We have several clients who use cash flow as the indicator of successful wealth building. I will admit, it does feel good to “clip coupons” and deposit the checks in the bank. Investors who value this metric tend to gravitate to real estate investments because it can generate rents. Real estate is also perceived as…
Segment has always run its own strategies. We build portfolios out of individual stocks and exchange-traded funds because they have exceptionally accommodative tax results. What we generally don’t buy is open-end mutual funds. These investment products with five digits in their ticker symbol are typical of what you would find in a retirement account like…
Never has cash been so controversial in wealth management. Merrill Lynch, Wells Fargo, LPL, and many other brokerage firms are currently facing lawsuits over the low interest rates they pay on accounts that hold clients’ uninvested cash. The hoopla over cash sweeps—which has attracted regulatory notice as well—hinges on whether clients are entitled to the…
For the eleventh consecutive year, Segment has been included on HBJ’s list of the Largest Houston-Area Wealth Management Firms. Segment ranks in the top “Private and Family Wealth Management Firms” category. We are proud to serve our clients and are grateful for their continued trust in us. Subscribers can follow this link to see the…
For over two years, economists have been predicting a recession. As their timing has proven quite poor, recent market gains were built on the expectations that they were flat-out wrong. Proper perspective is that recent market profits provide ballast to endure all the downside the market can throw at us, rather than letting our risk…
Back in 2017, Congress made changes to the tax code via the passage of the Tax Cuts and Jobs Act (TCJA). One of its provisions raised the Lifetime Gift Tax Exemption, the amount of assets each person can pass to heirs without estate taxation. TCJA raised the exempt amount from $5.49million to $11.18million per person….
As investors approach the age of retirement, many of us are faced with a difficult decision: should we retire or continue working? I still enjoy my work, so I have no current plans to retire. So don’t think this musing is prompted by my impending retirement. You can’t get rid of me that easily! For…
As we head into election season, you will surely hear more rhetoric claiming that the rich don’t pay their fair share of taxes. Warren Buffett is famous for once saying that he paid less in taxes than his secretary did. If Warren really wanted to fix this, he could simply declare a dividend for Berkshire…
Individual Retirement Accounts (IRAs) provide tax advantages for savers. However, managing these accounts can be a complex endeavor, particularly when it involves intricate investment vehicles like hedge funds. This complexity is exemplified in the case of the renowned actor James Caan and his investment in a hedge fund, which highlights the potential pitfalls of inadvertent…
“The Department of Labor is under pressure to release its new Retirement Security Rule, which would impose fiduciary obligations on more financial professionals working with retirement clients. But from my vantage point as a fiduciary advisor, regulators’ focus on individual retirement accounts overlooks more egregious activity in non-IRAs happening right under their noses. Particularly absent from the discussion about…
Segment is proud that our leader and advisor, Gil Baumgarten, has been named on Forbes’ Best-In-State Wealth Advisors list for the second year in a row. Gil is ranked #8 in Houston’s High-Net-Worth category, out of the 88 other Houston-area firms listed. See the full ranking and research methodology. Please see IMPORTANT DISCLOSURE information. *Please Note: Limitations….
