Insights from Meredith Wealth Planning

Taxes, like many other subjects, have narratives that are repeated very often that might not actually be true. Let's explore 5 common tax narratives and see if there is more to the story.

Greed and Envy are two sins that often plague an investors mind over time. Recently, my friend has found incredible success with his position in Nvidia stock. Multiple times over the years I have pushed for him to liquidate and diversify and each time the stock seems to explode higher. I wanted to summarize my own struggles coping with these emotions.

Meredith Wealth Planning is now 5 years old. It's a good time to recap how we got here.

How much of their portfolio should a retiree have in stocks? Is age in bonds actually a useful rule of thumb? Recent research shows an all-equity approach to be optimal.

2023 is now in the rearview mirror. Here is an updated from Mark Meredith. What actions should take in 2024 and should you alter your portfolio because of the pending election?

Even if you knew what events were going to unfold in the coming year, that still wouldn't help you as an investor. In fact, you would likely make drastic moves to your allocation and do more harm than good.

"We do better when you do better" is what we're told by asset-based fee financial advisors, but what is the reality?

We provide a high level overview of Medicare Plans available to participants, what these options entail and actions clients can take during the enrollment process.

US equities have continued their dominance relative to global stock returns, but there are merits in diversifying globally and today we explore them.

Bonds have not provided the low risk benefit that many investors became accustomed to. Does the future look better than the past for bondholders?

There is a large gap between the performance of various investment funds and asset classes versus what investors actually earn over time. This difference is called the "Investor Gap" which illustrates some of the behavioral issues investors experience when they chase after performance.

Mutual funds have served investors well but there are more tax-efficient alternatives to explore via exchange traded funds. Let's look at some examples.

Through May 2023 most US stock indices are showing large YTD gains, but are these gains representative of the overall market? We argue that the bulk of returns YTD are concentrated in an unusually small number of stocks which come at a hefty price for passive investors.

We highlight a few of our favorite data points from Dimensional Fund Advisors 2023 Matrix Book. Stories can help everyday investors understand how markets work and what drives successful investing. Dimensional's Matrix Book has been providing advisors a tool to help their clients turn data into stories for years.

I gave a client great advice, and they fired me. What gives???

An overview of why investors should consider adding alternative investment strategies to their portfolios. What is an alternative investment, how alternative investments can improve portfolio diversification, and who should consider them.

Alternative investments are the Holy Grail of portfolio management. Ideally they are a way to help your portfolio when traditional asset classes like stocks and bonds are suffering. What does the evidence show?

Silicon Valley Bank (SVB) has collapsed, and was taken over Friday by the FDIC. Is this a sign of things to come in the banking system, or an isolated event?

If there’s a silver lining to above average inflation, it’s that we may end up paying a bit less in taxes because of it. In this article, we list out 6 ways that inflation could cut your taxes in 2023.

2022 is in the books. It was a year of many “firsts”. Never before had we witnessed both the broad equity index and the bond market index clocking double-digit percentage losses in the same calendar year.

Ever wanted to travel back in time? Google has a fun tool where you can select search results from a specific time period:

As we approach the end of the year, many investors will be considering tax-loss harvesting which is a common technique to take advantage of losses on capital assets. Another concept that should be considered is tax gain harvesting.

2022 has not been a pleasant experience for investors. In recent memory, bonds have provided a safe haven during equity market selloffs but 2022 has reminded us that bonds can be volatile as well:

It’s hard to believe that it has been over a decade since I first met Mark in the lobby at TheBANK of Edwardsville. It was our first day as “Junior Financial Consultants” within the bank’s wealth management department. The 2008 / 09 financial crisis had just passed, and I finally landed my first full time job within the wealth management industry. The one positive from the start: I could always tell clients I had been through a “bear market” from day one as an advisor.

By now you have probably heard that Social Security Income benefits are scheduled to increase by 8.70% in 2023. According to the Social Security Administration, the average monthly Social Security benefit will increase from $1,681 to $1,827.

