Skip to main content

Sound Advice: April 6, 2022

E I E I Owe 

The coming of Spring tends to bring mixed emotions.  For those of us up in the colder states who have managed to get through yet another frigid winter, the appearance of the first robins and yellow buds of forsythia signal the onset of a more comfortable time of year.  The flipside, however, is the discomfort that may be in store when Uncle Sam awaits the annual income tax payments. 

Sending a check to the IRS may not be the most pleasant task, but the reality is that taxes due are based upon income.  Generally speaking, the greater the income, the greater the tax bite.  With the exception of income that is exclusively provided by tax-free investments, the prospect of no taxes due may well raise the thought of a difficult situation.

With that said, proper investing necessarily involves a long-term view for at least two reasons.  First, regardless of the expertise brought to bear in the analysis of possible holdings, the impact of interim events on short-term prices of those holdings will be largely exposed to important events that take place along the way.  Obvious recent examples were the start of the pandemic in early 2020 and the current war in Ukraine.  The list is lengthy, but the result is the same. 

In the short term, emotions rule the day.  In the long term, well-conceived analysis of the underlying fundamentals of investment possibilities will usually be well rewarded.  What must be ignored is the media bombardment about “Stocks of the Day”, “10 Funds to Buy Now”, and a host of schemes to bamboozle investors.  Equally dangerous are the opinions of folks we meet at social gatherings.  Serious investors need serious advice from qualified professionals, not cherry-picked boasting about occasional good luck.

The textbook rules have not changed and it’s essential to remember that there is no perfect approach.  Bill Miller of Legg Mason, one of the best-known professional investors, posted one of the lengthiest records of beating the market and then his results hit the skids. Investors who were short-sighted deserted his fund.  Surprise, surprise, Miller’s returns then rose again.

The Dogs of the Dow approach offers a similar lesson.  That approach is straightforward.  Buy the 10 highest-yielding stocks in the Dow Jones average and rebalance similarly at the beginning of each year.  Over time, the results have been impressive, but there have been periods when the numbers lagged.

Patience pays off.  We endure Winter to get to Summer.  We pay taxes because we’ve made money.  Not a bad deal.

N. Russell Wayne, CFP®

Sound Asset Management Inc.

Weston, CT  06883

203-222-9370

www.soundasset.com

www.soundasset.blogspot.com 

Any questions?  Please contact me at nrwayne@soundasset.com

Comments

Post a Comment

Popular posts from this blog

Sound Advice: July 8, 2020

Jobs Are Up, But So Are New Infections Through the spring months, m ost of the economic data was extremely negative, with record declines in employment and consumer spending.  The speed of that decline had no modern precedent. We are now in a recession.   The shortest recession on record occurred in 1980 and lasted just six months.  Second place goes to a seven-month recession in 1918-19, which was tied to the Spanish flu pandemic.  The big question is: When will this recession end? Given surprisingly strong data in May, April may have been the bottom of this economic cycle.  If so, it will have been the shortest recession on record.  With massive support from the Federal Reserve, the federal government, and the reopening of previously closed businesses, employment surged unexpectedly.  At the same time, pent-up demand, stimulus checks, and generous unemployment benefits led to a reacceleration of commercial activity. Still, not all is rosy.   In his recent testimo
Post a Comment
Read more

Sound Advice: December 13, 2023

What You Need To Know About Long-Term Care Insurance Long-term care insurance (LTCI) is a type of insurance that helps cover the costs of long-term care services, such as assistance with activities of daily living (ADLs) such as bathing, dressing, and eating. It can also cover the expenses associated with care in a nursing home, assisted living facility or at home by a professional caregiver. Here's what you need to know about long-term care insurance: 1. Not Covered by Health Insurance or Medicare: Long-term care services are generally not covered by health insurance or Medicare, which only provide limited coverage for skilled nursing care and rehabilitative services. Medicaid covers long-term care, but you need to meet strict income and asset requirements. 2. Costs of Long-Term Care: Long-term care can be expensive and can quickly deplete your savings. LTCI helps to cover these costs, providing financial security and ens
Post a Comment
Read more

Sound Advice: December 6, 2023

Some Suggested Financial Adjustments for Retirees Financial adjustments for retirees are crucial to ensure a comfortable and secure retirement. Here are some worthwhile financial adjustments and considerations for retirees: 1.      Create a Budget: Establish a realistic budget based on your retirement income and expenses. Categorize your spending and prioritize essential expenses such as housing, healthcare, and groceries. 2.      Emergency Fund: Maintain an emergency fund to cover unexpected expenses. Aim for at least three to six months' worth of living expenses. 3.      Healthcare Costs: Be sure to fully understand your healthcare coverage and consider supplemental insurance plans to cover gaps in Medicare. Account for potential long-term care expenses as well. 4.      Minimize Debt: Aim to pay off high-interest debt before retiring. This can significantly reduce financial stress and free up more of your retirement income. 5.      Investment Diversification: Div
Post a Comment
Read more