We are proud to be included once again in Barron’s “Top 1,200 Financial Advisors,” where we are ranked #19 among advisors in Texas and #5 in Houston. We have made the list 10 times since 2009, and have ranked consecutively for the last eight years. We are proud that our position on the list has improved every…
Like all industries, there is a pecking order in the investment arena, a hierarchy, if you will. At the top of the financial pyramid are the hedge fund and private equity businesses. At the base of the pyramid is the bank teller. While often grouped together, the hedge fund and private equity businesses are very…
Clearly, investors see the coming year as one of change. I am asked with some frequency my predictions about what part of our economy will break first. The expectation is that the cracks we all see will accelerate into some type of economic explosion. I, too, see cracks in the wall, but I think they…
Traditional investment advice normally focuses on allocation into buckets. These buckets could be traditional mutual funds, or ETFs, or managed accounts holding individual stocks. In most cases, the allocation buckets are tactically rearranged, and the securities within mutual funds and managed accounts are also actively rearranged. This process of rearranging can easily result in realized…
We get puzzled looks from new clients when we explain our position on taxable fixed income (bonds) in IRAs. Traditional planning advice recommends placing your highest growth assets in an IRA to maximize the tax deferral. We usually recommend the complete opposite approach, which becomes more and more preferable the higher the income of the…
We occasionally see portfolios come in for review containing structured notes. There are a wide variety of them, so I will speak generally. Not everything I will say applies to all, but likely most. A structured note is a bond from a brokerage firm or sponsor which represents an underlying derivative. Most often, this derivative…
Longtime readers of my musings will surely perceive me as part cynic with an optimistic bias. I would never be perceived as a pessimist. I’m a cynic when it comes to the nature of humans but an optimist when it comes to the nature of markets. To be a pessimist, I would have to believe…
From Financial Advisor to Published Author: Gil Baumgarten’s Multi-Faceted Success Our very own Gil Baumgarten was featured on CIO View’s May 2023 cover as an “Influential Finance Executive to Watch in 2023.” Gil shares the journey of his career, how to navigate the tax code, and his future plans for Segment Wealth Management. “In today’s…
The impending recession that the bumbling federal reserve seems intent on creating will present some risks and some opportunities. While they signal that they may be finished with hiking rates, current employment numbers are still too high, and the Fed will hike until they break something. One could argue that the first cracks are showing…
Just in time for Tax Day 2023, Gil talks tax strategy with the Houston Business Journal. “With tax season upon us, it seems an appropriate time to discuss tax strategy with a local specialist. Investors might assume that the frontline professionals for advanced tax strategy are CPAs. However, some investors find that their CPAs work…
You may have heard on Friday or over the weekend that a very large bank in California went belly up. Silicon Valley Bank was a very popular bank with emerging companies and venture capitalists. Details are still emerging about how the bank was mismanaged, but liquidity dried up when the bank said they needed to…
Gil published a piece in Forbes Council titled, “Death and Taxes: Not So Certain After All.” After years of writing about the subject, long-time readers will surely realize how degrading taxes are to returns. With market liquidity at all-time highs and trading commissions now free, investors are seemingly incentivized to trade their accounts. The math…
People believe that email communications are secure and private. Unfortunately, nefarious operators exploit this misconception, crafting elaborate schemes to separate you from your money. We all need to reset our beliefs about email and remain vigilant in communications. I’ll share a few close calls we’ve encountered to drive home this point. Once upon a time,…
This week marks two anniversaries of significance for me. Thirty years ago this week, the first exchange-traded fund (ETF) had its initial public offering (IPO). I bought shares in my own account on the IPO of the Standard and Poors Depository Receipt (SPDR), which tracks the S&P500. I knew it was a game changer. This…
Economist Paul Samuelson famously quipped that “the stock market has predicted nine of the past five recessions.” This tongue-in-cheek expression reflected his view of jumpy stock investors’ impact on the market, who pile in and out, often letting fear win out over fact. Current tea leaf readings might have one conclude that a recession is…
It is quite fun to try to predict the future and invest in companies in the sweet spot of your prognostications. Investing in long-term growth trends with short-term dislocations is a viable strategy, and we do this often. But finding the “next big thing” is entirely different and is fraught with pitfalls. Such positioning comes…
We all know that market timing doesn’t work. It is a fool’s errand to sell it all, hoping to buy it back lower. But the temptation to do so is heady when the market is in decline. When the near future looks scary, it’s easy to think that perhaps selling now and buying back later…
Maybe it’s wishful thinking, but trending election results seem to be going my way. I’m a low-tax, pro-business supporter, and I’m unashamed about my leanings because I believe that a strong economy benefits the whole of society. With energy stocks on a tear into the final days of the midterms, I have some concerns about…
