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Bitcoin Products and Pyramid Schemes

Pyramid schemes share one overriding characteristic, according to Debra Valentine, former general counsel of the Federal Trade Commission (FTC): They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Bitcoin products and pyramid scheme share this description, according to Jonathan Harris. He offers a cautionary view in a recent opinion piece for the CFA Institute.

“Bitcoin is too inefficient to be a currency. Certainly, no government has any plans to use it as one,” he wrote. Harris is a chartered financial analyst and vice president, manager of nonretail credit analytics for TD-Bank. “Thus, the sole way most promoters will realize value from their bitcoin holdings is through new entrants into the market.”

Some proponents of bitcoin equate it to investing in gold. This may be a reasonable analogy. Still, even in the best case scenario, both bitcoin and gold share the characteristics of being volatile investments with poor long-term returns. While gold has other uses (e.g. jewelry or art), Harris points out that bitcoin does not. Furthermore, after the supply of new bitcoin buyers is exhausted, final investors will find themselves with assets that decline in value as early investors sell off.

“If it looks like a pyramid scheme and sounds like a pyramid scheme, we should treat it like a pyramid scheme until proven otherwise,” Harris stresses.

Creating Diversified and Balanced Portfolios

At Perspective, our time-tested investment strategy focuses on building a well-diversified portfolio of stocks and other securities. The Perspective Investment Committee meets quarterly to review and fine-tune the list of funds our advisors utilize to build balanced client portfolios. It is part of the firm’s strategic process. Funds are selected based on several criteria. Considerations include factors such as cost and the fund manager’s tenure. It also includes overall performance and risk vs. return (both of which we compare to peer funds and other benchmarks).

For Harris’ full article on the CFA Institute website, click here.

By |January 7th, 2019|Current Affairs, Investing|

New Pass-Through Income Tax-Exemption

Learn about the new pass-through income tax-exemption.People who claim their business income on their individual income tax forms (often referred to as “pass-through” income) may now be able to exempt 20 percent of that income from federal taxes. This new pass-through income tax-exemption could add up to significant tax savings.

High-earning professionals like accountants, lawyers and consultants may encounter some eligibility rules; for example, they don’t qualify if income exceeds $207,500 for an individual or $405,000 for a married couple filing jointly. However, single filers with total taxable income of less than $157,000 in 2018 (or $315,000 for joint filers) can take advantage of the pass-through tax break regardless of their line of work. That includes people with side jobs and home-based businesses, too.

Read this Consumer Reports article and talk with your tax advisor if you’d like to learn more about reducing your 2018 taxes.

By |December 17th, 2018|Taxes|

End of Year Checklist

Lupe Camargo offers a financial end of year checklist for review.Where has the year gone? Throughout the year we have several ways to help lower our tax bill and save more money. Although most of the year is behind us, there is still time to take advantage of some things that can help put you ahead. Take a minute to review this end of year checklist.

Maximize retirement account contributions.

How much more can you save before year-end in your IRA or company retirement account? Traditional and Roth IRAs have a limit of $5,500 with catch-up contributions of $1000 for those over age 50. The 401K contribution limit is $18,500 with a catch-up contribution of $5,500. These extra contributions may push you into a lower tax bracket, so it’s worth evaluating.

Don’t miss your Required Minimum Distribution (RMD).

At age 70 ½ you are required to withdraw at least the required minimum distribution from your IRA or face a steep penalty. Remember the option of doing a Charitable IRA Rollover. This allows individuals to use their RMDs to make a direct transfer of up to $100,000 per year to qualified charities without incurring federal income taxes. Remember though, because taxes are not taken out when you complete a Charitable IRA Rollover, these funds may not be listed on your tax return as a charitable contribution.

Spend your Flexible Spending Account (FSA) money.

Is there money left in your company FSA? Use it before the end of the year, or lose it. Buy those glasses, or get the dental work done, before the money disappears.

Capitalize on tax-loss harvesting opportunities.

At Perspective, we regularly review portfolios for tax-loss harvesting opportunities. This helps to offset taxable capital gains you have had throughout the year by selling investments that have lost value.

Review your spending.

Are you confident you know where your money is going? Begin the process of reviewing your statements and identifying opportunities to save more. By focusing on what you can control, you can help kick off 2019 in the right direction.

By |December 3rd, 2018|Financial Planning|

Maintaining Perspective

Patrick Eng addresses maintaining perspective.When the Dow Jones Industrial Average climbed above 22,000 in August 2017 (an all-time high) I wrote an article titled “Managing Expectations.” In early October 2018, the Dow reached a record-breaking 26,800 points. In the four weeks that followed, it dropped by 2,000 points. By mid-November, the it was back near 26,000. As I write today, and the Dow is hovering at roughly 25,000, the new mantra is “maintaining perspective.”

After seeing these numbers, I felt compelled to share once again the points from my summer 2017 article. As we traverse the landscape of volatile financial markets – experiencing both the euphoric highs and the inevitable declines – it’s important to remember the following:

  • Stay diversified; even if it doesn’t feel right, history shows this strategy works.
  • Avoid jumping in and out of the market; it is virtually impossible to time market movement.
  • Invest regularly, in both good times and in bad times; the potential to buy investments at discount prices can only happen if you are involved when things look the bleakest.
  • Market corrections, no matter how painful, are a natural part of the economic cycle.

These long-term fundamental principles of investing will serve you well and set you up for long-term investment success. It also helps to stay in communication with your advisor as changes take place in your life or if you just want to get some perspective on market movement.  An important role we play in our clients’ lives is being an “emotional surge protector” when unavoidable declines take place.

By |November 19th, 2018|Current Affairs, Investing, Uncategorized|