Today’s topic is risk profiling for your portfolio.This is a very personal component of your investment experience. Your risk preferences are likely different than mine, or your neighbors, your colleagues, or your spouse.It’s really like a fingerprint for your investment process.
So let’s focus on the three risk components of risk:
- Risk capacity: can you handle it? Bear market
- Risk need: Do you actually need to take the risk? If you are worth $10m, but spend $200k, you likely don’t need to take much risk. If you are just starting out and are planning for retirement, you might need to assume certain risks to get to your goals.
- Risk tolerance: What is your general feeling towards risk? Some investors are tolerant of risk. Others are quite averse. Putting those pieces together and overlaying them with your asset allocation is a great first step.
Of course this is an important topic for you and it requires more than a one minute video and a website. For more financial insight, please subscribe to the right. Thanks for watching.
We have a lot of clients with real estate interests and ask which is better-real estate in REIT form, real estate in private equity, or direct real estate ownership. Each has pluses and minuses-direct real estate ownership allows: Different ownership structures, tax flexibility and depreciation and passive activity losses in the year of sale, leverage.
Downside? Tenant management, lack of diversification of property location and types REITs: Preferred tax treatment of dividend income-can be income, return of capital or capital gains, there is a diversification of property locations and types, and a portfolio can hold a large number of REITs.
Private equity real estate: Can do opportunistic investments-repositionings, recapitalizations, hard money loans, re-developments, developments. The downside is that it can be risky if too much leverage is used, or that it’s deployed incorrectly. Of course this is an important topic for you and it requires more than a one minute video and a website. For more financial insight, go to the link on the bottom of your screen, enter your info and let’s stay in touch.
This video goes out to the pre-retirees – today’s topic is the 4% rule for your retirement assets. What is the 4% rule for distributions from retirement assets? The rule states that once you enter retirement, you can safely withdraw 4% from your retirement accounts and still maintain those accounts throughout a 30-year retirement. From a $1m account, you can safety withdraw $40k and still likely leave a meaningful balance for your heirs.
How was it that 4% is determined the right number? Hundreds of monte carlo simulations of investment scenarios using multiple investment returns assumptions. Includes Great recession, 9/11, 1987 Crash, etc.
There is an industry-wide adoption that 4% is a safe number. In fact, more than 2/3s of the time, the retiree is left with 2x the amount of their original investment. Only 10% of the time the retiree had less than their original principal, and we’re not aware of a circumstance where there was no principal left. It works.
But what can go wrong? poorly constructed portfolio
A heavy bond allocation could be an issue. .75% is the 10 year Treasury yield.
Of course this is an important topic for you and it requires more than a one minute video and a website. For more financial insight, go to the link on the bottom of your screen, enter your info and let’s stay in touch. Thanks for watching
Today’s topic is “What are closed end funds and how do they differ from ETFs”.
Exchange-traded funds – It’s a security that trades like a stock, in real time on an exchange, generally has passive management, historically meant to track an index, low expense ratio.
They come in a host of flavors in every style from Morningstar-by market cap, by style, by asset class (stocks or bonds), by investment technique.
Closed end funds may trade at discount or premium to NAV, actively managed, leveraged to provide higher yields, higher expense ratio due to the nature of active management.
What type of investor should hold? An ETF or a closed-end Fund? Dividends Bond replacement? No guarantee of principal Track an index? Cost vs performance-indexing Core satellite strategy
Of course this is an important topic for you and it requires more than a short video and a website. For more financial insight, go to www.samalingroup.com/financefocus