The market continues its roller coaster ride for 2022. Typical stock mutual funds are down 20%. This decline is problematic enough, but adding insult to injury, taxes are about to make it worse for fund owners. Long-time readers will remember my numerous posts about the tax differences between various mutual fund structures. Since deferral or…
Rather than count the ways, let’s just discuss one for today – tax efficiency. Traditional Mutual Funds Traditional mutual funds, like those from Fidelity, Putnam, or any other fund company, have a particular type of accounting that results in tax inefficiencies for investors. Accounting rules for these open-ended mutual funds force all fund shareholders to…
The poor economic policy of the past is coming home to roost in the form of rising rates and spiraling inflation. To make matters worse, policy leaders spent months gaslighting us all, denying inflation’s presence when the signs were in plain sight. This lag in taking action has surely exacerbated the situation because it’s best…
At the extremes of market moves, whether up or down, prognostications of the future begin in rapid-fire succession from soothsayers. When downside prevails, the predictions get increasingly dire. But this makes for huge missteps when an unforeseen event feeds a violent upside reversal. Just such a reversal happened earlier this week, with the market jumping…
With almost 40 years of investing experience, Baumgarten is revealing how he applies keen knowledge and his eye for tracking the latest financial developments to Segment Wealth’s advisory practice. “During inflation, cash is under attack, so items such as property and investments will generally do better. Specifically assets like collectibles, ranches, prime real estate, even…
I was going to begin this musing with “don’t get me started,” but it’s too late for that. I could rant all day about how unfair it is to take money from one group and give it to another, especially when blue-collar taxpayers will end up footing the bill for white-collar kids. Giveaways like student…
Environmental, Social & Governance (ESG Investing) is the new popular trend in investment evaluation whereby investors use non-financial factors to screen investment options. As it gains popularity for its feel-good effects, it is currently enjoying outsized results as investors jump on the bandwagon. But as ESG separates its winners and losers, as is clearly the…
Hapless or Inept? Webster’s Dictionary defines Hapless as “Unlucky or unfortunate;” whereas they define Inept as “Lacking in judgment, sense or reason; Foolish.” In the case of the Fed, I’m going with inept. We expect ineptitude at the county DMV office. However, we should expect more from the highest offices in the land. The Federal…
Clients generally understand how our low-turnover methodology equates to better returns over time. For example, with enough tax deferral, an 8% return can be augmented to a 10% return (in dollars). But that’s not all. Preserved gains that remain untaxed until death are tax-free in many circumstances. This can make low-turnover methodologies even more compelling….
Segment’s strategies have been overweight to energy since the collapse in prices drew us in back in 2020. We did trim some positions earlier this year as oil prices got lofty. Last week was a rough one for energy, and we went back to full overweight accordingly. We also raised cash in our reallocation, reflecting…
Roth conversions remain one of the most underutilized tax planning strategies around. Imagine the limited benefits of continued tax deferral for a 90-year-old retiree with a $500,000 IRA and an income of $100,000 a year. That income is comprised of pension distributions, IRA required minimum distributions (RMD), and some dividend income. Let’s say she has…
There are very few tax issues more complicated than the intersection of estate taxes, income taxes, and IRAs. Very few couples exceed the $24million exemption amount to begin with, and even fewer get this part of their planning correct. If not navigated well, this confluence of factors can conspire to cause 80% of an IRA…
Mr. Biden’s new tax policy has proposed yet another angle to get more tax revenue from the “millionaires and billionaires.” This time he’s circling back to see if he can get a tax on unrealized (unsold) taxpayers’ gains after all. The new twist is that this tax policy is limited to those folks with more…
In my last musing, I wrote about the current odd situation where the 30-year Treasury bonds yields 2.58%, but inflation is running at 8% annualized. Who would loan their money to the government for three decades while it is currently depreciating at a rate three times that? To add insult to injury, Treasury bond interest…
Gil penned a piece on ESG Investing in Financial Advisor Magazine! Do well by doing good. That’s the trendy, feel-good mantra of ESG (environmental, social, governance) investing proponents. It’s much the same claim as electric cars being environmentally friendly. The carbon footprint of an electric car battery is far worse than a gas-powered car’s lifetime of…
As the tragedies in Ukraine and other Russian surprises have unfolded, I was most amazed by how unprepared the Russian army seems and that a ragtag team of civilians defending their homeland could put up such a fight. I always love an underdog. Along with showing the scrappiness of the Ukrainians, this serves to expose…
It is surely apparent by now that a confluence of events is causing energy prices to spike like none seen before. In 2008, when oil prices breached $140, the recession that followed quickly brought it crashing back down to the $30s. Prices today would need to be $200+ to match 2008 in inflation-adjusted terms. Rising…
For those who know me well, you then know about my family’s long-term friendship with Walter Thomas. Walter has worked for my family since 1963 when he was 16, and I was 4, and I still introduce him as my brother. To this day, Walter takes care of my mom, doing her shopping and honey-dos….
