Author: Scott Hohman, CFP®, AIF®

Which is Sturdier – A Three-Legged Stool or a Four-Legged Chair?

Written by Scott Hohman, CFP®, AIF® on March 31, 2025. Posted in Investment Strategy Articles.

Four-Factor Investing: Quality, Value, Momentum, and Size

Recently, we streamlined and enhanced our core investing strategy and moved from a three-legged stool to a four-legged chair. And, while we can make no guarantee of future results, we are staying with our new four-legged chair model for the foreseeable future. Why? We wanted to make it possible for our clients to tailor an investment strategy to match their unique goals, interests, and values. By adding a fourth factor to our existing factor-based investing, we’ve made a proactive expansion of our strategy in order to best serve the interests of our clients.

This article will serve as the first in a series designed to break down exactly how our enhanced approach, built upon our existing client-focused framework, will help you put a little more YOU in YOUR portfolio.

Four-Factor Investing Strategy: Expanding, Not Replacing

Our three-legged stool model focused on three main factors: Quality, Value, and Size. We have added Momentum as our fourth factor, which we believe makes for a strong combination for our risk-adjusted portfolio strategy. I want to take a moment to share what each of these factors means for investors:

Investing Strategy: Quality
The tendency for higher quality companies – those that are more profitable and safer – to outperform lower quality companies. Higher quality companies tend to have a consistent return on investment and thus provide some safety in a portfolio.

Investing Strategy: Value
The tendency for cheap assets to outperform expensive assets. There have been a number of studies comparing the long-term performance of value stocks to growth stocks demonstrating the excess returns of value stocks over time.

SEE ALSO: Recognizing Gains at the 0% Tax Bracket

Investing Strategy: Size
The tendency for smaller capitalization stocks within a universe to outperform larger capitalization stocks. Smaller capitalization stocks, especially those that demonstrate the Value characteristic, have provided excess returns over larger capitalization over time. (Note that smaller cap stocks are less efficient, less widely followed and less liquid. Hence, they do carry additional risks.)

Investing Strategy: Momentum
The tendency for assets that have performed well over the past year to continue to perform well over the near term. In other words, winners continue to win, and losers continue to lose. Value and Momentum are two of the most extensively researched factors and work well in combination due to their negative correlation. This negative correlation provides an opportunity for the combination of these two factors to enhance risk-adjusted returns.

Factors of a Feather
Quality, Value, and Momentum have the tendency to complement one another, and we can see this from an economic perspective in their responses to phases of the business cycle. Quality, which tends to correlate to high-quality financials in companies, tends to perform better during a slower, defensive, economic cycle. With Value, the strategy is to buy into companies that are undervalued by the market, making them less expensive but also riskier. Their performance is more aligned with a low-risk economy with prospects for strong near-term growth. Momentum, whose performance is contingent on the notion that stocks that have been performing well will continue to do so, tends to show its strength later in the growth cycle.

The factors of Quality, Value, and Momentum exhibit low correlation due to their typical reactions to various business cycles from defensive, low-risk and later-stage growth. The combination of these factors tends to work well together with the goal of providing a smoother portfolio experience.

Each factor generates positive expected returns independently but when Value, Momentum, and Quality are blended, it is expected that the portfolio can deliver compelling risk-adjusted performance. Given the longer-term outperformance of smaller cap stocks, but the additional risks associated, this factor is incorporated in the portfolio to a lesser extent than the factors of Value, Momentum, and Quality through the use of an all-cap strategy to provide exposure to small-cap stocks in portfolio design.

SEE ALSO: How to Gift Shares of Stock to Charity

Factor-Based Selection Process
So, what does this mean for our client’s portfolios? When making portfolio selections, individual stocks are evaluated to determine those that exhibit the factors of Quality, Value, and Momentum, with a minor emphasis on Size. The most attractive stocks in each of the respective factors are ranked highest as candidates for overweight in the portfolio. The final allocation is then selected in a manner to provide proper diversification with allocation to sectors based on market weights. The resulting portfolio exhibits enhanced exposures to the factors having the highest expected returns.

The Four-Legged Chair
While there is a great deal of technicality here that may or may not have put you to sleep, one thing has been clear in making the determination to shift to our four-legged chair model: We have done our due diligence and feel confident that our new strategy will provide our clients with greater opportunities for growth while maintaining protection for all risk-adjusted investment portfolios. It always remains our highest priority to make decisions that are in the best interests of our clients.

