Stephen Oliver and William Speciale presented to the Boston Probate and Estate Planning Forum on January 9, 2019 at the Union Club of Boston. The topic was Tax-Advantaged Investing: Achieving and Maximizing Tax Alpha.
The Boston Probate and Estate Planning Forum is an association of experienced and senior-level trusts and estates attorneys in Massachusetts. The Forum meets monthly to discuss current topics in the fields of probate, estate planning, tax, and trust administration. Guest speakers are attorneys, academics, government officials, and professionals in related fields with substantial expertise in their respective disciplines.
Diversification: The Only “Free Lunch” Doesn’t Feel So Free Right Now
The best performing strategy year-to-date has been to own the few high-flying stocks that are responsible for the majority of U.S. stock market returns. Against this backdrop, we feel it is an appropriate time to review Daintree’s investment strategy and why we think it has a higher probability of long-term success.
Many people wish to have a portion of their retirement income guaranteed. For example, a man who knows that statistically he is likely to die before his wife may want to assure that a portion of her income will not fluctuate with their investment portfolio.
Things rarely play out the way people foresee them. Take the FIFA World Cup for example, which recently concluded its 21st installment. The tournament began with 32 national teams vying for soccer’s ultimate prize, with tournament stalwarts Germany, Brazil, or Argentina favored to lift the trophy again. Against all odds though, each of these favorites crashed out, eliminated by seemingly lesser teams. No one could have predicted this result or that the tiny nation of Croatia would make the final. However, that is the nature of a contest with numerous potential outcomes; it is unpredictable and full of surprises.
Daintree employees enjoyed attending the 36th annual Jimmy Fund Scooper Bowl,® the nation’s largest all-you-can-eat ice cream festival. The Jimmy Fund supports Boston’s Dana-Farber Cancer Institute for adult and pediatric cancer care and research. This year the Scooper Bowl raised more than $400,000!
The expression “What a difference a day makes” means a lot if you have a son or daughter turning age 18. Before that 18th birthday, your cherub is a child, with little legal standing and few legal rights. You, as parent or guardian, are responsible instead. When he or she wakes up on the big day, everything is changed, even if everything looks the same.
A historic era is over. For 18 months prior to January of this year, the S&P 500 experienced zero pullbacks of 5% or more. This might not sound impressive in and of itself, but put in historical perspective, this was a period of extremely low volatility. In a normal calendar year, the S&P 500 typically experiences five pullbacks of 5% or greater and one pullback of 10% or greater. However, for an extended period markets confounded this norm as asset prices experienced unabated appreciation. At the beginning of this 18-month period, a reasonable investor would assume seven or eight sizable equity market pullbacks, yet equity markets experienced none.
Are you unfazed by the markets’ lofty valuations? Equity markets do not seem too fazed by much of anything. No matter what disaster or uncertainty came our way during 2017, global equity markets (MSCI ACWI) were up in each month of the year. That is a remarkable result and a measure of calm in the face of extreme political drama, international terror, policy changes, North Korea’s nuclear threat, cyberattacks, hurricanes, wildfires, etc.