Author Archives: Daniel Cohen

Same Career, Very Different Results

By Daniel Cohen

I have advised many corporate executives at various stages of their careers. Some make all the right decisions related to their personal financial planning and consequently accumulate significant wealth. Some will avoid making important decisions or forego available corporate benefits and miss out on some great opportunities to save and invest.

Corporate benefits come in the form of a match, bonus contribution to a plan, or a discount on the cost of an investment.  Other benefits can include a current or future tax savings. Working with a Certified Financial Planner experienced in corporate benefits and tax strategies serves executives well, especially those who work for publicly traded companies and firms that offer equity participation to employees.

Imagine that Jane goes to work out of college and takes the time to educate herself on personal financial planning and wants to maximize her financial position.  At the same time, John goes to work but does not worry about his financial plan and figures he isn’t making enough yet give his finances much thought or planning. Jane understands time value of money, the power of compounding and the benefits of dollar cost averaging. She learns that stocks have outperformed other investments over long-periods of time despite the periodic corrections and daily volatility. In addition, Jane recognizes that taxes are now one of her biggest expenses, and she needs to consider the impact taxes have on her financial life. John figures he will worry about these things later in life after he is more established in his career.

A Tale of Two Professionals

Jane and John both work in similar positions at the same publicly traded company which offers all employees a 401(k) plan with a 4% company match. The plan allows for traditional pre-tax contributions or Roth contributions. It also allows for post-tax contributions beyond the annual limits of $19,500 for those under age 50 and $26,000 for those over age 50. This plan even allows for in-plan conversions from the pre-tax or post-tax account to the Roth account. Additionally, the company offers a Health Savings Account. On top of that, the firm offers an Employee Stock Purchase Plan with a 15% discount on the price of the company shares. Ironically, so many options can overwhelm people into putting off decisions or doing nothing.

Jane knows that if she doesn’t contribute to the 401(k) she doesn’t get the match. If the average college graduate makes $50,000 annually and the invested income grows 5% per year, the match in a 401(k) can add up to a significant sum over a 30 year career. If the ongoing match in the retirement plan earns 7%, that account alone could compound to about $350,000 in 30 years starting with $50,000 of earnings. Of course, that wage income would likely increase over the years with raises and promotions.

John heard about the match but isn’t worrying about retirement at his young age. If he waits five years and then starts contributing to get the match, the compounded value of his account would be about $60,000 less than Jane’s at the same time. Jane’s decision to save 5% of her income from day one on the job, provided her with significantly more money in savings.

Participating in an Employee Stock Purchase Plan, ESPP, is similar to the 401(k) decision just described. If you participate, you get the additional savings. If you don’t, you lose that opportunity.

A little now can mean a lot later!

I’ve advised many people with access to ESPP plans and fewer take advantage of this benefit than do the 401(k). The benefit amount is generally less than a 401(k) match at lower income levels but an investment in an ESPP does not need to be deferred for 30 or more years until retirement. If Jane and John’s employer offers a 15% discount on their shares and allows employees to invest up to 10% of their pay into the plan, it would provide an initial $750 bonus assuming the share price does not change during the year. Jane gladly participates to get this bonus but John won’t bother for that small amount. What John doesn’t realize is this $750 discount bonus earning 7% and increasing with pay raises could grow to well over $132,000 if compounded during a 30 year career.

Share prices can go down but if they appreciate during the year, the ESPP gain would be bigger. ESPPs only require employees to hold the shares for six month or a year so young employees who might need cash for something down the road can participate without tying up the funds too long.

We see by these examples that making informed decisions now can make a big difference over the course of a long-term period such as a career span. There are many other investment, tax strategies and savings opportunities that should be explored to create the optimal financial plan.

Unravelling Complexities

Some savings plans depend on the benefits offered by an employer while many others are unrelated. For employees, it’s not enough just to participate in their company 401(k). Employers’ savings plans often have dozens of investment choices within the plan that should be strategically chosen.

Someone investing in stock funds will likely accumulate more than someone investing in stable value funds over a 30-year career. Then, there are tax strategies that need careful consideration. Sometimes paying taxes on money contributed to a plan now rather than paying them later can allow for tax-free compounding that can have a highly positive impact in retirement. Just as eating right should be a healthy lifestyle decision, participating in available savings plans and investment opportunities is essential to long term financial health.

The ideal financial plan starts as early as possible. Some young people even start saving money in tax advantaged accounts from summer jobs earnings and allow those contributions to compound over many decades. Courses on financial planning can be greatly beneficial to young investors, and seeking the advice of a Certified Financial Planner is highly recommended.

