The Hidden Cost of a Free Fund

For years now, there has been a war in the investment industry, driving down fees as fund companies compete for business. At first glance, lower fees may seem like the answer to investors’ prayers. After all, keeping costs as low as possible is an important pillar to maximizing one’s invested wealth, as it is one of the few things you can control in an uncertain market. While our firm’s investment thesis agrees with this idea, we constantly remind ourselves and our clients that there’s no such thing as a free lunch.

Read More

Blindsided by Early Retirement

The age when you leave the workforce is one of the most vital factors that determine how much money you will have available in retirement. Working longer can be a good way to improve retirement security. After all, working longer not only provides more years to earn and save, it results in fewer years to rely on retirement savings. Many Americans seem to have gotten that message. According to the Center for Retirement Research, the share of workers reporting that they expect to work past age 65 rose from 16 percent in 1991 to 48 percent in 2018. However, their research also indicates that over a third of workers involuntarily retired earlier than anticipated.

Read More

High Anxiety: 3 Things to Know in the New Bubble Economy


Nervous yet? I can't imagine why not. After all, aren't we living in the age of the "everything bubble?" Real estate, stock prices, crypto-currencies, credit, you name it, valuations seemingly lurch from one peak to the next...and each peak ratchets the altimeter up to a level never before seen. Like poor Daedalus escaping the bonds of captivity while watching his reckless son Icarus soar higher and closer to the sun, investors yearn for the rewards of flight and are simultaneously scared witless whenever they glance down.

Read More

Investing in a House of Cards


It’s long been said that home ownership is the escalator to wealth in this country. But with residential home prices continuing to advance well beyond the high water mark set prior to the Great Recession, both existing homeowners and prospective new home buyers may be starting to wonder if the escalator more closely resembles the stairway to heaven they're hoping for, or the conveyor belt to oblivion they fear.  I wanted to know too.

Read More

Robbing Yourself Blind? The Truth About 401(k) Loans


The ability to borrow from your 401(k) plan remains one of the most highly popular features with plan participants. A few years ago, the Wharton School of Business reported findings that 20% of active workers have a loan outstanding at any given time and 40% of all participants will have taken a loan sometime over the last five years. Intentional or not, this certainly lends credence to the idea “if you build it, they will come.” Paradoxically, an internet search for opinions on the wisdom of borrowing from your 401(k) plan would lead most investors to quickly conclude financial planners and money experts are nearly united in their opposition to such schemes. This conclusion is often well-meaning human resource & benefit departments of large employers. To illustrate this point, we recently came across a 401(k) publication from Delta Airlines stating in bold print that a 401(k) loan “shrinks your account,” “carries risk,” and “taxes you twice."
Read More

Your Child’s Inheritance: Spend it or Save it?

 "I would as soon leave my son a curse as the almighty dollar." -- Andrew Carnegie

Let's blame it on parental DNA. Somewhere deep in the marrow of our bones, many of us believe it is an act of love, generosity--or pursuit of forgiveness--to leave our children an inheritance. Sometimes we even convince ourselves that the more money we leave, the greater our act of love! However, is it possible the assumption that our kids will benefit from, and appreciate, our gift is flawed? Could it be that leaving money to our children after we die is a zero-sum game? Said another way, is it possible that for everything we give our children, we take something else away?

Read More

Financing The Boomerang Tax

In 2018, Zillow released a report estimating that nearly one third of college graduates will move back home with their parents. For some parents, that outcome is a dream come true. For others, it’s a nightmare. Regardless of how you feel emotionally, it’s important to understand the financial impact of indefinitely supporting children after graduation day.

How can this increase in aid towards children be explained? The sudden expansion in support for adult children is usually linked to rising education expenses, increasing housing costs, stagnant wage growth and numerous additional factors.

Read More

The Power of RSUs - Understanding Your Restricted Stock Units

2019 is shaping up to be a big year for tech company initial public offerings (IPOs). Uber, Pinterest, Airbnb, and Slack are looking to follow in the footsteps of Lyft which was first to the party in April. These unicorns - privately-funded startups with a market value of at least $1 billion - are just a few examples that are making headlines for the large windfalls early investors are expecting to receive as a result.

Read More

The Conundrum of Naming a Trust as a Retirement Account Beneficiary


Naming beneficiaries to retirement accounts is a seemingly simple task, yet it’s quite often misunderstood, especially when it includes a trust. For many individuals, retirement accounts represent the majority of their assets. Therefore, getting this piece of estate planning right is crucial and should not be overlooked.

Read More

The Price is Right: Stock Buyback Edition

When Andy was ten years old and in fifth grade, he discovered that if you strode confidently toward the bike rack at lunch time, the Hall Monsters (sorry, Monitors) would assume you had permission to go home to eat lunch with a parent. A few times that year, he used this method to hop on his bike, take his bag lunch to his empty home, and (sometimes with an accomplice) watch as much of The Price is Right as could fit into an elementary school lunch hour. Andy learned a few important lessons that year:

  1. Confidence and initiative are a powerful combination
  2. If you are unsure of the exact price of a thing, do your best to build a range of decent guesses before you bid
  3. When push comes to shove, bidding at the low end of your range leads to better outcomes over time
  4. We all have a responsibility to help control the pet population

Collectively, the West Wing at Exchange Capital Management has spent years studying architecture, engineering, finance, and mathematics, and we are all CFA charterholders or candidates. Sometimes, though, some educated guessing and intuitive logic can answer a complex question better (and faster) than quantitative analysis; just ask the contestants on The Price is Right. Given the recent revival of criticism toward corporate stock buybacks, we decided to walk through a thought experiment considering a simple question that is often ignored in the conversation.

Read More