If you or someone you know is interested in becoming a client of Resolute Wealth Advisor, or if you would like to sit down for a complimentary portfolio consultation, please contact us at info@resoluteadvisor.com, (419) 422-4400, or select a convenient time here.

If you enjoyed this content and you’d like to learn more about our enhanced investment strategy, stay tuned for Article 2 in this series, in which we’ll discuss opportunities to invest in individual stocks and ETFs through separately managed accounts (SMAs).

LEARN MORE ABOUT THE RESOLUTE INVESTMENT STRATEGY

Q4 2024 Market Commentary

Written by Scott Hohman, CFP®, AIF® on January 16, 2025. Posted in General Blog.

This report features world capital market performance and a timeline of events for the past quarter. It includes a global overview, as well as features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic: How to Feel About Consumer Feelings.

VIEW FULL COMMENTARY

Investing After Retirement: Why it Pays to Have a Strategy

Written by Scott Hohman, CFP®, AIF® on September 16, 2024. Posted in General Blog.

Leaving the working world behind requires a different mindset, especially when it comes to investing after retirement. Instead of focusing solely on building wealth, the priority shifts to managing how to live off your savings in both the short and long term. With the risk of running out of money being a major concern, it can feel overwhelming. However, there are strategies to help reduce risk and possibly even grow your portfolio during retirement. Read on for insights into extending the life of your nest egg through smart investing after retirement, plus an overview of the streamlined investment approach we utilize at Resolute Wealth Advisor.

Managing Market Risk in a Volatile Market

A smart investment strategy can go a long way in preparing for retirement. With a lot of time to weather the ups and downs of market conditions, leaning on investments with historically proven long-term returns makes sense before you retire.

When you’re in your prime earning years, you can afford to play that long game to your advantage, making the most of down markets. When you’re retired and you don’t have the same source of income, however, you don’t have the luxury of time or as much comfort rolling the dice and taking a loss.

It’s typical to shift to much safer investments post-retirement, ones like bonds that are more immune to sudden, sharp declines. And while no two retiree investors’ needs are identical, managing that market risk can help protect your finances against the unknown.

Managing Longevity Risk in Retirement

The average length of retirement for those leaving the workforce at age 65 is 19 years for women and 17 for men, but many people enjoy retirements that last two to three decades, making it prudent to plan past statistical life expectancies. Knowing you may need to rely on your investments for 20 or 30 years to come, it’s a good idea to consider some growth-oriented investments. This can help you combat cost of living increases and keep up with inflation so that you don’t outlive your income.

It’s all about how much you need, preservation of capital, and mitigating uncertainty. The key is to grow your investments enough to keep up your standard of living for the years to come and focus on low-risk opportunities.

Four Considerations for Investing After Retirement

When you’re focused on growing your nest egg, it may help you to begin with these four things in mind:

Begin With Budget: A budget is always a good idea, no matter your stage in life. Understanding how and why you’re spending can help you plot an attainable course of action. Make sure to adjust your budget as necessary.
Build in Flexibility: A budget is a helpful tool, but it doesn’t provide any guarantees. That’s because it’s impossible to predict your expenses with total precision. Build in some flexibility when planning the size and timing of your retirement withdrawals. As a bonus, doing so can also help you better manage your tax bill.
Plan for Sufficient Liquidity: Sometimes, you may need funds on short notice, which makes it helpful to build sufficient liquidity into your portfolio. Some investors consider fixed-income investments or sell appreciated equity investments periodically.
Navigate Portfolio Volatility: Every investor must navigate volatile markets. It’s easy to get caught in a cycle: taking distributions in down markets, liquidating investments at inopportune times and prices, and disrupting the entire long-term plan.

The good news is you don’t have to undertake a strategy for investing after retirement on your own. Working with a financial advisor you can trust means you’ll have professional guidance from a team that always works with your best interests in mind.

Putting a Little More YOU in YOUR Portfolio with Resolute Wealth Advisor

At Resolute, we are proud to offer a streamlined investment strategy that was designed with your needs in mind. We’ve made it possible for you to tailor an investment strategy that matches your unique goals, interests, and values.

Our enhanced investing offering includes:

Factor-based investing with primary emphasis on Value, Momentum, and Quality (and minor emphasis on Size)
Opportunities to invest in individual stocks and ETFs through Separately Managed Accounts
Strategic Tax Management
Values/Impact-based investment initiatives
Opportunities for exposure to emerging innovations and digital assets
Strategies for focusing on income by investing in dividend-focused stocks

We know that there is no one-size-fits-all approach to investing after retirement, but there are common strategies that can help to extend your retirement savings while mitigating risk.