This article’s story, along with its characters Jane and John, are fictional. However, the mistakes and lack of planning represented in John’s case are all too common. As a Certified Financial Planner, I see it all the time. Our job is to help our clients plan a better future. Knowing everything about their financial history and present situation enables us to optimize their investments and savings plans.

After 25 years of financial planning experience and seeing repeated patterns, we can share the knowledge with others facing similar situations. Better financial plans stem from knowing the common mistakes to avoid and the time-tested principles to embrace.

Strong Companies We Can Learn From

By Daniel Cohen

There are many ways to invest for the long-term. Index funds are popular and offer a good way to easily diversify your money either into the broad market or favored sectors. Mutual funds also provide a good way to invest on a regular basis, and most retirement plans that allow for payroll deductions use mutual funds for employee contributions.

Some brokers sell packaged investment products like variable annuities, index annuities, structured notes, and other investment trusts. These instruments provide an alternative way to gain exposure to the markets, often with a guaranteed minimum return or principal protection. However, these alternatives have a high cost of ownership.

Underlying all these different ways to invest are the companies that make up the publicly traded markets. Many successful investors forgo index funds, mutual funds, and the alternative investments and instead purchase shares of leading companies directly. Through proper planning, they build a diversified, tax-efficient portfolio to achieve their financial goals.

What makes a company worth investing in? How do we determine winners from losers? Some companies seem to be winners one day and losers the next. There is no formula that works all the time as even the best money managers may sometimes find poor performers in their portfolio.

Understanding the Big Picture

If your goal is to own a portfolio of great long-term positions, then don’t focus too much on short term price movements. The markets are volatile much of the time, and the price of any company’s shares fluctuate daily. Much of the movement has nothing to do with the fundamentals of that company. I always advise not to make frequent trading decisions based on short term movements of the market, and not to sell positions due to short term underperformance relative to the market.

At times, some sectors go out of favor but if you own a leader in that sector you may be best off holding through that market cycle. For example, banks underperformed for a few years and many investors sold positions in that sector and missed out on the recent strong performance. The same thing happened recently in the energy sector. Some investors moved money out of energy stocks but the companies in that group have outperformed the market as energy prices rebounded this year.

The Fundamental Indicators

Of course, fundamentals should be a primary consideration when investing in a company. There is plenty of data available about the financial history of public companies including dividends paid out. Growth of revenue and profits are important considerations along with a growing stream of dividends. Growing dividends over a long period of time tends to indicate financial strength in a company. The company’s products or services should be adaptable and expanding into the foreseeable future.

Perhaps most importantly, the company also needs a strong management team to operate efficiently and anticipate changes in their industry so they can adapt and remain a leader. While this last quality is among the most crucial, it’s also one of the most difficult to identify.

Follow the Leaders

There are many great companies to invest in that have the financial history and strong management to execute on their business plans and also been able to adapt to changes in their industry. Disney, Microsoft, and NextEra are three examples of companies that have adapted well to changes and have rewarded their shareholders handsomely.

Everyone knows the Disney brand and millions of people around the world visit their theme parks and watch their movies. Many would have thought it would have been best for the company to stick to their formula of slowly expanding their parks by adding attractions and bringing out new movies each year.  But, fifteen years ago, management started acquiring media properties starting with Pixar Animation Studios in 2006, Marvel Entertainment in 2009, and Lucasfilm in 2012.

In strategically managing its acquisitions, Disney has cultivated and developed a good deal more popular entertainment cultivated from all those brands under ownership. Additionally, Disney+ launched last year to offer unlimited access to Disney entertainment, and subscriptions have outpaced expectations by a wide margin. This company has clearly adapted well over a long period of time to changing market conditions and is leading its industry.

Adapting to Trends and Technologies 

Microsoft is also a company known all over the world with its software being essential to personal and business computers. However, for many years after growing significantly in the 1980s and 1990s, the companies stock price hardly moved for 15 years. Though it continued to be the market leader in its industry, Microsoft was considered old technology and from the year 2000 until 2015, the stock did not gain. However, patient investors would have received a regular dividend starting in 2003 which was increased on a regular basis. Since 2015, the stock has multiplied almost five-fold and the dividend continues to grow.

Microsoft’s management invested in cloud infrastructure to complement its legacy business and has also developed and acquired businesses in gaming. The Microsoft of today is clearly a technology industry leader. Recent investors have been rewarded and so have long-term investors, even factoring the years of no price appreciation.

NextEra Energy is a great example of an old industry leader that was able to reinvent itself to the changing dynamics of its industry and the overall market. Florida Power and Light was the leading utility in the state when I began my career there. I bought shares of the company for the stable dividend it provided with modest growth. Utilities historically provided above average yields with less volatility than the market and traditionally were suitable investments for widows and orphans for their income and stability. However, things change.

