Timing the market, Required Minimum Distributions & other news

As Summer winds to a close and the S&P 500, Dow Jones Industrial, and Nasdaq are all makings new highs, it is more likely than ever for the human psyche to fall victim to the fool’s errand of trying to time the market. With lots of experts on TV attempting to forecast the future of the markets, it is a good time to read Warren Buffet’s quote, “We have long felt that the only value of stock forecasters is to make fortune-tellers look good.” It may seem overly simple, but one of the pillars of our investment philosophy is that we invest in companies that generate profits and trade at an attractive price relative to those future earnings prospects. One way to evaluate this is by using a forward PE multiple. The forward 12-month PE of the S&P 500 is currently sitting just under 18 (Wall Street Journal), while the forward 2019 multiple of our portfolio has a weighted average of around 13.5. While the S&P’s forward multiple is significantly higher than that of our portfolio, it is not outside of its normal historical range. In fact, this figure for the S&P 500 has actually decreased over the past couple of years, which is an indication that the market has not overheated and that the investment community at large is still anticipating future earnings growth. Staying the course and investing for the long term in companies that fit our strict criteria are what have allowed us to generate the kinds of returns that allow for the meaningful accumulation of wealth.

As we inch closer to the 4th quarter, we know that many of you will be taking your Required Minimum Distributions (RMDs) for 2018 in the coming months. We thought this a pertinent time to bring up a lesser known option taxpayers can use to satisfy their RMD called Qualified Charitable Distributions (QCDs). QCDs are a way to make a charitable donation using funds from an IRA. The maximum amount of QCDs you are allowed to make in a given year is $100,000. This option is especially important this year because of the dramatic increase in the Standard Deduction for 2018 and moving forward. Normally, charitable giving counts toward a taxpayer’s total itemized deductions. Since starting in 2018 the Standard Deduction is doubled for virtually all taxpayers, there will be fewer people who can use their total itemized deductions and thus charitable donations give no benefit to the taxpayer. If instead you use a QCD from an IRA, the distribution counts toward your RMD, but is NOT included in taxable income for the year. For the many retirees, distributions from qualified retirement accounts make up the vast majority of their annual taxable income. Qualified Charitable Distributions are a great tax efficient way to satisfy your Required Minimum Distributions and support the organizations you are passionate about.

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The information being provided today is for educational purposes only and shall not be considered specific individual investment advice or recommendation.  The information being provided is believed to be accurate at the time of distribution. However, over time may become materially inaccurate or may not apply to your specific circumstances.   Please refer to our ADV for detailed information about our services and disclosures.  You may request a copy of our ADV by contacting 941-365-3435.  In addition, please refer to https://www.adviserinfo.sec.gov/IAPD for additional information on the firm and the Investment Adviser Representatives.