Maximize Your Nest Egg with Strategic Investing After Retirement

The key to making your retirement as anxiety-free as possible is a smart investment strategy that’s customized to your financial and lifestyle goals. Creating a solid investment plan starts with knowing who you are as a person. Your comfort level with risk, knowledge of how you want to live, and plans for the future are the foundation for creating a portfolio that works for you. We can help you clarify your goals by asking the right questions – and answering yours, too.

At Resolute Wealth Advisor, your investment goals matter, and helping you achieve them is our utmost priority. With sophisticated tools and offerings, we hope to add more value to our clients’ portfolios –and to their lives, too. If you have questions about our investing offerings or how these opportunities might align with your portfolio needs, we would be happy to speak with you. Book your strategy session now and take a step forward into building the retirement of your dreams. We look forward to hearing from you!

Investing in Stocks and ETFs through Separately Managed Accounts

Written by Scott Hohman, CFP®, AIF® on September 3, 2024. Posted in Investment Strategy Articles.

Learn the Benefits of Using SMAs to Customize Your Portfolio

In this second installment in our Investment Strategy Series, we’re going to examine another facet of our streamlined and enhanced investing strategy: the ability for our clients to invest in individual stocks and ETFs through separately managed accounts usually referred to as SMAs. (If you missed the first article in this series, read it now to learn more about our enhanced factor-based investing approach.)

This article will serve as the second in our series designed to break down how our newly enhanced investment approach will better serve our clients. It’s all about helping you put a little more YOU in YOUR portfolio! Read on to learn the benefits of investing in individual stocks and ETFs through Separately Managed Accounts (SMAs).

We feel strongly about providing opportunities for our clients to truly personalize their investment portfolios. Investing in individual stocks and ETFs – as opposed to mutual funds – is one way to accomplish this. At Resolute, we now offer access to Separately Managed Accounts (SMAs) that allow our clients an alternative to mutual funds and provide for enhanced customization in investment strategy, approach, and management style. Before we review seven benefits of this approach, let’s spend a moment better defining SMAs.

What is a Separately Managed Account (SMA)?

A Separately Managed Account (SMA) is a portfolio of assets managed by a professional investment firm. Not only do these accounts offer investors increased portfolio customization, but they offer direct ownership of securities and tax advantages, too.

SMAs differ from mutual funds in that each portfolio is unique to a single account. The account manager will make decisions at the individual account level and these decisions will vary from one investor to another. Many investors feel this approach gives them a greater degree of control over their investments, especially since they can impose restrictions. For example, you could decide not to invest in companies that have exhibited severe environmental controversies or companies that participate in activities that are opposed to your religious beliefs. In essence, SMAs give individual investors a tool to accomplish the sort of personalized money management that used to be reserved for institutions.

Benefits of an SMA Investing Strategy

There are seven distinct advantages to investing in individual stocks and ETFs through SMAs:

1. A Clear View of What You Own

When you invest in mutual funds, you own shares of companies that, in turn, own shares of other investments. And while mutual funds do have benefits, this approach can feel a little convoluted. If you’re an SMA investor, however, you benefit from clarity: you own each individual investment directly and in your own name.

2. Alignment of Your Investments with Your Personal Convictions

As mentioned in the environmental controversies example mentioned above, utilizing Separately Managed Accounts to own individual stocks and ETFs means you can choose to own companies in industries or sectors that fit your values. And, conversely, you can eliminate owning shares of companies that do not align with your convictions.

3. Ability to Harvest Tax Losses and Establish a Capital Gains Budget

Tax loss harvesting is a savvy technique for minimizing your potential capital gains liability. Here’s an example of how it works: Let’s say you utilized an SMA to purchase two different securities at similar price points. As time goes on, you see that one of the securities has doubled in price, while the other has fallen by about half. If one stock doubles and another loses half, that doesn’t result in $0 capital gains, (if $1 grows to 2, but the other $ drops $0.50, then we just offset half of the gain), but at least the loss on the one stock can reduce the taxable gain on another to have more opportunity to manage your gains.

You can use this strategy to set a “capital gains budget” that sets limits on the number of gains you’re willing to absorb and pay taxes on. It can also help ensure your gains won’t push you into the next tax bracket in any given year.