Florida Power and Light became NextEra Energy and invested in renewable energy. They are now a major generator of power from wind and solar assets. Management anticipated changes and executed well on their strategy. The company has been among the top performing utilities and is owned in many clean energy portfolios even though they still generate much revenue from their legacy regulated utility business. Long-term owners of the stock have been rewarded with both share price gains and growing dividends.

There are countless other examples of high performing companies in the market that share the basic fundamentals of performance history, leading products & services, market adaptability and strong management teams. It makes sense to learn from them!

What Experience Can Tell Us

Despite all we know about what makes companies perform and generate investment returns, some investors try to get a step ahead of the markets and anticipate gains in specific stocks or industries. Rather than making long-term investments, they trade frequently, and studies show that more often than not, performance suffers.

Predicting the market’s near-term future is almost always a dubious objective. Looking only at the current snapshot of a company’s stock position while ignoring it’s history, management team and other influential factors, provides an incomplete investment picture.

Successful investment planning, or the lack of it, can make a profound difference in an individual’s or family’s future. For most people, financial planning is best done with the help of a trained, experienced and trusted financial planner.

The Security of your Personal Information at Cohen Investment Advisors

In an ongoing effort to keep our clients informed and aware of identity protection measures and cybersecurity guidelines, we are providing this circular article as a helpful reminder of the following information to help you keep your information secure.

We will NEVER:

  • Ask for Social Security Number (SSN) or other personally identifiable information via email
  • Ask for login credentials or passwords
  • Send you email from an address other than “…”
  • Accept trade instructions or fund transfer requests by email or voicemail – these must be verbally confirmed EVERY TIME
  • Ask for payment or account details via email (unless through encrypted service or eSignature form)
  • Send you an email requesting that you “verify” any personal information (unless through encrypted service or eSignature form)
    • If a message contains a hyperlink to another website, the purpose for the website will be included in the body of the email and you will NEVER be redirected to a site that asks you to verify any personal information

Use the Tools You Have to Protect Your Identity and Accounts

  • Monitor your accounts online; be aware of your balances and holdings
  • Be alert to “phishing” scams which seek to gain access to your personal information
  • Protect your login IDs and passwords; use a combination of letters, numbers and special characters for your passwords and change them at least every 90 days; do not carry them on you/in your wallet
  • Do not give your SSN or other personal information about yourself to anyone you do not know
  • Order copies of your credit report once a year to ensure accuracy
  • Choose to do business with companies you know are reputable, particularly online
  • When conducting business online, make sure it is a secure transaction (look for HTTPS in the address)
  • When using social media sites, NEVER publish personal information including telephone numbers, Social Security number, date of birth, email addresses, physical address, mother’s maiden name or other information that may be sensitive information to fraudsters or hints to passwords
  • Do not open email from unknown sources and use virus detection software

What to Do if You Believe You are a Victim of Fraud

  • Contact us immediately if you know or suspect your identity has been stolen or your account has been compromised; the phone number for our office is (603) 232-8350
  • File a police report and contact the three major credit reporting companies; the fraud unit numbers are:

Transunion – (800) 680-7289

Experian – (888) 397-3742

Equifax – (800) 525-6285

  • Keep records of your communications with authorities, including names, contact numbers and dates and times of the calls

“Phishing” – The Most Common Method Fraudsters Use to Steal Your Personal Information

How Not to Get Hooked by a “Phishing” Scam

Phishing is a high-tech scam that uses spam emails or pop-up messages to deceive you into disclosing investment account numbers, bank account information, Social Security number, passwords, or other sensitive information.

According to the Federal Trade Commission (FTC), phishers send an email or pop-up message that claims to be from a business or organization with which you already do business, such as your Internet Service Provider, investment adviser, bank, online payment service, or even a government agency. The message typically states that you must “update” or “validate” your account information, and it may additionally allude to dire consequences in the event you fail to respond (i.e., the closure or suspension of your account). The message then redirects you to a fraudulent website designed to look like a legitimate site for the organization; however, it is not. The purpose of the fraudulent site is to trick you into divulging your personal information so the operators can steal your identity, run up bills or commit crimes in your name.