Shares of stock represent very small ownership stakes in businesses. How do we arrive at a fair value of what any business is worth? You take all future estimated cash flows from the business, and discount them back a certain rate to a present value. How do we estimate all future cash flows from a business, and what discount rate do we use?

The longer an investor’s portfolio is beneath an all-time high, the more doubts start to creep into their mind. The common words of wisdom begin to grow old such as “stay the course”, “buy low”, or “it always recovers”. Patience is tested. One may begin to wonder if things will ever recover, or if they will live long enough to see the recovery.

I am aware that no one really wants to hear their financial advisor voice opinions over a political issue, so I’ll try to only do this on rare occasions. Student loans and college planning are well within the realm of financial planning, so here we go…

Last year financial author and educator, Paul Merriman, appeared for an interview on The Rational Reminder podcast (check it out here). During the interview, Merriman discussed his most recent book “We’re Talking Millions” which outlines 12 steps for investors, each of which has a potential million-dollar payoff.

I am not advocating we initiate a run on the banks, but we are at a point in the interest rate cycle where I think it makes good sense to keep as little in the bank as possible. Banks have not increased deposit rates just yet, meanwhile you can get higher returns elsewhere without jeopardizing your principal. While that may sound too good to be true, I assure you it isn’t.

We are now 164 days into a market decline with the S&P 500 Index experiencing a drop of 24.5% thus far. This is the longest decline we have seen since May 2015 – February 2016, which lasted 267 days but only resulted in a 15.2% decline.

I-Bonds can be a great safe option to consider. It is a fixed income instrument with no default risk, no principal risk, and no inflation risk. While they have been written about extensively by financial columnists for the last year or so for paying rates above 7% annually, the truth is that I-Bonds pay the same real interest rate today (0% after adjusting for inflation) as they did a in 2010.

Proper implementation is pertinent. Too much “tinkering” can be harmful. Unfortunately in my many years of watching baseball I often wondered why managers often made such important decisions based on very small sample sizes. As investors we have an edge that a baseball manager does not (as the need for immediate results do not allow it), patience.

Below is a short blog post I wrote in June of 2018 regarding interest rate math. It’s always entertaining to look back and read what the current thoughts were at that time. I remember 2018 quite well, and everyone and their mother seemed to think rates would only go higher well beyond 2018. So what actually happened?

When equity markets dip 10%+ the annuity pitches get amplified by 5 orders of magnitude as people start exploring “alternative investments” to equities and bonds. Are annuities a viable solution, or are they simply pushed aggressively by agents preying on people’s fears to collect large commission checks?

I’ve fielded a few inquiries recently regarding the fear over the Russia-Ukraine tensions, and how one’s portfolio should be altered to account for this risk. Not to be dismissive, but we’ve seen this story quite a few times in recent history. Let’s look back on some of the news on this situation over the past 8 years:

Here we have the Nutrition “Facts” for orange Tic Tacs, which I pulled from tictac.com. You will see from these “Facts” that Tic Tacs have 0 grams of sugar serving. What if I told you that Tic Tacs are nearly 100% sugar?

We all know equities can go backwards at times, and in a violent fashion. While it has happened many times in the past, and will happen many times in the future, when it happens it is only natural for a bit of fear to creep into your mind. Negative thoughts might appear such as:

2021 is now a distant memory. The annual review blog posts seem to come a little too frequently. Having children has turbocharged the rate at which time passes. Back when we first became aware of COVID-19, I suspected life would slow down a great deal. The opposite has seemed to occur.

Transitory became the buzz word from the Federal Reserve as they insisted the price increases would only be temporary. However, a quick Google analysis which I placed below will show how the narrative has shifted from “inflation is transitory” to “inflation is good for you”.:

“The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of a doubt, what is laid before him.” -Leo Tolstoy

With interest rates hovering around all-time lows, borrowers may not be in a hurry to pay down their mortgage. The common perception is that rates are very low, so now we can borrow at 2.5% – 3.5% to buy a home, and invest extra money into a portfolio that can earn more. Effectively you are leveraging your investment returns with a low fixed interest rate loan.

