2 Minutes With Magis Wealth Planning 3/10/17

“2 Minutes With Magis Wealth Planning” is published on the second Friday of every month.  It is comprised of five brief thoughts that we’ve come across during the course of our daily reading and research.  It summarizes data points that we find both relevant and interesting on various topics including investments, retirement, taxes, industry news, etc. 

  • Warren Buffett’s annual “Letter to Berkshire Shareholders” was published recently and had some interesting food for thought as always. Stick with low cost index funds because actively managed funds rarely outperform them, net of fees – very similar to what we advise our clients. What about the smooth talking “financial advisors” that make a lot of promises about outperformance and recommend “proprietary strategies” and fancy (and expensive) funds? He quotes an appropriate old adage:  “When a person with money meets a person with experience, the one with experience ends up with the money and the one with money leaves with experience.”  Clink Here to Read Warren Buffett’s Letter
  • Here’s a link to an interesting research paper that explores whether a group of funds that outperform their benchmarks in one period can continue to do so in subsequent periods. Conclusion: Not very likely. Picking fund managers solely on past performance is not a winning strategy.   Click Here for the Research Note
  • The race to the bottom continues: Last month we mentioned that Charles Schwab had lowered its standard commission price to $6.95 per online stock or ETF trade (lowest in the industry at the time). Well, last week they lowered it again to $4.95 per trade, matching Fidelity (who had lowered their trading commission from $7.95 a week prior in response to Schwab).  We suspect this downward spiral will continue – which is good news for investors.
  • If you are or know a teacher or a public employee paying into the state pension system, here’s an interesting article that was recently published in The New York Times which compares the teachers’ pension fund in Puerto Rico to a legalized Ponzi scheme. The article includes an interactive map that compares teachers’ pension plans by state.  Ohio was one of 6 states that received an “F”. Click Here to Read the New York Times Article
  • Chart of the Month: Pie chart that shows the breakdown of federal expenditures according to the Congressional Budget Office (CBO) and how it is expected to change in the next 30 years. Bottom line: Entitlements are crowding everything else out, which suggests that taxes will probably need to go up in the future.  We think this underscores the potential benefit of strategic Roth conversions (e.g. taking advantage of low income years in retirement before RMD’s).

CBO Federal Spending Chart

Source: Wall Street Journal Daily Shot 3.6.17; OFFIT Capital. h/t Anne

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s