The FTC, the nation’s consumer protection agency, suggests these tips to help you avoid getting hooked by a phishing scam:

  • If you get an email or pop-up message that asks for personal or financial information, do not reply or click on the link in the message. Legitimate companies don’t ask for this information via email. If you are concerned about your account, contact the organization in the email using a telephone number you know to be genuine, or open a new Internet browser session and type in the company’s correct website address. NEVER cut and paste the link in the message.
  • Do NOT email personal or financial information. Email is NOT a secure method of transmitting personal information. Protect your personal information at all costs and only divulge in person or by phone to an individual known or verified by you.
  • Review credit card and bank account statements routinely to determine whether there are any unauthorized charges. If your statement is late by more than a couple of days, call your credit card company or bank to confirm your billing address and account balances.
  • Use anti-virus and anti-malware software and keep your programs up to date. Some phishing emails contain software that can harm your computer or track your activities on the Internet without your knowledge. Antivirus software and a firewall can protect you from inadvertently accepting such unwanted files. A firewall helps make you invisible on the Internet and blocks all communications from unauthorized sources. It is especially important to run a firewall if you have a broadband connection. Always install routine updates to ensure your software is current to evolving schemes.
  • Be cautious about opening any attachment or downloading any files from emails you receive, regardless of who sent them.
  • Report suspicious activity to the FTC. If you receive an email phishing for information, forward it to If you believe you have been scammed, file a complaint at, and then visit the FTC’s Identity Theft website at to learn how to minimize your risk of damage from ID theft. Visit to learn other ways to avoid email scams and deal with deceptive spam. The FTC works on behalf of the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit or call toll-free, (877)-FTC-HELP ((877)-382-4357); TTY: (866)-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Stop the FIRE!


You may not have heard of the FIRE movement which became somewhat popular after the financial crisis of 2008. The FIRE (Financial Independence, Retire Early) movement appealed to some millennials at that time as they became disenfranchised by the lack of opportunities to earn a good income and were attracted to the idea of making lifestyle changes so they could retire young.

Combining simple living with saving a large percentage of income can be a recipe for success. However, as we are now finding out due to the mass shutdowns all over the world, the simple living plan can only work if a small minority of people practice it. Shutting down restaurants, theaters, sporting events, malls, and so much more, is causing economic damage that will derail many people’s financial plans including those following the simple living plan of the FIRE movement.

Forced FIRE

For good reasons that were based on medical data at the time,  governments around the world shut down travel and asked their citizens to shelter in place during the global pandemic. Immediately, successful restaurants had no customers, sold-out sporting events were cancelled, and malls shut their doors. People quickly adjusted to preparing meals at home, shopping online for necessities, and working from home.

From a purely practical standpoint, no one really needs to eat at restaurants when you can prepare meals at home and save the extra expense. Who needs to go to the mall when you can order what you need online with free shipping? Who needs to book pricey tickets to concerts or sporting events when there are so many online and cable entertainment choices right in your living room at minimal cost?

The hope is that the economy will return to where it was just months ago as businesses open and stay-at-home orders are lifted. Millions of people have lost their jobs and there is a severe contraction in the economy due to the measures taken to “flatten the curve.”  It will likely take many months and maybe even years to fully recover. Many businesses and jobs may never return.

Some have been fortunate to maintain their income during the shutdown, but their spending is greatly minimized. There have been no business lunches or dinners out. No weekend getaways or long-anticipated vacations. Personal training sessions, tennis lessons and salon appointments were cancelled.  No shopping was allowed other than for the necessities. No summer travel plans were made. And, no tickets were booked for baseball games. With or without earned income, everyone was forced to live a simple life and we’re all paying a price.

The Ripple Effect

As a nation, we are learning the importance of economic interdependence. All our spending and purchase activities cause ripples that run through the economy. This continuous commercial activity is vital to a functioning society. We depend on each other to preserve the society we’ve built and assure a good future for our kids and grandchildren.

My daughter had to miss out on Peppa Pig Live at the end of April.  She had a good day anyhow playing at home, but the venue lost out on the booking, the actors lost out on their income, the vendors lost out on their sales, and there was no gas consumed getting to the show. Attending a show affects the economy in so many ways.

While saving and investing for the future is always wise, extreme measures such as “saving every penny” or foregoing spending on desired things indefinitely to have a large nest egg later have a negative effect on economic recovery and growth. Government-mandated work stoppage and travel restrictions clearly take their toll. Conversely, people “living life” by taking trips, staying in hotels, eating out, going to shows and sporting events, attending religious services and shopping at malls and boutiques; these activities help everyone in the long run. The memories of graduation dinners out and trips to celebrate milestones are valuable beyond the cost incurred.

Ripples Grow into Waves

Each season, we go to see a Red Sox game. The tickets and parking are expensive, but the memory of taking two of my kids with their grandfather is worth it. Of course, by the second inning, the kids need hot dogs and other snacks, so we spend at the concession stands. Pictures are posted on Facebook, and I am sure that the company makes money in advertising sales on the data provided. While my two boys, me and Grampy are enjoying the game, my wife and two daughters are strolling around Boston and visiting stores. We all meet for dinner after the game. Overall, it is an expensive day. Can you sense the economic impact of one family on one day and extrapolate that to all of America? And, don’t forget about the sales taxes, meal tax, gas taxes, income taxes, and payroll taxes collected throughout the day.  How else would the government pay for all their spending?