4. Improved Access and Technology

Access to Separately Managed Accounts where clients own individual stocks has improved as technology has allowed for more efficient trading platforms. This has brought down the minimums (i.e. barriers to entry) along with the costs. What’s more, it can still be included in a client account as a piece of the allocation. In the past, you’d have to open a specific account for one manager, but now we can have that manager’s portion as one piece (sleeve) of the portfolio, so SMAs can be incorporated with ETFs, or with other SMA managers.

Here’s an example: A stock portfolio focused on Value, Momentum, and Quality holdings can be a core component of the portfolio and a client can also supplement with a Dividend Strategy also utilizing individual stocks, rounding it out with International ETFs, emerging market ETFs, and more.

5. More Balanced Costs

Costs for many of the SMAs we implement are now closer to those of mutual fund and ETF expenses. Yet, you get the other ancillary benefits of knowing what you own, aligning what you own with your values, and much more flexibility to manage taxes.

6. Diversification without Duplication

Investing in individual stocks and ETFs through SMAs can be useful for investors who already own stocks on low cost basis or holdings they’d like to keep. The SMA manager can work around the position with the other stock holdings to help better diversify a portfolio without duplicating.

7. Hyper Customization

If you’ve read the above, you can see why this investment strategy puts more YOU in YOUR portfolio. Along with our SMA partner, we use the term “hyper customization” to describe this approach of investing in individual stocks and ETFs using SMAs.

Are You Interested in Investing in Individual Stocks and ETFs?

If your interest is piqued, we would love the chance to talk further with you about this enhanced investment offering. We also offer a complimentary portfolio consultation. To schedule a time to sit down together, please contact us at info@resoluteadvisor.com, (419) 422-4400, or select a convenient time here.

If you enjoyed this content and you’d like to learn more about our enhanced investment strategy, stay tuned for Article 3 in this series, where I’ll share how Resolute Wealth Advisor clients are able to benefit from a network of qualified research groups whose expertise is targeted to specific market segments and tax strategies.

Client Benefits from Research Groups with Targeted Expertise

Written by Scott Hohman, CFP®, AIF® on August 3, 2024. Posted in Investment Strategy Articles.

Client Benefits: Enhance Your Investment Strategy with Access to Specific Market Segments and Tax Strategies

In this third installment in our Investment Strategy Series, I want to share an overview of another valuable facet of our new streamlined and enhanced investing strategy: the ability for Resolute clients to benefit from a network of research groups with targeted expertise. (If you’re new to this article series, start with the first article to learn more about our enhanced factor-based investing approach, or check out the second article to learn more about investing in individual stocks and ETFs through SMAs.)

As you’ll see, this third facet of our approach is another opportunity for our clients to customize their portfolios around their personal values and areas of interest. Our clients have access to a wide variety of options such as:

Emerging technology, innovation, and digital assets
Impact and values-based investing
Tax management overlay and loss harvesting to manage capital gains
Dividend-focused SMA

I’ve said it before, and I’ll say it again – it’s all about helping you put a little more YOU in YOUR portfolio!

In subsequent articles in this series, I’ll be going in-depth on each of the areas of expertise mentioned above. Right now, though, I want to share in brief how Resolute’s clients gain distinct investment strategy advantages through our network of research groups with targeted expertise. Never before have we been able to offer our clients so many ways to tailor their portfolios to their unique goals, interests, and values – and we’re excited about the advantages this brings to today’s investors!

Emerging Technology, Innovation & Digital Assets

If you’ve been interested in new technology trends and crypto, we’ve got you covered through a Managed Account SMA that focuses on disruptive innovations. It’s important to note that this approach invests in companies engaged in emerging technologies along with providing exposure to cryptocurrencies in an indirect manner.

Essentially, it’s a concentrated stock portfolio making large-scale investments in public companies that could be perceived as leaders, enablers, and beneficiaries of disruptive innovation across transforming technology that could potentially change the way the world works. (Pretty exciting, right?)

Impact and Values-Based Investing

More and more investors are interested in aligning their portfolios with their values and convictions, and we’ve made it easy for our clients to do so. We now offer access to Impact Screens that act as portfolio matchmakers. A client need only select from a list of personal conviction screens and the selected criteria will be applied to their individual stock holdings. The screens will automatically exclude companies that are not in alignment with a client’s beliefs.

