try to choose a time when interruptions will be minimal and you can concentrate on one thing at a time.

Focus on the most relevant and not just the most available information: Try not to make snap judgements based on the most immediately available information. Taking time to do necessary research will allow you to make more informed choices. The latest information is not necessarily the whole story!

Look at the Big Picture: There are apps that can help monitor bills, payments, account balances and can help you track trends or payment schedules to take some of the work out of these tasks. Take the time to put the whole picture together before making a decision about one piece of your financial picture.

Keep away from the Phone: That small computer in your hand is a big culprit in causing distraction. One of our reverse-mentors told us about the latest Apple IOS 12 update which now shows how much screen time you spent in any given period and also will track the activities that you spent time on. If you saw that you spent 5 hours on your phone one day, with about 3 of those on FaceBook, Twitter or checking your Fantasy Football standings, it might prompt some restraint and help you to lessen your screen time each day. That is a useful tool!

We want all of our DWM clients to feel confident that, as your financial “quarterback”, we are paying very close and undistracted attention to your financial health. We try to carefully review all of the information at hand to make informed financial decisions on your behalf. We want our clients to worry as little as possible about financial decisions and we always welcome any questions or requests for assistance. We hope that when making your own decisions, you can slow down and take time to carefully determine the best path. Also, our dependence on constant information and interaction truly can take away from the wonderful experiences in our lives. So put down the phone, enjoy time spent on your favorite activities and with your favorite people. Watch one football game at a time! We think this will enhance your financial health and help you focus on the important things in your life.

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Paying Taxes on Your Investment Income

Written by Lester Detterbeck.

 

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Press Release: On November 6, 2018 (Midterm Election Day), SC Public Radio Host interviewed Les Detterbeck. The message: Income Tax Planning for your Investments is very important.

Click here to listen to the audio http://www.southcarolinapublicradio.org/post/paying-taxes-your-investment-income and/or please read the transcript below.

Mike Switzer: There are two basic truths. We all love when the stock market makes us money. We all hate paying income taxes on those profits. But you still have almost two months to get your investment tax planning in order, so today we have a guest that may be able to help. Les Detterbeck is a Chartered Financial Analyst and Les is also a Certified Financial Planner and CPA. Les joins us from his office in Charleston, SC. Welcome, Les. Thank you for joining us today.

Les Detterbeck: Thank you, Mike for inviting me. Good to speak with you today.

Mike: So, let’s go ahead and dive right into these tips. What’s number one?

Les: Tip #1 is that each year you should go through your portfolio and identify those unrealized losses, that is where the current value is less than your cost. You should go ahead and harvest these losses by selling the securities so that these losses can come into your tax return for that given year. Of course, the losses would offset your capital gains for the year with the net objective that you will have no taxable capital gains for the year.

Mike: You’ll have a limit on the amount of loss you can take if you don’t have enough gains, correct?

Les: Exactly right, Mike. You have a $3,000 annual limit with the excess being carried forward indefinitely. Again, what can happen, because we have had a big pullback in October, you can harvest losses this year because you might need them next year. That wouldn’t be a bad strategy.

Mike: Does your tax bracket matter?

Les: The tax bracket does matter. The general tax rate for capital gains is 15%. However, for the lowest tax brackets, capital gains are taxed at 0% and for the highest brackets at 20%. And, of course, I am only referring to the federal income tax as there is SC tax as well.

Mike: Okay. What’s next?

Les: The next tip, Mike, is to always look at both asset allocation and asset location. You have three types of investment accounts: taxable, tax deferred or tax exempt. For taxable accounts, you must pay taxes in the year income is received. Retirement accounts, IRAs and annuities are examples of tax deferred accounts, in which you pay tax on the income when you take it out. Tax-exempt accounts, like Roth IRAs and Roth 401ks, are not taxed even at withdrawal.

Tax efficient investments should be in taxable accounts, tax inefficient investments should be in tax deferred or tax-exempt accounts. Stocks or equities are tax efficient- if you hold them for more than a year, you pay capital gains taxes not ordinary income.   Bonds/fixed income are tax inefficient. Interest earned on bonds in taxable accounts is income in the year received and is taxed at ordinary income tax rates. Income in a tax deferred account, such as an IRA or retirement account is taxed as ordinary income but only at withdrawal. Hence, the most efficient overall asset location is to put stocks/equities in taxable accounts and fixed income and alternatives in tax deferred accounts.

Mike: And, I heard you mention Roth IRAs. Is there anything there specifically that we should know about for our planning.