Playing with FIRE 

To gain financial independence and retire early, you need to save enough to live on for the rest of your life. Those investments need to generate income and gains to be able to withdraw enough to live on each year and to grow to keep pace with inflation. The few followers of the FIRE movement who retired early, are faced with a major market correction with near zero interest rates. It will be hard for them to live on their investments for an extended period, and once out of the workforce, it is not always easy to step back in. I am sure many plans have had to be reconsidered in these unusual times.

Consumer spending fuels the American economy and has provided wonderful lifestyles for millions of people. It helps generate the tax revenues required to fund the government and provide safety nets and assistance programs that benefit millions of people. For a relatively short time, we have all been forced to live a simpler life. Some will be required to make changes to their lives, and some will choose to make changes. Most will probably want to go back to living the way they were accustomed only months ago.

Silver Linings

We are fortunate to have the freedom to make life choices. In good times, we can spend more and create lasting memories. In lean times, we can find happiness doing simpler things. Lots of successful people today realize there is no need to retire when they become financially independent unless they want to. So many people love the work they do and want to remain engaged in either paid or voluntary service. This is a very encouraging development with positive implications for individuals and the community.

Making Wise Decisions in Tough Times

Bear MarketInvestors with only a decade or less of experience in the markets had seen mostly good times until the end of February when that winning streak abruptly ended. After that, we’ve seen records set and mostly the types of records you wish you only would read about in history books. The market had its fastest slide ever to become a bear market, or 20% correction, in 20 days.  It usually takes over five months to reach that level. The market lost its first 10% in only six days which is another record.

During March we had the biggest one-day point drop in history of 2,997 points and the biggest one-day gain in history of 2,113 points. March was the worst month since 2008, the first quarter was the worst since 1987, and the volatility was extreme with the market being up or down more than 1% every day except one, which was the highest volatility ever recorded. Mixed into the month was one week of gains, the best since 1938 and a welcome relief.  Some will throw in the towel and vow to never invest again after a period like we just experienced. It would be better to learn from this time and become a better investor.

Recent History Gives Perspective

Having started as a financial planner in 1993, I have seen great times and very difficult times. From 1995 to 1999 the market gained 20% per year. From 2000 to 2003 the market had a loss of about 50%. From 2007 to 2009 the market had a loss greater than 50%. The latest decade did not have any correction of 20% or more and saw the market nearly triple in value. Through all this, an investment of $10,000 when my career began in 1993 would be worth over $90,000 at the end of March 2020 and this factors in the three bear markets we endured during this time. Anyone throwing in the towel during any of the bear markets including the recent one would not have earned the average annual gains of over 8.5% during this time by remaining invested through the ups and downs of the market.

You might ask, how do I remain calm and keep my clients focused on the long term when world events seem so uncertain and that uncertainty can at times bring extreme volatility to the markets?

At the core of client portfolios are companies that have long histories of paying dividends that are covered by their earnings and that are consistently increasing those payouts. Dividends are an important component of long-term performance, especially during difficult periods. It is comforting to be collecting those regular cash payments.

Why Dividends Matter

It’s important to study the balance sheet and income statement of a company as dividends can be discontinued at any time, but certain companies like Procter & Gamble, Johnson & Johnson, McDonalds, Coca-Cola, Home Depot, Verizon, AT&T, and Chevron have been paying dividends for at least a decade, each with increasing payouts every year. Proctor & Gamble has been paying annually increasing dividends for sixty-three years and just announced a dividend increase for 2020. Management of that company must feel bull marketconfident that diapers, personal care products, cleaning supplies, and their highly coveted toilet paper will continue to be bought even though the markets and the economy are suffering a most challenging time. I agree with their approach and have been investing in their shares throughout my career. Johnson & Johnson also announced an increase in their dividend this month to continue their fifty-seven year stretch of continuously increasing their annual payout.

Certain companies have been able to survive the test of time and continually reinvent themselves to offer the products that consumers want even as tastes and times change. Companies like these were holdings of mine back in 2000, and when we went through three tough years in the market, their dividends were always welcomed as they still are now. These stocks were also held through the Great Recession of 2008 and continue to be held today.

Owning a diversified mix of companies including consistent dividend payors makes it much easier to remain invested during challenging times. In conversations with clients that are nervous during times of market stress, I often list the companies we own and that alone can be comforting.

What About Index Funds?

The past decade saw a significant increase of investors buying the indexes. Vanguard was the biggest beneficiary as significant amounts of money were added to their S&P 500 Index Fund and other index funds they manage. When you own an index fund, you own a proportionate interest in every company in that index. By investing in your own managed portfolio of individual companies that are properly diversified, you retain much greater control.