In addition, ESG portfolios and thematic impact portfolios are available as standalone portfolios. In essence, it’s never been easier for our clients to put their money where their values are. So, if you’ve been interested in impact investing or ESG but worried that it may be too complex, you can rest assured we offer a streamlined and user-friendly process.

Tax Management Overlay and Loss Harvesting

In the second article in this investment strategy series, we went in-depth on the client benefits of investing in individual stocks and ETFs through separately managed accounts (SMAs). When an investor utilizes an SMA, Tax Overlay Services can be added. The goal is to reduce tax exposure, especially short-term gain exposure. The process can be coordinated across multiple SMA managers, as well.

Dividend-Focused SMA

Our strategy is helpful for any investor seeking a lower-volatility strategy in their stock allocation with an emphasis on dividend yield. It’s well-suited for any investor looking to reduce overall downside risk in their stock portfolio.

Are You Looking for These Client Benefits in Your Investment Strategy?

As mentioned above, I’ll be sharing more about each of these interest areas in subsequent articles. However, if you’d like to have a conversation right now about your investment strategy and what Resolute can offer, please get in touch.

We would love the opportunity to answer your questions, learn about your goals, and help you determine whether our newly enhanced investment strategy services can help you achieve them.

Investing in Emerging Technology, Innovation, and Digital Assets

Written by Scott Hohman, CFP®, AIF® on July 3, 2024. Posted in Investment Strategy Articles.

How Resolute Clients Gain Exclusive Access to These Emerging Asset Classes

This fourth installment in our Investment Strategy Series will be of particular value to anyone interested in – or even simply curious about – investing in Emerging Technology, Innovation, and Digital Assets. If you’re just jumping into this article series, you can start with the first article to learn more about our enhanced factor-based investing approach, then check out the second article to learn more about investing in individual stocks and ETFs through SMAs and the third installment for how Resolute clients benefit from a network of research groups with targeted expertise.

And speaking of that targeted expertise, as technology continues to evolve, new investment opportunities arise. Resolute clients have access to a Managed Account SMA that focuses on disruptive innovations, and I’d like to share more about this opportunity.

What Does This Investment Opportunity Mean?

Emerging Technologies sometimes referred to as Disruptive Technologies, are defined as tech sector segments that are set to significantly impact the way we live within the next decade. Examples you may already be familiar with are artificial intelligence and cloud computing.

Innovation investing is, essentially, about investing in new ways of doing things. Most often, it includes things like Research and Development (R&D), and it can make businesses and commercial enterprises more efficient, productive, and competitive.

Digital assets include cryptocurrency, which most people are familiar with, but it’s a much broader asset class than that. In fact, a digital asset is any asset that exists in a digital form and includes a right to use. Examples include non-fungible tokens (NFTs) and virtual real estate in the metaverse.

What is a Managed Account SMA Focused on Disruptive Innovations?

As mentioned previously, Resolute clients have access to a Managed Account SMA that focuses on disruptive innovations. It’s a concentrated stock portfolio making large-scale investments in public companies that could be perceived as leaders, enablers, and beneficiaries of disruptive innovation across transforming technology that has the potential to change the way the world works.

Common Themes

Investors interested in this SMA can expect to invest in companies involved in areas like artificial intelligence and cloud computing. Other common themes include companies interested in DNA technologies, energy storage, the increased use of autonomous technology, next-generation internet services, and even technologies that make financial services more efficient.

Although many of these companies are in the tech sector, this approach spans sectors, geographies, and market capitalizations. The focus is on Artificial Intelligence, Autonomous Vehicles, Fintech, DNA Sequencing, Robotics, and 3D Printing.

Associated Risk

It’s important to note that this is a high-risk approach. It is designed for those investors who are willing to accept the associated risks. Sometimes, our clients want to have the ability to hit a home run and are willing to take a high level of risk for that opportunity.

This type of investment is not for every investor. It is best suited for high-net-worth investors as a minor percentage of an overall portfolio.

Do You Have Questions About Emerging Technology, Innovation & Digital Asset Investing?

If you think this Managed Account SMA focused on disruptive innovations might be right for you, we would be happy to answer your questions. This is an exciting area of investing that continues to evolve, and we’re pleased to be able to offer such access to this opportunity for Resolute clients.

If you’re already a client, please feel free to reach out to your Resolute advisor for further discussion. If you’re not yet a client and you’d like to discuss our services, please reach out to schedule an initial call. We look forward to sharing more information about our recently enhanced investment strategy and learning whether Resolute can help you meet your goals.