A Roth IRA conversion opens the door to a unique financial planning opportunity. Below will look at Roth IRA strategies and what you should consider when implementing one.

Over the years as a financial planner I have developed a few pet peeves. It was fun to jot a few of them down below.

Many of us have heard the data that it is very difficult to outperform the broad market index over time. While many mutual fund managers dedicate their life mission to this goal, few succeed.

Previously I have disclosed that I do not own any positions in cryptocurrency, and I still do not intend to. That being said, I am not opposed to people owning it. However, I do enjoy the crypto investment thesis debate and enjoy poking the bear a bit.

Where does one start when looking back on 2020? It seemed the year was off to a poor start when Kobe Bryant and his 13 year old daughter were tragically killed in a helicopter crash. The year continued to go downhill from there.

At the end of December I will have been a financial advisor for 10 years. In some sense it feels like a lifetime has gone by, and in other ways it only feels like a few months. Early in my career I feared the question from prospective clients “how long have you been doing this?”, and always thought it would be great one day to tout how many years of experience I have.

Parallax – is a displacement or difference in the apparent position of an object viewed along two different lines of sight.

I don’t know if you’ve heard, but there is a Presidential election in November. Every 4 years this seems to add a bit of nervousness for investors. This is the third Presidential election in my short career as a financial planner. In all three election years a number of people have asked me “should I sell before the election?”.

Investing in gold is once again gaining in popularity, with the price appreciating over 25% for the year thus far. On August 6th the price reached an all time high of $2,065 an ounce and it has since retracted. Some investors view gold as a hedge against tail risk, inflationary environments, or the potential downfall of fiat currency.

Before I say anything critical about Tesla’s stock split, I would like to take the opportunity to remind everyone the stock is up about 300% since I questioned their market valuation in this post in January. Actually, that may actually prove the entire point of the article (Stock Picking is Hard).

No I’m not joking. I don’t have health insurance. My wife doesn’t have health insurance. My children don’t have health insurance.

The 2nd quarter saw a tremendous recovery in global markets, leaving many people surprised as the market seemed to move upward in the midst of a lot of bad news. This is not unusual, as the market is a leading indicator of expectations and will typically move in anticipation of bad or good things happening.

Most of us are already aware that statistics are commonly framed in a way to fit a narrative. That doesn’t mean we are always less prone to falling for the bait. I suspect this will be the first of many posts I make regarding statistical lies, so we’ll start with the most pressing issue at the present time, COVID-19.

Ulysses (Greek name Odysseus) was the Greek King of Ithaca and the hero of Homer’s Odyssey. After the Trojan War, Ulysses had a long journey back to Ithaca. Along the way, he had an extended visit with the witch-goddess, Circe, who advised him on the remaining stages of his journey.

It would unlikely ever be prudent to invest all your assets into a strategy like small cap value, and other academic factors have shown to diversify the risk of small cap value quite well. Using a barbell approach with a fund that provides exposure to momentum stocks, or high relative profitability can help dampen some of the underperformance when it occurs.

I know in 2020 we have all become a bit numb to bizarre things happening, but the price of a barrel for West Texas crude oil dropped to negative $39.55 today. Yes, the producers are paying people to take it off their hands as storage facilities are at max capacity.

Before I dive into the quarterly commentary, I wanted to take a moment and mention that March 6th was the one year anniversary of starting this firm. My days at TheBANK of Edwardsville feel like quite a distant memory at this point, and since the day my confidence has never wavered that I made the right decision.

Back in December I wrote about a market timing strategy that has shown to work over a limited sample size. It had shown to provide a little better return than the overall market with significantly less downside risk. I thought it would be “good timing” to update the results of this strategy and provide more data on it after we just experienced a significant decline in global equities during the 1st quarter.