We can purposely avoid taking positions in the very cyclical industries like airlines, autos, and cruise lines that took the biggest hit during the latest market correction. Companies in these industries have a poor history of consistent dividend payments and have had periodic bankruptcies which obviously affects performance. In the worst case, shareholders’ value could be wiped out. When owning an index fund rather than a portfolio of individual companies, it is too easy to become frustrated as your position will lose exactly what the markets are losing and you can’t choose to avoid certain higher risk companies or industry sectors as they are all part of the broad market index.

Former high growth companies like Apple, Starbucks, Visa, and Microsoft were originally owned primarily because they were rapidly expanding and increasing their revenues. At some point each one started paying dividends and has consistently raised their dividend each year since. These companies are a good addition to a portfolio to provide that steady income that is growing at a rapid pace along with the earnings of the business. Further, companies like Amazon, Alphabet, formerly named Google, and Facebook, all which do not pay any dividends but probably will in the future, may be good additions to a portfolio for exposure to these industry leaders.

Apple which pays a dividend that is increased each year didn’t pay a dividend at all until eight years ago which was more than 30 years after it became a public company. Industries which have higher than average dividend yields include financial services, health care, utilities, and telecommunications and leading companies in these fields should be included in a diversified portfolio.

Experience Pays Dividends

I was a freshman at Boston University on Black Monday, the day in 1987 when the stock market dropped more than 20% which was the biggest one-day drop in history. Many of my fellow students were worried what that would mean to their careers. The drop seemed irrelevant to me at that time because I was in business school to learn skills so that I could contribute to my family’s business. Back then I had no idea that one day I would be at the center of the financial industry investing money for clients and accepting responbility for their financial future.

My career plans changed when the real estate market took a big hit in those years following Black Monday, which made the family business no longer an option for me to join.

We should learn from all of our experiences. I share with my clients the lessons I learned from my family’s successes and failures as well as lessons learned from navigating the past treacherous markets I have personally experienced. There is always a recovery after a bear market, and as long as we maintain a diversified portfolio of leaders in each industry, we have always recovered after temporary setbacks. Wise people have often repeated the saying, “This too shall pass.” Looking back on past financial storms followed by long periods of sunshine in the markets, we remain confident going forward.

Facing Coronavirus Head-on with Promising Signs – March 30, 2020

Our March 30, 2020 Client Newsletter contained important information we’d like to make available here on our website.

During the past several weeks I have reached out to a large number of clients, family and friends. It comforts me that almost universally, those I spoke with are closely following the government guidelines to stay safe and help control the spread of the coronavirus. My staff and I are working from home and making excellent use of the available communication technologies most people have access to today.

Just a little over a week ago the headline of the Wall Street Journal was, “U.S. Virus Cases Surpass 10,000,” but now we are approaching 150,000 cases. On Friday the headline read, “U.S. Virus Cases, Jobless Rate Soar” as a record 3.28 million Americans filed for unemployment.  But, also during the week, there were some positive headlines too. On Wednesday, “Dow Soars 11%: Best Day in 87 Years.”  And, Thursday’s headline, “Trump Signs Record Stimulus Bill” reassured many investors as the government is making it clear that it will do whatever it takes to help restore the economy once the coronavirus is under control. There is already talk of another economic stimulus bill being considered.

It is easy to understand how our emotions can reach extremes in a time like this. For many, it’s hard to imagine things getting back to normal or the way it was just a month ago. Some people have applied for unemployment for the first time in their lives after working continuously for 20 or more years.  Successful businesses have had to lay off loyal workers as revenues have dropped significantly or to zero in some cases.

Experienced Historical Perspective

In my 26 year career as a financial advisor and portfolio manager, I have experienced two prior crises where the markets dropped more than during this past month. The first major crisis was September 11, 2001 which occurred during the bear market which started in March of 2000 and the other was the financial crisis which started in 2007.  The U.S. and global markets have encountered countless other crises and incidents that have created temporary disruption and widespread concern.

These situations always end and better days have always dawned. Some are asking why the markets are moving up in the past week when the news is so negative. History shows that the markets move up in anticipation of better days rather than waiting for the news to confirm that things are better. During recessions, the markets often gain value well in advance of the end of the recession. There is risk in investing during volatile times as the future appears uncertain. However, continued investing and even adding to investments during times like this have proven rewarding in the past as valuations are depressed and waiting for the news to be all positive can lead to reinvesting at elevated price levels.

Promising Signs

In the past week, many of the CEOs of the major companies held in our portfolios have been interviewed on the top business and news channels. It is encouraging to hear of the hard work being done by so many companies to start making medical equipment or protective gear thus helping to alleviate any shortages. Many pharmaceutical and medical technology firms, including some that we own, are directing much of their resources to develop therapies, vaccines and testing for COVID-19.