Impact Investing and Values-Based Investing

Written by Scott Hohman, CFP®, AIF® on June 3, 2024. Posted in Investment Strategy Articles.

Opportunities to Align Your Money with Your Values

In this fifth installment in our Investment Strategy Series, I’m pleased to talk about an area of investing that has been growing in leaps and bounds in recent years: impact investing and values-based investing. Resolute’s enhanced investing strategy includes a valuable opportunity for our clients to align their portfolios with their personal convictions – and it’s an easier process than you might think.

If you need to get caught up on this article series and the other elements of our enhanced investing strategy, you can do so here:

Now, let’s get into today’s topic.

There’s a growing trend among individual investors to use their money to create positive change in the world in areas that they find meaningful. For these investors, gone are the days of simply calculating which funds will generate the greatest returns. Instead, impact investors choose where to put their assets based upon their values and convictions, while earning returns in the process, too.

Now, the nuts and bolts of impact investing and values-based investing can seem a bit complex. Though there are some tools available, it can be difficult for investors to make sense of the influx of information about a company’s, say, commitment to reduce fossil fuel use or steps it’s taken toward greater gender equity in the C-suite.

Luckily, Resolute’s clients have access to a user-friendly tool to help them invest in the greater good.

Impact Screens

Our impact investing and values-based investing clients utilize Impact Screens to match their values with their investments by being able to select from a list of personal conviction screens. The selected criteria are then applied to their individual stock holdings to exclude companies that aren’t in alignment with their beliefs. Many of our clients choose value investing as a way of connecting their religious beliefs and/or environmental concerns with their investment portfolio. The beauty of this is that you can select from a menu to customize your portfolio.

ESG Portfolios

As part of this enhanced investment strategy offering, our clients can also choose ESG portfolios as standalone portfolios. ESG stands for Environmental, Social, and Governance. This one-time niche investment strategy has gone mainstream in recent years, and we offer a simple and efficient way for Resolute clients to begin their ESG journey.

Thematic Impact Portfolios

We also offer the opportunity for our clients to invest in Thematic Impact Portfolios. These are ideal options for those who may want to target owning companies that are trying to create positive impacts (instead of simply excluding companies that they feel have a negative impact) on the environment, social, or governance themes that are important to the client.

A Note on Diversification

It’s important to know that, with each of the above impact investing or values-based investing strategies, we still maintain diversification. We also work closely with portfolio managers to balance client values with existing manager models.

Want to Know More About Impact Investing and Values-Based Investing?

As with each aspect of our enhanced investing strategy, our goal is to help you put more YOU in YOUR portfolio. In this case, we can now better serve our clients who want to use their investment dollars to effect positive change in the world we live in.

If you’re wondering whether impact or values-based investing may be right for you, let’s have a conversation. If you’re an existing Resolute client, please contact your advisor to learn more. And, if you’re not yet a Resolute client, you can schedule an initial discussion to learn more about all of our services. We look forward to hearing from you!

Tax Management Overlays and Tax Loss Harvesting

Written by Scott Hohman, CFP®, AIF® on May 3, 2024. Posted in Investment Strategy Articles.

Critical Elements of Your Tax-Smart Portfolio

This article marks the sixth installment in our Investment Strategy Series, where I’ve been introducing each of the valuable elements of our newly enhanced investing strategy for Resolute clients. You can review any of the previous articles in this series through these links:

Today, I’d like to share our offerings related to tax management overlays and tax loss harvesting – critical elements of a tax-smart investment strategy.

What is a tax management overlay?

The vast majority of individual investors are not tax experts, yet managing your tax liabilities is key to a successful investment strategy. Our tax overlay services allow us to protect the integrity of your overall investing plan while better managing your tax exposure – especially short-term gain exposure when Separately Managed Accounts (SMAs) are utilized. For example, we can look for opportunities to harvest unrealized losses in order to off-set gains. This process of tax loss harvesting means you’ll only pay taxes on your net profits – the amount you’ve gained minus the amount you’ve lost – thereby reducing your tax bill and better positioning your portfolio for the future.

The goal of this process is to improve a client’s after-tax returns. Essentially, we enhance returns by minimizing the tax cost related to investment returns.

How does it work?

With Resolute’s tax management overlays and tax loss harvesting services, you can rely on a smoothly coordinated effort across multiple SMA managers. The process weighs the impact of transactions on taxes against the risk of not complying with the manager’s first-choice recommendation. It actively seeks out opportunities to match gains with losses, or harvesting losses when possible, to off-set prior gains.

