Financial News

Why is this Topic Important to Wealth Managers? This blogticle represents part two a special series regarding advanced investing with ETFs. Recently there has been much discussion in the marketplace on the use of these tools and thus we present this topic for wealth managers who may consider these investment vehicles for their clients.

The saying goes that “the best way to gain money is to avoid losing it.” It is also said that “nothing is certain in life except death and taxes.” If there is truth to either of the above kernels of wisdom, a logical conclusion is that the most assured way to avoid losing money is to minimize, defer, and eliminate taxation to the greatest extent possible. This article begins a 3- part article series that will briefly outline some of the most common and effective means of limiting the over-taxation of the individual investor’s portfolio. The techniques described here will be most beneficially applied if diligently overseen and executed through a competent financial planner and portfolio manager.

Today’s blogticle concludes our 3 part series on tax efficient investment opportunities. Please see the two previous days coverage for the full story.

This article represents part 2 of 3 in this series. Please see yesterday’s post as well as tomorrow’s for the full article.

If you are a professional in the investment management or economics fields, your entire system of decision making and the basis of everything you do in your workday may be wrong. While the following discussion may seem purely academic, it could actually have far-reaching practical implications for your personal and professional livelihood.

The two years preceding 2010 have resulted in a great deal of criticism of the ideas of rational economic actors and the “Efficient Markets Hypothesis” (EMH), the latter of which attempts to describe the pricing of securities markets. While an in-depth discussion of EMH and its validity is beyond the scope of this article, it is worthwhile to consider the antagonistic viewpoint on this subject, which states that markets are largely inefficient, and by extension means that it is possible for an investment portfolio manager to consistently beat the markets in terms of portfolio risk/return performance based on skill (which is contrary to EMH). But rather than make an absolute judgment on whether markets are 100% efficient or 100% inefficient, we can alternatively make the assumption that markets are sometimes “efficient” and are other times “inefficient.” If we are to take this latter stance, then how should portfolio managers best act for their clients?

It has been stated by many of the most influential minds in economics that “There is no such thing as a free lunch.” Despite this profound statement, Modern Portfolio Theory (MPT) has been credited by some with identifying the only known “free lunch” in economics.

In our last issue of the Compass & Crosshairs, the underlying theoretical tenets of what we will refer to as the “Global Development Systems” method of investment portfolio management were discussed in some detail. The following assertions were made and topics discussed (See the July ’09 issue for further information):

With the 2007-2009 financial system crisis and economic downturn as an impetus, some portfolio management professionals have begun to ascertain that Modern Portfolio Theory, as it has traditionally been applied, is due for an overhaul. In our last issue of the Compass & Crosshairs, in which we explored some of the various methods that might be applied under a “Multi-Contingency Investing” methodology, we briefly made mention of a Global Development Perspective Strategic Asset Allocation philosophy.

In our last two issues of the Compass & Crosshairs, we introduced the concept of multi-contingency investing and why the current financial/economic crisis has made this a new practice management imperative for financial planners, CPAs that provide financial planning services, and investment managers.