I recently finished reading through 150 pages of compliance materials in order to sign my annual attestation. Yes, it’s required. And yes, I read it all. I even wrote some notes to send to the chief compliance officer offering feedback. It was rather exhausting.

Each compliance requirement was enacted with good intentions, but nobody has stopped to look at the big picture for a while. As my wife tells me, if everything is a priority, nothing is a priority. She might be onto something. On the days when I read 50+ pages of compliance, my brain was mush.

The same principle carries over to portfolio construction. I would venture to say that most portfolios are constructed with a cohesive purpose at first. The portfolio ought to change over time, but are changes made in the context of the overall portfolio? Or are you just adding shiny objects to an ever-growing jumbled mess? It’s human nature to gravitate towards the latter.

Here’s an example. The past few years, fund companies have been launching products that offer a less risky stock market experience. They do it in all sorts of different ways. Some use options to hedge. Some buy stocks that are historically less volatile. You can do either or both of those about a dozen different ways. Do you need a dozen different funds like that? Of course not. You might not even need one, depending on what else you have in your portfolio. It’s my job to figure out if any of them fit.

When we’re evaluating new funds, we want to be confident that they are filling in a hole or emphasizing a legitimately different opportunity, not just adding to an ever-growing mess of holdings. In doing so, we are okay passing on interesting opportunities. Interesting doesn’t mean it materially changes your portfolio.

If you look at your holdings and you can’t make sense of them, we’re here to help. We have software to analyze your current positioning, and we can give you ideas for optimizing it in a tax-efficient manner. Reach out if you’re interested.

About the Author: John O’Connor

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2025. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

It’s easy to see how sustained success can cause overconfidence. Let’s say you live in a country where the stock market index has trounced the rest of the world for two decades. I’m talking left everything in the dust, destroyed the competition, gave no mercy performance. Your country’s stock market index is up 17% per year for 20 years. The rest of the world is up a measly 7% per year.

You’d be hearing all sorts of articles of how your economy is more conducive to growth, your companies innovate better than anyone else, your management philosophy and corporate governance are superior. Your stocks dominate emerging industries. It doesn’t look like anything can stop you.

If you lived in Japan in 1989, it would be easy to see how you might throw caution to the wind and go all in on Japanese stocks. 20 years of superior performance is enough to prove sustained success, right?

Wrong. The party ended shortly thereafter. The Nikkei (Japanese) stock index lost 38% of its value in 1990. It didn’t hit a new high again until 2024. Meanwhile the rest of the world’s stocks earned 9% per year for those 24 years (MSCI World ex-Japan Index (JPY) 1/1/1990-2/1/2024).

History doesn’t repeat itself, but it often rhymes. We’re living in a world where U.S. stocks have destroyed the rest of the world for 15-20 years. Our tech companies have clobbered the competition. Our capital markets are the envy of the world.

Where do we go from here? I’m not going to say it can’t continue. I will say we’re not likely to see a repeat of the last 15-20 years. Size your investments appropriately. Global diversification is your friend.

About the Author: John O’Connor

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2024. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

I’m going to share an unpopular opinion – the vast majority of my clients do not need an alternatives fund. Wall Street is awash in new funds launched in the past decade (many in the past five years) that offer to bring exclusive investment opportunities like private credit, private equity, and private real estate to the investing masses. I’m not interested. Here are a few reasons why:

1. Most of my clients are retired and need to live on their money. They can’t afford to lock up a certain percentage that may not be accessible for years. Yes, I know many new alternatives funds offer regular liquidity, but I’m not convinced that will be available in a crisis. Low correlation doesn’t matter if I can’t get my money out.
2. The fees are too high. The least expensive options I’ve seen start with fees over 1%. They can easily be double or triple that including performance fees. That’s 10x-30x more than our average fund expense ratio today. I can’t fathom returns that would make up for that.
3. Returns in private markets vary widely. If you’re not investing with the most skilled managers, your performance will suffer. Explain to me why the best managers want to bother with thousands of individuals instead of a handful of the biggest institutions (endowments/foundations). I suspect that they don’t. I refuse to join any club that will have me as a member.

I understand why the fund companies want to offer these new funds. They are a sexy story, and they generate a lot of revenue. I can’t figure out why I should want to buy them. Until I do, I’ll leave them for others.

About the Author: John O’Connor

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2024. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

We are now in the thick of tax season. You should have most of your documents. Now you’d better get them to your CPA so that they can meet the April 15th deadline. With that in mind, I have a few quick reminders for you today:

• 2024 IRA and Roth IRA contributions are due by April 15th. If you’re close to an income level limiting your contribution, it often makes sense to wait until you prepare your return to be sure you qualify. Just don’t forget to make the contribution.
• Qualified Charitable Distributions (QCDs) are a bit of mess when it comes to documentation. QCDs are a rapidly growing way to maximize your charitable giving by donating directly from your IRA. They count towards your required minimum distribution, but do not count as taxable income. The potential problem is the 1099R reports from the custodian do not specify that you made a QCD. You need to list it for your CPA to make sure you get credit for it. (Side note – We have software that tracks this and provide our clients with a statement showing all their QCDs.)
• Take the time to review your tax return when it’s complete. In fact, I’d love to help you do this. Reviewing how your taxes came out is the best way to see if any adjustments should be made for 2025. In addition to scanning for errors (we found at least two that required amended returns for 2023), we look for ways to achieve tax savings by smoothing out your income over your lifetime. That includes strategies to defer income in some years (IRA/HSA contributions, donor advised funds, QCDs) and recognizing income in other years (Roth conversions and/or IRA distributions). Taking a multi-year approach can produce serious savings over your lifetime.
• Remember that there are many proposals to change the tax code in 2025. We don’t know if they will be enacted for 2025 or 2026, but we are confident there will be some changes. A wait and see approach is a good idea for the first half of 2025.

About the Author: John O’Connor

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2024. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

There was a bipartisan law passed late last year that repealed the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). That jargon describes two laws that reduced or eliminated Social Security benefits for retirees in certain jobs that paid into a separate pension system and did not pay into Social Security – think police officers, firefighters, other government jobs, some clergy, etc. The repeal paves the way for some retirees to receive substantially more benefits.

I know people read less over the holiday season because we are all busy doing other things (as we should be). Now that we’re all solidly back into our routines, I want to make sure you didn’t miss this important update.

The biggest change is for public sector employees whose benefits were previously eliminated by the Government Pension Offset. They are now entitled to spousal benefits and survivor benefits just like anybody else. That can mean hundreds of thousands of dollars over a typical retirement for someone in their 60s.

If you have any questions about whether this affects you, reach out to me. I’m happy to help you dive through the details.

About the Author: John O’Connor

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2024. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.