In this process, Resolute clients have the ability to establish limits on how much they are willing to recognize in gains by establishing a “tax budget.” Our clients can also request to harvest losses in years where they may be looking for capital gains off-set from events outside the investment account.

Further, the process allows clients to hold onto positions that have gains until they are long-term, so as not to pay the higher tax rates associated with short-term capital gains. An investor can also transfer in low-cost basis stock and have a portfolio built around that stock that is diversified, while the gains are captured over time. This strategy means better managing the tax cost of just selling it all immediately.

Another important benefit? Tax management overlays and lax loss harvesting can also help investors who are trying to manage their total taxable income in order to keep Medicare rates in check.

What do these services mean for our clients?

As with every element of our newly enhanced investment management services, our goal is to allow our clients to better customize their portfolios. Through the use of tax management overlays and lax loss harvesting, we provide an opportunity for what we call “hyper-customization” – the ability to put a little more YOU in YOUR portfolio.

If you’d like to learn more about the services discussed in this article, or any facet of our enhanced investment management strategy, let’s talk. If you’re a Resolute client, reach out to your advisor at any time. And, if you’re not yet a client, schedule an introductory discussion so we can get acquainted.

At Resolute, we believe in helping you regain the personal aspect in your advisory relationship. We look forward to getting to know you and your unique goals, and to answering your questions about our wealth management and investment management services. We offer deep expertise, customized plans, client engagement, and a commitment to providing our clients with confidence in – and ownership of – their respective financial futures. If this sounds like what you may be looking for, reach out today. We look forward to hearing from you!

Dividend-Focused SMA Opportunities

Written by Scott Hohman, CFP®, AIF® on April 3, 2024. Posted in Investment Strategy Articles.

A Low-Volatility Strategy Focused on Yield

This article marks the seventh and final installment in our Investment Strategy Series, where I’ve been introducing each of the valuable elements of our newly enhanced investing strategy for Resolute clients. If you’d like to review any of the previous articles, you may do so through these links:

Today, I’d like to discuss dividend strategy and, specifically, the opportunity to utilize a dividend-focused separately managed account (SMA).

Why Do You Need a Dividend Strategy?

If it’s your dream to retire someday with a steady, passive income, having the right dividend strategy can help you accomplish your goals. Of course, there are multiple ways investors approach dividend investing, and it can be daunting to select the investments in your portfolio that will give you the long-term income you desire. That’s why we’re excited to be offering Resolute clients access to a dividend-focused SMA that takes much of the guesswork out of building your own dividend strategy.

How Does it Work?

The dividend-focused SMA we have partnered with emphasizes holding large-cap stocks as a step to reduce downside risk. This strategy seeks out companies that are perceived to have free cash flow over the next three to five years to support the current dividend.

Traditionally, you might expect this strategy to underperform in strong upward markets, but also to provide more stability during volatile markets.

Is it Right for You?

Our offering is designed for investors who are seeking a lower volatility strategy in their stock allocation, with an emphasis on dividend yield. It is a strategy that is particularly well-suited for those who are looking to reduce the overall downside risk in their stock portfolio or those who are seeking income opportunities while still having the potential for capital appreciation. These investors understand that they are likely owning lower-risk stocks, but they do still own stocks and that carries more risk than fixed-income investments. So, utilizing this dividend strategy can be a fit for those who are comfortable with adding risk by reducing some of the fixed income portions of their portfolio and replacing it with income-producing stocks.

Do You Have Dividend Strategy Questions?

At Resolute, we believe in helping you regain the personal aspect of your advisory relationship and in helping you better customize your investment portfolio. We look forward to getting to know you and your unique goals, and to answer your questions about dividend strategy or about our wealth management and investment management services. Our professional team offers the depth of experience, customized plans, client engagement, and a commitment to providing our clients with confidence in – and ownership of – their respective financial futures. If this sounds like what you may be looking for, reach out today. We look forward to hearing from you!

Tax-Savvy Charitable Gifting Strategies

Written by Scott Hohman, CFP®, AIF® on November 22, 2021. Posted in General Blog.

Did you know that America is the most charitable nation in the world? In 2020 alone, U.S. charitable giving totaled $471 billion. What’s more, 69% of that giving was from individuals.