Some companies are hiring in record numbers. Amazon is hiring 100,000 people and raising wages by $2 per hour to reward their employees and keep things moving to satisfy overwhelming demand with so many people remaining at home.

We can also take confidence when executives at major companies buy stock in their own shares as they did at companies such as Wells Fargo, Citigroup, Cisco, Disney, Facebook, Eli Lilly, Procter & Gamble, Raytheon, Starbucks and Exxon, among others, all in the past few weeks. Overwhelmingly, these large companies and many others have the balance sheets and cash to maintain their dividends during this crisis. When questioned during their interviews, the CEOs of the companies we own affirmed their commitment to paying dividends.

A Few Suggestions

At a time like this, it is not healthy to watch the news constantly. Most news channels are filling airtime by keeping tallies of the numbers of cases and the death toll in the U.S. and around the globe. No one needs an hourly or even daily update of these numbers. We know that the peak is not expected in the U.S. for at least a few more weeks and the number of cases will continue to increase.

To make the best of our current situation, experts suggest keeping a daily routine, especially if you have kids at home. It’s important to maintain healthy eating habits and keep up your exercise. Read a book, do a puzzle, play a board game, or get an early start on spring cleaning or any other useful project. Keep your relationships strong at home and remotely.

One great idea shared with me by a senior client is keeping a journal of the crisis to share with future generations. This client’s friend journaled about the major events of her life including the JFK assassination, September 11, Nixon’s resignation, and more. I suggested this idea to my oldest child who’s 14.

A neighbor of ours started a project to make protective masks for the workers at the local hospital and so many pitched in to help, it made me smile. I have heard of countless similar projects being done all over the country. We always come together to solve our country’s and our world’s toughest challenges, just like we see happening now.

Coronavirus Effect on Markets March 1, 2020

We’re sharing one of the messages we recently sent to our clients and we thought this information would be generally helpful, keeping in mind the dynamic coronavirus situation.

There has been a lot of concern this week about the coronavirus that started in China last year. Every day, there have been news reports of this outbreak spreading throughout the globe. The rapid flow of news along with the uncertainty of the length and severity of the situation has caused the markets to pull back this week.

We have been actively monitoring the global situation and its effect on the economy and the markets. The Center for Disease Control and Prevention (CDC) at is an excellent resource with official information updated regularly. That site along with many respected print and online news sites provides reliable data to help you stay informed.

According to the CDC, the coronavirus is capable of traveling through the air but only a few feet, unlike other pathogens that can remain airborne up to 100 feet. Therefore, the infection rate is only slightly higher than the seasonal flu or the common cold. The fatality rate for the coronavirus is estimated to be around 3% which is only slightly higher than the seasonal flu. The SARS epidemic of 2003 had a 10% fatality rate, and the Ebola virus of 2014 had a nearly 50% fatality rate.

Although the weekend’s news is focused largely on the rise in cases in South Korea and elsewhere, what is notable about China is that, as the Wall Street Journal and other media report, of the 80,000 cases of coronavirus in that country, nearly half or 39,000 patients have recovered from the disease. Of those 80,000 total cases, there have been 2,835 deaths or 3.5%. More people have recovered from the disease than still have it and hopefully this trend will continue.

China is sharing their knowledge of treating their patients with officials in other countries to attempt to reduce the fatality rate and improve treatment. These actions have slowed down their economy as people were forbidden to leave certain cities and most businesses were temporarily closed. Steps like this are welcomed to help save lives and prevent spreading infections.

The economic disruption will only be temporary and the markets have always recovered as business returns to normal. MarketWatch has published results of studies on the markets during global epidemics like SARS in 2003, Avian flu in 2006, Swine flu in 2009, MERS in 2013, Ebola in 2014, and Zika virus in 2016. All saw temporary negative market responses but six months and twelve months after the outbreaks passed, the markets were always higher.

We’re encouraged by the news out of China that nearly half of their patients have recovered. We don’t know if the worst is behind us yet, and some worry that the information coming from China may not be accurate. Either way, we will be watching and responding. When making investment decisions, it is important to focus on long-term expectations and avoid letting short-term disruptions derail those decisions.

Want to retire “tax free?” Pay your taxes now.

By Daniel Cohen

Good financial planning will have you debt-free in retirement. Who wants to be paying a mortgage or other debt during the years when there’s no more earned income coming in? For most people, eliminating the mortgage by retirement is an important goal. Eliminating this fixed expense relieves most people of a heavy burden during retirement years. An even bigger expense in retirement for many is taxation, especially taxes on one’s retirement savings.

For most, little is done to eliminate or at least lower their ongoing tax expense, until it is too late. To make matters worse, the amount of taxes one will owe in the future is very unpredictable, but there are things you can do now to minimize or possibly eliminate the expense in the future.