Les: Yes, Roth assets are tax-exempt, which makes them the most valuable investment you can own. Furthermore, Roth accounts, unlike traditional IRA accounts, do not require minimum distributions when you and/or your spouse reach 70 ½. Upon your passing, the beneficiaries of your Roth assets can “stretch them” by allowing them to continue to grow them tax-free over their lifetimes. Therefore, you want these assets to be able to grow as significantly as possible consistent with your risk profile and asset allocation.

Mike: And, we have time for one more tip.

Les: My final income tax planning tip today would be to do an Income Tax Projection. Do it yourself or work with your CPA. You need to look at it particularly for 2018 as the Tax Reform made some big changes this year. Review your income, deductions, tax bracket and estimated taxes. Two principal reasons, Mike. One, a projection will help you minimize surprises and penalties. And, two,

hopefully, you will come up with some tax savings ideas, some of which may need to be put into effect before December 31.

Mike: Les, thank you so much for the information and your time today.

Les: Thank you, Mike. Pleasure to be with you.

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A True Halloween Scare: Volatility Returns to the Marketplace

Written by Jake Rickord.

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Recently, we here at DWM posted a blog discussing the phenomenon that “Bull Market Runs Come in All Lengths”. Within this article, we mentioned the idea that before our current bull run ends, we may see many more pullbacks and/or corrections.

Within the current month, we have seen these types of market downturns as investor fears of upcoming mid-term elections, tariffs, rising rates,  and international economic slow-down issues have spiked levels of consumer fear (measured by the volatility index, VIX), by nearly 50% .

While this data can’t tell us whether the current bull market run is coming to an end, it opens up the opportunity to better understand just what is happening in the economy, and how we should handle times like these.

To understand the severity of market moves, there are three unique distinctions: a pullback, a correction, and a bear market, which signify downward market moves of 5%, 10%, and 20% respectively.

Over the past month, securities within all asset classes – equities, fixed income, and alternatives - have experienced one of these. On October 23rd, in fact, over 40% of the stocks in the S&P 500 were considered to be in bear market territory. Since then, markets have continued their run of ups and downs.

What can this market data tell us about the future? Unfortunately, not much. While markets tend to be cyclical in nature over the long-term, the short-term is usually marred by emotions (herd mentality, greed, and fear) rather than by solid fundamental and economic modeling. Furthermore, the risk of attempting to predict these short-term outcomes can have a serious long-term effect on the performance of an investor. Studies have shown that by missing out on only a few days strong returns in a market cycle can drastically impact the portfolio’s overall return.

Thus, in order to stay on track with long-term financial goals, one of the most successful and least anxiety-inducing ways to manage investments is to generate a financial plan, assess and re-assess risk tolerance regularly, and continually stay disciplined to these values in order to avoid making emotional and poor decisions. In conjunction with these actions, an investment portfolio needs both an appropriate asset allocation based on a client’s financial plan and has to be made up of a well-diversified portfolio that can help provide exposure to market areas, such as fixed income and alternatives, that are arenas that may still produce returns even with stocks stuck in a slowdown. The combination of these strategies can work as shields to protect both an investor’s assets, and his/her mental health during times of volatility such as today’s challenging marketplace.

At times, corrections, pullbacks, and even bear markets can actually be good things! If certain areas of the market are being overvalued, or company valuations are getting ahead of their fundamentals, pullbacks and corrections can serve as a check and balance system, to get these more in line. This makes companies, sectors, and markets more stable as they can refresh a bull market that is verging on inflating itself beyond its means.

Furthermore, a pullback, correction, or bear market move down for a certain security can provide other opportunities. For example, this month, DWM will be creating value for clients by taking advantage of tax-loss harvesting options. Tax-loss harvesting is the process of selling out of a security that has lost value since an investor first bought it, and using that loss to offset any gains that an investor realized during a tax year. This upside can serve as a nice treat to offset the “trick”-y investment arena of October.

One other somewhat notable factoid is that in the mid-term election year of October 2014, the stock market took a noticeably similar look. That of the Dow Jones down nearly 3%, rebounding, and selling off throughout, ultimately dropping into correction territory. This was quickly followed by a November post-election market boom hitting record highs for the Dow and S&P 500. Once again, while interesting to see, take these numbers with a grain of salt moving forward and looking at future returns.

All in all, keeping in mind that while volatility and uncertainty in the marketplace can be scary, maintaining a balanced, disciplined portfolio and financial plan, and staying dedicated to that plan throughout all market cycles is the key to being financially sound and minimizing the number of sleepless nights. At DWM, we proactively discuss these matters with clients, and strive to keep our clients informed, motivated, and on-target to their financial plans to help them reach their long-term financial goals. Happy Halloween!

 

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