What is the biggest reason to save and invest for college or retirement?
- The short answer is inflation, when prices increase for the same product or service compared to a few years ago. For example, the Toyota Prius had a price tag of $17k when it first came out, and now a brand-new 2024 model is selling for above $35k.
- CD – one of the standard products at the bank, could be named a “Certificate of Depreciation” instead of a “Certificate of Deposit” because the rate of CD offered by a bank is usually the rate of ongoing inflation. For example, if a CD is offered at 5%, the inflation is about 5%.
My situation is unique and different from others. How do you help me?
- As your investment adviser, we understand that each client is unique. That’s why we employ a personalized approach, starting with the Investment Policy Statement (IPS). This document, considered one of the most important in investment management, is tailored to your risk profile, asset allocation, and measurable goals, ensuring we’re always aligned with your needs.
- Generally speaking, the younger you are, the more risk you can take. The older you are, the less risk you can take. However, a client’s risk profile and suitability must be determined case-by-case.
Where is my money kept and invested?
- Your money is with a custodian bank, a business where the money is kept safe and invested professionally. The two biggest ones are Schwab and Fidelity. We also see Robinhood and Altruist come from a mobile-friendly perspective.
- Regardless of your decision about which to use, the most important things to consider are: (1) dividend reinvestment must be accounted for correctly. (2) Statements must be available when we need them. (3) Customer service must be available when we are on the phone.
- Generally speaking, a custodian bank should provide us with monthly, quarterly, and year-end statements for your investment accounts with a beginning and ending balance. In addition to these statements, trade confirmation, transfer history, activity history, and tax forms such as 1099 composite should be available if needed.
When my money is invested, how does it grow?
- There are only three types of investment income: Dividend, Interest, and Capital Gains. Many types of investment products exist, but investment income is straightforward. Generally speaking, stocks (may) pay dividends, bonds pay interest, and capital gain/loss will be realized when you buy and sell.
- Capital gain is also further divided into Long-term and Short-term capital gain. Long-term capital gains are taxed similarly to qualified dividends, while short-term capital gains are taxed at the investor’s income bracket.
Why can I do it myself, and why do we need to hire you to manage our portfolio?
- Good portfolio management comes from good practice standards and efficient operational procedures. It requires knowledge of investment products and market conditions, accurate trading, regular monitoring, and on-time account maintenance.
- Between 2017 and 2023, I worked as an investment accountant for private and public Universities in California, performing investment/endowment accounting for hundreds of millions of dollars. I was trained to read and prepare financial statements, recognize and differentiate investment income, analyze and provide feedback on investment activities and balances between quarter ends.
- My first stock was ATT (ticker T) back in 2009. Since then, I have bought and sold individual stocks (US and foreign), mutual funds, ETFs, and US Treasury saving bonds. I have also researched corporate bonds, brokered CDs, commercial paper, and preferred stocks. On the other hand, I have been to Omaha, three times to learn what kind of environment makes Warren Buffett the best long-term value investor. I’m also a big fan of attending Berkshire’s annual shareholder meeting via Yahoo Finance.
Why do you have an MBA, and how can that degree help me?
- Business matters, and industry matters. Companies in the same industry share similar financial ratios and enjoy similar growth cycles. MBAs are usually trained more extensively in almost all business perspectives. For example, some industries, such as public utility companies, are regulated more than others, and some businesses, such as big techs, are frequently subject to antitrust litigation. Some industries, such as automobile manufacturers, are naturally hard to make money by selling products.
- Understanding the economic cycle and the supply-and-demand relationship is crucial in making informed investment decisions. As your investment advisor, I will guide you through these factors and help you make decisions that align with the current market conditions.
- Accounting is the language of business. To fully understand financial statements, one must know how to read numbers, what they mean by earnings, price/earnings ratio (p/e ratio), and return on equity (ROE). What are the balance sheet, income statement, cash flow, and shareholder equity statements? What am I looking at? Those questions must be answered before a rational investment decision is made.
Why do my employer sponsor benefits matter, and why that’s usually a good place to start with?
- It matters because it is part of your overall compensation package. It is usually a good place to start reviewing your choice because the underlying investment option differs; therefore, the investment result can vary over time.
- As your investment adviser, I will read and review what investment options your employer or investment solution provider offers and help you make an informed decision. For example, 401A, 401K, 403B, and 457B are employer-sponsored retirement benefits. HSA, FSA-Health Care, and FSA-Depedent Care are employer-sponsored health and dependent care benefits.
- Stock options like Restricted Stock Units (RSU) have advantages and disadvantages. For individuals or families who work for big techs in the Bay Area, partnering with someone who knows how RSU works can be a good choice because this partnership will save you time and money.
Why is education so important, and what are the best ways to save and invest for a college education?
- College tuition is expensive. It often takes parents’ lifelong savings to buy the future for their children. However, a well-researched, well-defined, and carefully executed college savings plan can significantly increase the chance of success for your children.
- As a father of three, I have spent hours researching the pros and cons of different investment options and comparing plans between different states for our kids. As your investment adviser, I’m happy to share all my experience and discuss details of different products, such as 529 plans and ESA accounts.
- There are other ways to pay for college, and I can share many different cases with you so you can be prepared.