Factor the impact of taxes into your financial planning!

I can’t remember a time when there was so much uncertainty about tax policy. For financial planners, taxes are a major factor to consider when giving advice. There are choices to be made whether someone should deposit funds to a retirement account and get a tax deduction now or else forego that deduction to allow the funds to grow without being subject to taxes in the future, no matter how much the account grows.

Some investments generate income that is taxed lower than other investments and some investments generate gains that are not taxed when earned but when the position is sold. To confuse the decision further, our politicians use the tax code as their platform to either promise lower taxes for certain groups like the “middle class” or they make promises to “tax the rich” to gain favor among groups of voters. No matter the politics or issues of the day, there are things you can do to reduce the uncertainty of your tax expense.

Avoid Assumptions!

Long-term investment decisions are ideally made when factors like tax rates are known and stable. A simple calculation can be used to project whether it makes more sense to take a tax deduction today or to pay the tax when the funds are withdrawn years into the future.

Let’s take the hypothetical case of a doctor and business executive spouse achieving a modest level of success. It’s likely they are currently in the 35% Federal tax bracket. With their level of financial success, they are probably saving toward their retirement. It sounds attractive to be able to save money and be able to deduct that 35% on the funds saved and the conventional wisdom assumes once this couple stops working, they will be in a lower tax bracket.  In practice though, very often, couples like this find that in retirement, tax rates may be the same or close to what they were during the working years due to the growth of one’s investments and other factors like inheritances. So, how can we run the numbers for tax rates in retirement when we don’t even know what tax rates will be next year or after our next election? The projections are not very reliable.

Everyone’s Fair Share

Just like I encourage clients to be debt-free in retirement, I encourage them to live tax-free in retirement or at least limit the uncertainty of taxes in those years by making changes now that will help them reach that goal. After all, should you spend a lifetime paying taxes on what you work hard to earn just so you can retire and keep paying taxes?

A majority of companies that offer retirement accounts allow for the participant to put funds into a traditional retirement account or into a Roth account. The traditional account gets the current tax deduction but is taxed fully in retirement while the Roth account does not get the tax deduction, but the account is tax-free in retirement.

Each worker under age 50 can contribute $19,000 this year to a retirement account and those 50 and over can contribute $25,000. Many people choose to save up to the limits on their retirement accounts and then save no more. But choosing the Roth option forces many to save more as they are giving up the tax savings to reach their plan maximum and so are unintentionally saving more, and will have more tax-free savings in the future.

Options for the Self-Employed

Self-employed individuals without employees such as consultants, contractors and realtors can set up individual retirement plans that allow savings up to the same participant limits and also allow for Roth accounts. And to really accelerate their savings potential, they can contribute to individual Roth IRAs in addition to their company’s Roth accounts in those plans. Couples under 50 utilizing these strategies can potentially save a combined $50,000 into Roth accounts and at 50 or older $62,000. Think about the potential future value in saving those amounts annually with the growth tax-free in 10, 20, or 30 years in the future!

These self-employed individuals can save additional amounts of up to $37,000 on top of the participant contributions if carefully planned, and those amounts can be converted to Roth accounts.  Always consult a qualified financial planner, CPA, or tax professional when adopting these advanced strategies as there are strict rules that need to be understood and followed.

More Tax-Saving Opportunities

In addition to the significant amounts that can be accumulated in Roth accounts, additional tax-free savings can be accumulated by utilizing the investment options in Health Savings Accounts (HSAs).  Families can save $7,000 per year in these accounts, and projecting the growth 10, 20, or 30 years in the future can be a meaningful contribution to building wealth. It helps to stay healthy!

Always remember the difference between tax deferral and tax-free accumulation. If the rules are followed, Roth accounts and Health Savings Accounts allow your money to grow tax-free. Traditional retirement accounts, IRAs, and insurance products like annuities grow your money tax-deferred, meaning eventually the accounts will be taxed, either during your life or your beneficiary’s life.

Stay Current on Policy

The Tax Cuts and Jobs Act signed in late 2017 was the largest overhaul of the tax code in many decades.  Tax rates were reduced for both individuals and businesses which provided a strong stimulus to the economy.  But, for individuals, there are fewer items that can be deducted from income and other items like property taxes are limited so that some may be paying more in taxes than before the changes.

For the most part, the change in the tax code has been positive but for many, it added complexity. As Benjamin Franklin famously stated, “nothing can be said to be certain, except death and taxes.” Much about the future is unpredictable and although taxes are certain, with the advice of a qualified financial planner, you can greatly reduce the uncertainty of your tax burden and keep your savings less subject to the ever-changing policies driven by our political system.