A new study released in October 2021 revealed the sneaky behavior of mutual fund managers in selecting their comparative benchmarks. The SEC requires mutual funds to illustrate how fund performance compares to an index for 1, 5 & 10 year periods. The purpose is to help investors measure the value added from the wisdom of…
There’s much wisdom in exercising caution when stirring up things long undisturbed. Politicians often run amok in efforts to garner “points” with their constituents. In this case, Mr. Biden ought to have let sleeping dogs lie. His recent attempt to discard the Step-up in Basis Rule, a popular tax loophole, was met with understandable resistance,…
There is nothing more mesmerizing than eye-popping percentage returns. While investors equate high returns to transactional intelligence, studies routinely show that randomness and luck are the far more likely explanations. Investors often don’t fully appreciate that all percentage returns are not created equal. These occasional high returns earned by aggressive investments give them a marketing edge when investors…
Segment’s strategies are grounded in decades of experience of dealing with things as they are and not as we wish them to be. Sometimes this puts us twenty years ahead of the crowd. With 2021 came a “new” trend: Direct Indexing! Back in 2003, I attended a dinner meeting with an executive from one of the…
Through tax rule changes, President Biden and his allies in Congress are taking aim at high earners and the wealthy in general. Their tax increase proposal is being called the Build Back Better Act (BBBA). That’s a bit of a misnomer, however, since the non-partisan Tax Foundation Equilibrium Model found that as proposed, the Build…
Gil published a piece in Forbes Council titled, “The Profound Power Of The Unrealized Gain.” Unrealized gains have a benefit that doesn’t show up in percentage return. “Money managers and hedge funds hang their hats on their trading prowess and the glory of periodic home runs. Any success they have provides good cover for the…
Since early 2020, the stock market has made headlines with its unexpected ebbs and flows. This prompts people who otherwise had their money invested elsewhere to try their hand at investing in stocks. The crazy swings also set off alarms of panic in others. The stock market is always tumultuous, and weathering the storm is…
Twenty-five years ago, I had an archery deer lease in Refugio County, Texas. One time, I headed down there after a long day at work and arrived at Two-J’s Restaurant just at closing time. The place was empty, but they seated me anyway and promptly delivered my order. The waitress asked me what I did…
Gil penned a piece on Advisory Practice Evolution in Financial Advisor Magazine! “Many advisors get stuck in the path of least resistance methods and never evolve to scale.” “Over my nearly four decades as an advisor, I’ve seen quite an evolution in my practice. There was a day when I would take on new clients…
The field of economics has long assumed that people make decisions that optimize their own utility, and to derive the greatest benefit for themselves. However, psychological studies show that we humans do not do this, but rather we often make irrational choices, and we do so predictably. In this case, irrational investing choices. The reason we…
Gil published a piece in Advisor Perspectives entitled “Don’t Overvalue Dividends.” “My advisory firm is a big fan of stocks that pay dividends. Segment’s tax-efficient rising dividend portfolio is our most popular strategy. But if you dig into the numbers, the dividends our holdings pay are not huge. This is because we manage for…
Gil published a piece in Forbes Council titled, “The Implications of Biden’s Proposed Tax Changes.” “Investors are understandably concerned about President Biden’s plans for additional tax revenue. In my experience, these concerns focus primarily on a couple key parts of the president’s proposal. Below, I’ll take a look at what those parts are and their…
Signs of inflation abound with chip shortages, car shortages, and sky-high lumber prices, among others. Many forecasters are predicting 70s style inflation or even stagflation. Given the similarities in Jimmy Carter’s and Mr. Biden’s policies, it’s a valid concern. Yet, I feel there are extenuating circumstances this time that give me hope that we can…
Everybody has heard the old saying that nothing is certain in life except death and taxes. But not everyone knows how death and taxes are inextricably linked.
