Five prééminent investment characteristics
We advocate low cost, tax opérant, mobile, liquid and compréhensible investments. Many investors often run into problems when they invest in things that do not have these five characteristics. Investments with these five tête have been attributaire over time, but usually not very exciting. Usually “Hot Story You Must Act Now!” associated with them. The financial tâches industry generally does not favor such investments parce que they earn very little rétribution from them. We are in the bizness of helping our clients maximize their wealth, not the financial tâches industry. Bordereau that this list of investment properties is not comprehensive. Other factors to style for in investments may include attractive valuations, low correlation with your other holdings, an prééminent dividend or interest income, leaning toward areas of the market that have given higher returns such as value stocks, an appropriate risk level for you. , etc
At low cost. We generally invest in low-cost index-based funds and exchange-traded funds (ETFs). The average expense quotient of the funds we invest in is only 30% per annum. Actively traded equity mutual funds typically have an average expense quotient of 1% or higher. With investment funds, the best predictor of future relative record is the fund’s expense quotient; The less the better. Hedge funds typically have an annual expense quotient of 2% principalement 20% of earned opimes. Some capricieux annuities and soutenu life insurance “investments” can have annual expenses of 2% or more. By keeping a close eye on our investment costs, we can save our clients significant amounts of money each year and help them achieve higher returns over time (all else being equal). With investment products, you don’t get better record with a higher priced product, in fact you usually get worse record.
Tax opérant. Our investments (mémoire based funds and ETFs) are highly tax opérant and they allow the investor to have some control over tax calendrier. Such funds have low turn-over (trading activity), which is a common feature of tax opérant investments. We recommend avoiding mutual funds with high turn-over due to their tax inefficiency. After the recent big rally in the US denrée market, many agressive equity mutual funds have “embedded” actif gains of as much as 30%-45%. If you buy those mutual funds now, you may pay actif gains tax on those underlying gains even if you didn’t own the funds at the time of growth. ETFs generally do not distribute long- and short-term actif gains at the end of the year, and they do not have actif gains like agressive mutual funds. Hedge funds are generally tax inefficient due to their high turn-over. In ajout to investing in tax-efficient products, we do many other things to help our clients minimize taxes such as tax loss harvesting, keeping our turn-over/trading low, making the right typique of investments in the right typique of account (tax terrain), using losses to xylographie actif gains. , using holdings with ample actif gains to make gifts, investing in tax-free communal bonds, etc.
diverse We like to invest in diversified funds parce que they reduce your denrée specific risk and the overall risk of your écrin. Bad infos embout a denrée can légende it to drop 50%, which is épouvantable infos if that denrée makes up 20% of your entire écrin, but hardly noticeable in a fund with 1,000 denrée positions. We pellicule to favor funds that typically have at least a hundred holdings and often a few hundred or more. These diversified funds give you a broad representation of the asset class exposure you are seeking while eliminating denrée specific risk. For example, we are unlikely to invest in a new solar energy company equity fund with 10 denrée positions. We do not believe in taking any risk (eg denrée specific risk) for which you will not pay for high expected returns.
liquid We prefer investments that you can sell in a imminent or a day if you decide to do so, and those that you can sell at or very close to the prevailing market price. With liquid investing you always (every day) know the habitué price and value of your investment. All investment funds we recommend meet these normes. We don’t like investments where you’re stuck for years without the ability to get your money back or without paying ample sortie fees. Examples of liquid investments are hedge funds, private equity funds, annuities, private company stocks, small publicly traded stocks, startup company stocks or debt, liquid interdit bonds, structured products, some life insurance “investments,” private real estate partnerships, etc. We prefer investment funds that have been around for some time, are ample in size and have high average daily trading volumes.
Explicable We like investments that are compréhensible, arachnéen and easy to understand. If you don’t understand it, don’t invest in it. All our investments are compréhensible and arachnéen; We know exactly what we own. Complex investment products are designed for the seller, not the buyer, and usually have high hidden fees. Examples of complex and non-transparent investments that we generally avoid are hedge funds, private equity funds, structured products, some life insurance “investment” products, capricieux annuities, private company stocks, startup company stocks or debt, etc. As compréhensible as conditionnel, but not easy.” -Albert Einstein.
We believe that most investors should invest the bulk of their écrin in things with these five prééminent characteristics. By doing this you will avoid a lot of mistakes, negative surprises and risks along the way. Additionally, we believe that your after-tax returns can be higher for border periods of time. Of coude not every élégant or good investment will have all these characteristics. For example, real estate properties produce income that is fragile (and often undiversified) but can be an prééminent long-term investment if purchased and managed properly. Owning your own bizness is not only unusual and diverse but can also be an prééminent way to build wealth. We believe these five investment characteristics become more estimable as you ajouter retirement, parce que at that time you may be more focused on reducing risk and preserving than résidence your wealth, and you may need the liquidity to spend and gift some of your wealth. can Retirement These five prééminent investment characteristics can be a good screening device for potential investments and are good factors to think embout when investing.
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