Author: John Reagan
Why didn’t you tell me how simple you were going to make my tax life?
We like good surprises! Because each client’s tax situation is unique, the time and dollars saved are challenging to quantify in advance. No matter your situation, we are confident your tax experience will likely improve, whether your tax bill this year goes up or down.
You may be asking yourself, “how can I save more on taxes?”. Whether you are wondering about this year or next, if you’re a client, you already know you have a team working on it. We provide a spectrum of services to minimize your tax bill, in addition to guidance throughout the year and regular evaluation of potential tax law changes. In other words, you don’t have to worry that you’re leaving money on the table – we’re already working with you and your tax team to avoid that. If you want to learn more about how we see tax management schedule a complimentary call with us – we’d love to chat!
We love images that capture the benefits of “taking the long view.” Here is Rick Hill, our Co-Founder, on a family hike in Palm Desert. Rick knows that by removing the stress of investing out of our client’s lives, they can spend more time doing the things they love. Rick and Lynn Hill, who of course are clients themselves, estimate that they’ve saved six weeks per year by adopting an evidence-based approach. That’s 2.5 + years going back to 1998! Now start to compound the value of that time saved and the results become even more satisfying.
*Rick’s time-saving story was captured in Larry Swedroe’s books, most recently in Playing the Winner’s Game.
Like this? Follow us on Instagram and check out our team living the benefits of “taking the long view,” then send us your own example!
We’re fortunate inflation has been low, but that doesn’t mean we shouldn’t be prepared for its return. What are important ways we look at offsetting inflation for our clients? Our partners at Dimensional have outlined points on best practices. Read below.
- On Wednesday, January 13th the Labor Department stated that the consumer price index (CPI) increased by 0.4% in December and 1.4% for 2020, which was the smallest yearly gain since 2015 and was a significant deceleration from 2.3% in 2019.1
- However, given the $900 billion pandemic relief plan approved in December and the expectation for more fiscal stimulus, along with the rollout of the COVID-19 vaccine, some economists are forecasting a rise in inflation for the months ahead. As forecasts have moved higher, so too have market measures of inflation expectations. The 10-year breakeven rate, which is derived from prices of inflation-protected government bonds, recently climbed above 2% for the first time since 2018.2
Ways to mitigate the effects of inflation while still growing wealth:
- Commonly, equities are used as the growth asset within a portfolio and can help protect against purchasing power risk. While inflation has averaged about 4% annually over the past 50 years3, stocks (as measured by the S&P 500 Index) have returned around 11% annually during the same period.4 Therefore, the “real” (inflation-adjusted) growth rate for stocks has been around 7% per year, for the period.
- There are also tools within fixed income to hedge inflation risk including Treasury Inflation Protected Securities (TIPS). TIPS deliver the credit quality of the US Treasury, while hedging against unexpected inflation. As inflation (measured by the CPI) rises, so does the par value of TIPS, while the interest rate remains fixed. This means that if inflation unexpectedly rises, the purchasing power of any principal invested in TIPS should also increase. Dimensional’s Inflation Protected Securities Portfolio (DIPSX) launched in 2006 and has been ranked in the top quartile of its Morningstar category over the last 1-,3-,5-, and 10-years, outperforming its benchmark over each of those time periods.5
- When considering future consumption, investors may prefer a strategy that might provide higher expected returns over TIPS by investing in corporate bonds, while tax-sensitive investors may prefer a strategy that provides exposure to municipal bonds in addition to inflation protection.
Bottom Line: The good news…our clients don’t have to keep track of all these tools. That’s why we’re here for you. We stay on the cutting edge of investing and implement the best-in-class solution in an evidence-based investing world on your behalf. Curious how we can help you hedge inflation risk in your portfolio? Schedule a complimentary call with our advisory team by clicking here.