Gil recently wrote a piece for Adivsor Perspectives on The Lost Art of the Handwritten Note. Here’s a snippet… you can read the entire article on Advisor Perspectives, at the link above. “I am an introvert and have never been a hard prospector. Despite this, I built a billion-dollar solo advisory practice in 10 years,…
By now, you’ve likely heard that the Biden administration is angling for more of our hard-earned cash. Clearly, low tax rates are wonderful for the economy, but politics often drive less optimal paths. Rather than rehash the tax hikes proposed to corporate and personal tax rates, I thought we should review the issues facing estate…
Segment is a big advocate of buying market exposure on dips. However, an investor must use this strategy within a certain context; otherwise, the tail can wag the dog. Buying the dips can have an undeniably profound positive impact on long-term results. Segment’s three primary equity strategies all had fantastic 2020 results, due primarily to…
Back in the pre-Covid glory days, when you could have charity golf tournaments, I played in the LifeHouse tournament at Carlton Woods. I’m not much of a golfer, and because it’s such a time-consuming hobby, I tend to stick with things for which I have a natural propensity. I mention this because this tournament was…
Hedge fund managers are far and away the wealthiest and most powerful operators on Wall Street. This is despite producing some of the worst overall results for investors. Their periodic eye-popping results offer great camouflage and encouragement that fantastic things are possible. Casinos operate on the same mindset. Last week laid bare some of the…
Whatever you are doing that’s working, stop it. The cyclicality in investing is profoundly impactful. Unfortunately, most investors misread the signals and misplay their hand. They look for trends that have persisted and invest late in the game, often just in time for the reversal. Therefore, investing in last year’s loser is often a better…
2020 was certainly an interesting year for stocks. We are glad it ended on a high note in the face of very challenging economic conditions. One reason for the divergence is that the markets are always forward-looking, and 2021 is likely to be a much better year for the economy. The market’s current action is…
Segment’s business model is focused on compressing client costs and taxes and letting the market do its work. We operate this way because taxes and costs are controllable to a remarkable extent, and the benefits of doing so are repeatable. Stock pickers and trading-centric methodologies forfeit these benefits in search of market-beating returns. Our methodology’s…
When you’ve been in the investment business for 36 years, you tend to get the same sort of questions over and over again. One that I hear repeatedly surrounds how scary the current moment is. Yes, this is a scary moment in our nation’s history. However, scary moments also existed when the market crashed 27%…
One of the greatest misconceptions investors have embedded in their psyche is the assumption that predictions about the future are accurate or even valuable. I struggle with it too. To the extent that many other investors have the same information and believe the same thing, the value of opinion and acting on what is to…
As investors attempt to navigate choppy waters, we often come to realize how difficult it is to predict the future. Most tend to project today into tomorrow and more dangerously, we tend to act today based on what we feel about tomorrow. Investors who act on these predictive thoughts will soon be missing a few…
This year marks my 36th as an investment advisor. While I have memorized in great detail many of the curveballs the market has thrown my way in the last four decades, I’m still more a student of people than markets. Investing is an emotional art form with very little science, although Wall Street does a…
Recent large stock market swings bring about possible benefits by revising our personal tax strategies. For investors with large stock holdings in an IRA, the brutal market reset could make the math of a Roth IRA conversion even more compelling. Now could be a particularly good time because a decline in value would cause a…
Hopefully you’re not tired of reading my blog posts about why long term investing pays off and why short term events are irrelevant. Surely they are not irrelevant to your emotion. If you listen to that emotion, you will make grave errors in judgment. Just remember a few important facts. Dark days of investing are…
In times of crazy market gyrations, there are always reasons. Those reasons seem imperative at the time and often portend a terrible fate. Yes, there have been some dark times, particularly around times of war. Other times excessive valuations are the cause of necessary and painful realignments. Whatever the cause, the rationale at the time…
One of the most difficult parts of investment decision making is just how much to trust your gut instinct. Every day presents a new set of variables, so there is never a playbook. Yet, when you think in the context of the very long term, history is an excellent guide. Warren Buffett says to “get…
Stock prices have been plunging for the last three weeks as coronavirus fears shut down many swaths of the global economy. Conferences and festivals are getting cancelled and surely cruise lines and airlines have no lines. There will be repercussions. Talks of recession may prove true, but that may also be brief. A vacuum of…
Yesterday was a complicated day in the stock market. It was dealing with coronavirus fears, along with coming to grips with Bernie’s surge in the Nevada primary and what a socialist US president would do to markets. I’m feeling the Bern already. Particularly hard hit were health insurance stocks, and it’s difficult to decipher which…
Happy New Year to all! While most of us were busy this holiday season preparing gifts to exchange with our loved ones, Congress was busy giving us “gifts” by adjusting the tax law late in 2019. They gave us (and the IRS) benefits by way of the passage of the SECURE Act, presenting lots of…
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