We have implemented a recession in order to control the outbreak of the Coronavirus. While we’re all wondering when this pandemic will end, and if the economy will recover within a reasonable length of time, I have been thinking about this extensively. And rather than annoying my wife with more out loud thoughts, I’ll share them with all of you.

Once upon a time Collinsville, IL was nationally recognized as a high school basketball powerhouse. I remember going on a family vacation to Florida as a child and someone asking our family where we were from. When we replied “Collinsville, Illinois” they said “Oh, the home of Virgil Fletcher”.

“Stocks won’t make you wealthy. Your behavior around stocks makes you wealthy”-Nick MurrayI know enough to know that clients don’t always appreciate hearing the following from their advisor at a time like this:

While the asset-based fee model may be an improvement over the commission-based one, there are still a few issues to point out as to why more improvement is needed. The fundamental disagreements I have with the asset-based fees are the inequitable nature of them, the nasty compounding effect they have, and the conflicts of interest that still exist under the model.

Here I will present you with information about two mystery companies that operate in the same industry (which is a cyclical one) and are competitors of one another.

“The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently.” - John Bogle

Financial advisors are often encouraged to outsource the portfolio management portion of their business in order to scale their practices. This is not always a bad thing, as some advisors tend to be more focused on budgeting, estate planning, insurance etc. they do not have the time or desire to engage in investment research.

Many of us have run through retirement calculators. We punch in our current investment account balances, how much we’ll save each year, what rate of return we expect, and it spits out a projected future value. That projection will be wrong.

It’s true, US stocks are up 19.90% for the year. But from 05/01/2019 – 09/30/2019 they are only up 1.15%, and foreign stocks are down 1.63% during that same time horizon. Nearly all of the 2019 return for stocks so far came in January – April. Can you imagine if an investor bailed during December of 2018 when the market had fallen substantially and missed this subsequent recovery?

While I didn’t win the stock game with fake money, I choose not to play the game with real money. A permanent loss like the ones listed above could be severely disruptive to your lifelong endeavor of compounding interest. Broad diversification amongst different asset classes does limit your short-term upside, but can still build significant wealth over time.

Of course there’s also the infamous, “What’s Wrong, Warren? article that Barron’s posted at the end of 1999, which questioned whether or not Warren Buffett had lost his magic touch due to Berkshire’s significant underperformance. Since the turn of the century through August of this year, Berkshire A Shares have outperformed the market by 4.48% annually. Buffett does not seem to have lost his magic touch.

Peter Schiff is known for his doomsday predictions on the US economy, and being a permabull on the price of gold. Why is he famous? He predicted the housing market collapse and the ensuing deep recession we experienced 2007 – 2009.

An article on July 13th by Shawn Langlois of MarketWatch shares the story of a Reddit discussion where an anonymous man posted his household monthly budget, and how they are struggling to get by on a $500k annual household income. One more thing, they live in Kansas….

This is the first ever quarterly update from Meredith Wealth Planning. Assuming I stay in this position for about 30 more years, you can expect about 119 more of these.

This may surprise you, but a lot of clients have similar concerns when it comes to investing in markets. Here’s a few that come up every now and then:

It has been well documented that the S&P 500 index fund has outperformed the vast majority of actively managed funds historically. Having said that, it may not be a prudent strategy to put everything in the S&P 500.

There can be winners and losers on trades, like when the Cubs traded the Cardinals Lou Brock for Ernie Broglio and Bobby Shantz (who? Exactly), but trade deficits are not necessarily a bad thing. We engage in trade everyday and the dollars we spend for goods create an imbalance between us and our trade partner.

While there are many other wealth management firms to work at, I never considered applying at any of them. Traditional brokerage firms are littered with conflicts of interest that do not align themselves and the clients properly. When I looked around the independent advisor marketplace in the Metro-East area, I noticed there was a lack of fee-only firms.