Displaying items by tag: portfolio

With upcoming tax changes in 2026, now is an opportune time to explore strategies for maximizing tax alpha in investment portfolios, and here are four strategies recommended by JPMorgan: 

1. One key approach is asset location optimization, ensuring tax-inefficient investments are placed in tax-advantaged accounts like IRAs or 401(k)s, while assets benefiting from long-term capital gains are held in taxable accounts. 
2. Tax-aware trading—including active tax-loss harvesting and tax-efficient portfolio transitions—can further enhance after-tax returns. 
3. Charitable giving strategies, such as donating appreciated securities to donor-advised funds or making qualified charitable distributions from IRAs, offer additional tax benefits. 
4. Wealth transfer techniques, like grantor retained annuity trusts (GRATs), can help pass on assets with minimal tax implications. 

Finsum: Using a line of credit can provide liquidity without forcing premature, tax-inefficient asset sales.

The retiring type?

Yeah, well, not if you’re the retiree who created the Retiree Portfolio Model – an Excel spreadsheet that can be downloaded -- for retirees, according to bobleheads.org.

Seems as if Forum member BigFoot48, who developed the model, was onto something.

Homing in on a retiree and the lives of their spouse’s, it models their most common financial aspects. That includes pensions, Social Security benefits and living expenses. With that data, a model of their accounts over a period of one to 40 years is used.

With a feature of this model, the user can compare their normal portfolio results with that one includes alternative choices, like performing Roth IRA conversions and selecting alternative Social Security starting ages and benefits, not to mention buying a Single Premium Immediate Annuity.

And talk about visibility. Formulas and results – and that means all of them – can be viewed completely – not to mention the fact that they can be unprotected; paving the way to user customization.

Meantime, monitor the markets, you say? 

Um, among a good chunk of advisors, apparently not.

According to capitalgroup.com, in the U.S., some of the highest growth advisors are 40% more likely to leverage model portfolios in their practice. And that’s at the cost of monitoring the markets, into which they’re sinking less time.

Perfecto. A perfect 10.

And that’s not to mention the “perfect investment?”, which, in all likelihood, you’d like to see manifest in, among other things, high returns and low risk. While such an investment – despite the development of all; sorts of methods and strategies – might be all but unattainable, modern portfolio strategy or MPT’s come as close as any, according to investopdia.com.

Looking at the expected risk and return of one specific stock falls short of the mark, according to MPT. Rather, sock your money in more than one; that way, an investor can reap the benefits of diversity. That includes shoring back the risk of the portfolio.

Probably not surprisingly, like pretty much everything else, MPT has its limits, according to yourwealth.com. Its perceived positives aside, in the clutches of economic downturns, certain aspects of MPT could be placed under a microscope. Not to mention the fact of when various asset classes don’t necessarily balance one another.

Nevertheless, potentially, MPT can smooth out the returns of a portfolio and put a lid on volatility while, perhaps, dispending earnings down the road.

Volatility’s not your game? You’re sure now?

Well then, to tamp down volatility in a portfolio – or generate steady income -- fixed income assets are popular alternatives to dividend stocks, according to money-usnews.com. And the assets pay out a defined stream of income.

It typically assumes the form of bonds, which, essentially, are IOUs investors can reach into their wallet for from a number of sources, like, for example, governments and corporations.

That said, bond investing isn’t as easy as one-two-….you get the ides. Instead, since individual bonds are traded over the counter and mucho calculation is required to price correctly, it can be complex.

"Given the higher risks and costs associated with portfolios of individual bonds, and the time they take to manage, most investors are better served by low-cost mutual funds and exchange-traded funds, or ETFs," said Chris Tidmore, senior manager at Vanguard's Investment Advisory Research Center in Wayne, Pennsylvania. "This is particularly true in the case of municipal and corporate bonds, which are less liquid and harder to purchase than Treasury bonds."

Meantime, this for U.S. investors in exchange traded funds: you might want to mull over taking the splash into medium-term fixed income ETFs. according to marketwatch.com. Why, you might ask? They could not only dispense “attractive carry,” they also could translate into a “buffer” against the volatile returns in the U.S. equity market. That’s in light of the fact that the Fed’s path toward interest rate hiking’s immersed in a lack of clarity, Gargi Chaudhuri, BlackRock’s head of iShares investment strategy for the Americas, said.

In an article for the Institute for Management Development, Maude Lavanchy discusses the opportunities and risks of venture capital (VC). It’s not surprising that interest in alternative investments has increased following 2022 when both stocks and bonds posted negative, double-digit returns.

As a result, institutions and asset managers are increasing the amount that they allocate to alternatives and specifically, venture capital. Typically, venture funds focus on early-stage, high-growth companies. This obviously comes with considerable risk but also the potential to generate significant returns. These funds do tend to have higher costs and fees with much less liquidity 

Historically, VC has outperformed stocks and bonds. Between 1987 and 2022, VC had an average return of 59% compared to 15.9% for the S&P 500 and 6.8% for Treasuries. Two caveats are that venture returns tend to be quite volatile, and returns will be lower as more capital enters the ecosystem, leading to higher valuations and more generous terms for startups.

So, VC is most appropriate for investors that have a long time horizon and are OK with the lack of liquidity in exchange for the increased diversification and returns.

Finsum: VC is seeing renewed interest in 2023 due to its outperformance relative to stocks and bonds in addition to diversification benefits.