Have you found yourself asking, “Who cares about diversification? Shouldn’t I put everything in the US market?” Here are a few reminders as to why we go global with our clients. 

It’s no secret the US market has performed exceptionally well over the past several years. Still, as the saying goes, you shouldn’t put all your eggs in one (market) basket.

• The US market hasn’t been the best performer this year. Sweden, Denmark, Finland, Ireland, and Norway all outperformed the US market in the third quarter of 2020, with Sweden pulling ahead of the US by almost 8%. In fact, over the past year, Sweden has outperformed the US market by 12.7%.
• There’s no reasonable way to predict which country’s market will outperform and when. Less than a year ago, Finland, for example, went from the third worst-performing market to the third-best market this past quarter.
• Guessing wrong could have a significant impact on returns. The difference between the best performing developed market (Sweden) and the worst-performing market (Portugal) was 20.7%. The gap was even wider amongst emerging markets, with 30.5% separating India at the top of the list and Turkey at the bottom.

We often ask prospective clients if they are clear on their fees, returns, and allocation. Most are fuzzy on the answers. In our world, we value transparency and keep a close eye on fees, exerting pressure where there is room for a reduction. We are pleased to share that Dimensional Funds just announced meaningful reductions in management fees for the equity funds we invest in for our clients and ourselves. The majority of our clients will experience 20% lower fees on the equity portion of their Dimensional investments. We’ll be sharing the details in future client meetings, but for now, know that the odds of long term success just got better!

With 2020 coming to an end, we thought it would be a good time to remind everyone of a few tax planning strategies that can be easily overlooked:

1. Maximize your 401(K) or other employer plan contributions – Saving funds on a pre-tax basis in a retirement account allows them to grow tax-deferred until they are withdrawn in retirement.
2. Contribute to your Health Savings Account (HSA) – An HSA is an often overlooked savings vehicle that allows individuals covered by high-deductible health insurance plans to save money on a pre-tax basis. The funds then grow tax-deferred and if used for medical expenses can be withdrawn tax-free. These are sometimes called the triple tax advantages of an HSA.
3. Get going on 529 contributions – If you have children (or grandchildren, nieces, nephews, or anyone that may attend school in the future), a 529 may be the right savings vehicle for you. The tax deductibility of these contributions depends on your state of residence, and any contributions grow tax-free so long as they are used for qualified education expenses.
4. Contribute to a cause you care about – If you don’t have a charitable organization that you want to support directly in 2020, you can open a Donor Advised Fund to make the charitable contribution this year, allowing you to gift to your favorite charitable organization later. You receive the tax deduction in the year of contribution to the Donor Fund, and this also allows your funds to stay invested, and potentially grow, so that you can give away greater amounts in the future.
5. Think about financial gifts to individuals – While gifts to individuals are not tax deductible, they are a great way to lower your overall estate and reduce the amount that is potentially subject to estate taxes in the future. Cumulative gifts to an individual up to $15,000 [$30,000 for a married couple filing jointly in 2020] are under the annual gift exclusion and do not require a gift tax return to be filed. If you give more than $15,000 to one person, you may have to file a gift tax return and would encourage you to consult with your tax professional.

For some individuals it makes sense to accelerate their tax deductions in 2020, and for others it may make sense to delay their deductions until 2021. One of the things we do at Hill Investment Group is work with our clients’ clients’ CPAs and estate attorneys to ensure they are maximizing not only their portfolio with us, but their complete financial picture. Feel free to give us a call to discuss.