If you’re reading this article, it’s likely you’re a part of that tremendous show of generosity. When you decide to make a charitable gift, it’s a very personal decision. Most often, it’s about much more than money, too. It’s about your values, your passions, and your hopes for the future. Even though tax planning probably isn’t your main reason for giving back, though, there are several valuable benefits you should not overlook, some of which were strengthened by the Tax Cuts and Jobs Act (TCJA) of 2017.

Current Law

If you’re practicing philanthropy – that is, making donations of cash or property to charitable organizations – it’s important to take a few particular steps to ensure you qualify for current tax advantages associated with your giving.

You’ll need to:

Make sure your gifts are going to qualified charitable organizations.
Itemize deductions on your income tax return.
Meet gift documentation/substantiation requirements.

How much of your giving can qualify for a tax deduction? Well, prior to the TCJA, you could deduct up to 50% of your adjusted gross income as charitable gifts. Now, however, you can gift up to 60% of your income while still benefitting from the tax deduction.

Since the TCJA also doubled the standard deduction, many fewer taxpayers are itemizing. However, the CARES Act provided a $300 charitable tax deduction for both 2020 and 2021 tax years. For 2021, married couples who file jointly can deduct up to $600.

What if You want to Give Considerably More?

If you have the desire and the resources to give much more than $300 or $600 to your favorite charitable causes, there are two fairly straightforward strategies you may want to consider.

‘Bunching’ Contributions Through a Donor Advised Fund

Let’s say you typically give $10,000 per year to one or more qualified charitable organizations, but you stopped itemizing your deductions due to the increased standard deduction created by the TCJA. If you’re committed to continuing to give each year and you don’t want to lose out on the tax benefits associated with your philanthropy, you might consider “bunching.” This means putting several years’ worth of giving into a single year (maybe a single gift of $30,000 for the next three years) and placing this gift into a donor advised fund (DAF).

Here’s how it works, and why it’s tax-savvy, too. DAFs are separate charitable investment accounts. They’re easy to set up through a qualified custodian, and you can fund them with assets like cash, stocks, and bonds. Once your DAF account is open, you get to choose a strategy for how any of your gifted – but not yet granted – dollars will be invested, and then recommend grants of funds to any qualified charitable organizations you’d like to support. Contributions to a DAF are irrevocable, so you get an immediate tax deduction in the year you make the contribution, regardless of how long you take to distribute the funds. So, in keeping with the example above, you could make a contribution of $30,000 to your DAF now, enjoy the itemized tax deduction this year, but spread the grants out over three years so that you’re still contributing about $10,000 to your chosen charities annually (and taking the standard deduction in years two and three in this example).

Essentially, this strategy lets you front-load your giving in such a way as to enjoy multiple years of tax deductions in a single year.

Gifting Your Required Minimum Distributions

You’re required to start taking Required Minimum Distributions (RMDs) from your retirement accounts starting at age 72 – even if you don’t need the income for your living expenses. Typically, you pay income tax on these distributions. However, the IRS allows you to use your RMDs as tax-free gifts to 501(c)(3) charities instead. Essentially, if you don’t need all or a portion of your annual RMD for income, you can use it as a significant gift to a qualified non-profit – up to $100,000 per taxpayer per year.

This is called a Qualified Charitable Distribution (QCD), and it’s a valuable tool because it allows you to accomplish four things at once. You can satisfy your RMD requirement, avoid paying taxes on it, support a cause or organization you care about, and avoid the potential that your RMD might push you into a higher tax bracket or cause a phaseout of other tax deductions. It’s truly a win-win for you and the charities you support.

Are You Practicing Tax-Savvy Giving?

Philanthropy is a meaningful way to truly change lives, whether in your own community, on the other side of the world, or anywhere in between. Charitable giving helps to address critical needs, and your example of giving back can have the benefit of encouraging the next generation to focus on philanthropic giving, too. These are just a few of the reasons why the IRS allows you to reap some tax benefits from your giving, so be sure to optimize your giving, both for your own benefit and so that you’ll have more resources to give in the future, too.

At Resolute Wealth Advisor, giving back is foundational to our work in several ways. Not only are we as a team committed to making a positive impact in our community, but we encourage and empower our clients to make a difference, too. We have termed this dual commitment “The Giving Box.”

If seeking to create impact beyond yourself is a priority for you, contact us today to begin a conversation about how you can create a financial plan that serves both your family and the causes that matter to you. We look forward to helping you accomplish your financial and philanthropic goals!