The Structure Matters: Choosing the Right One for Your Business

The choice of a corporate structure for a business has many consequences: a crucial impact on the business’s taxes, your ability to raise funds, the paperwork you must file, and perhaps most important, your personal liability.

Fortunately, you can change your mind and convert to another business structure later on, but as with all legal matters, it is not that simple; switching could have a few negative impacts. For example, your state may have restrictions about these changes, and there could be tax consequences, among other issues.

Continue reading

A Charitable Strategy for Tax-Efficiency: Qualified Charitable Distributions

If supporting charities meaningful to you is part of your long-term financial plan, creating a strategy around your giving can help you maximize the gifts you give. It can also be tax-efficient across several dimensions of your overall plan.

A qualified charitable distribution (QCD) is a distribution from your IRA account that you are eligible for beginning at age 70 ½. But because it goes directly to the charity of your choice, it doesn’t count as taxable income to you. It can keep your income at a lower level and help you avoid taxes on social security and premium surcharges on Medicare. In addition, the IRS will allow the QCD to count as a required minimum distribution (RMD) from your account.There are rules to follow and limits to be aware of but being thoughtful about including qualified charitable distributions in your financial plan can help you achieve multiple goals.

Continue reading

Selling a Family Business: Preparing for a Transformational Event

It’s generally thought that there are several cycles that reflect where a business is in preparedness for a sale. These capture the economy, the market, and the mindset and planning of the business owners.

From an economic standpoint, the liquidity cycle is the one that matters. This cycle gauges the amount of available liquidity and the current appetite of investors to invest in companies.1 With record amounts of cash sloshing around looking for investments and interest rates continuing to be low, the liquidity cycle is currently at an advantageous point, and looks poised to remain so.While getting the right price is clearly a big consideration, there are a lot of other things to think through that are just as important.

Continue reading

GMB #130: Innovation in Stock Market Structure: A 40 Year History Lesson With Kenny Polcari

With the widespread adoption of retail investing and the usage of handheld devices, investing and stock trading have become easier than ever. However, in the 1980s, it used to be an entirely different story. This week on Grow Money Business, we bring you an informative and entertaining conversation with a stock trading veteran who has been in the industry during many of the defining moments of the financial markets over the last four decades. Kenny Polcari, Managing Partner Kace Capital Advisors, joins us today to dive deep into how the stock market structure has evolved over the last few decades.

 

 

Show Notes

[02:54] Getting to Know Kenny – We start the conversation with Kenny’s long career in the financial sector and discuss what the New York Stock Exchange was like when Kenny began his career in the 80s.

[08:16] Building a Career – Kenny reflects on a couple of stories from the early years of his career and how he progressed through the industry.

[15:23] Stock Trading in the 80s – Kenny talks about the way stock markets worked in the 80s and why that environment was exciting.

[22:50] Members of Stock Exchange – Kenny explains the role of a member of the New York Stock exchange.

[27:17] Technology – Kenny discusses early applications of computer-based analytics for financial markets and how relying too much on technology led to a meltdown in the financial markets across the globe.

[42:19] The Tech Boom – Kenny shares his thoughts on how the massive expansion of technology that took place in the 90s shaped the financial markets.

[48:36] The Evolution – How the stock markets and the technologies used for stock trading has evolved over the last few decades.

[54:06] Impact of 9/11 – Kenny reflects on how the September 11th attacks destroyed the infrastructure of the New York Stock Exchange and the process of recovering from that destruction.

[1:00:55] Modern Stock Trading – How the modern stock trading systems make use of the latest technology available in order to make stock trading more reliable and immune to threats.

 

Resources

GMB Ep #129: No, Index Investing Isn’t Bad For The Markets

 

With recent developments in the financial markets, we’re seeing quite a bit of people who are concerned about index investing and the effects it may have on the economy. We dedicated today’s episode of Grow Money Business to addressing some of these concerns. Throughout the episode, Grant shares his thoughts on four of the biggest arguments against index investing and some studies that question the legitimacy of each.

 

 

Show Notes

[03:18] Recent Developments – How the recent developments in the financial markets reignited the discussion against index funds.

[06:15] Competition – One of the major arguments against index investing is that it reduces competition within an industry. Grant shares his thoughts on why this notion is not valid.

[13:11] Corporate Governance Standards – Grant explains how index funds allocate their resources in a way that’s beneficial to shareholders and why index investing won’t create corporate governance issues.

[16:46] Price Discovery – Grant breaks down how the price discovery mechanism works and why index investing is unlikely to hurt price discovery.

[28:20] Income Inequality – Grant shares his take on the argument that index investing exacerbates income inequality.

 

Resources

Are Fed Actions Working? Parsing the New Data

After April’s downturn, the first two weeks of May have not seen substantial improvement. By Thursday, May 12, markets were dangerously close to bear territory. The Fed enacted a 50-basis point increase in the Fed funds rate at the May FOMC meeting, and we also now have April’s key data. In addition, Fed Chairman Powell sat for an interview in which he discussed his definition of a “soft landing” and what it will take to get there.

Our three main points are the labor markets, interest rate hikes, and economic growth as measured by GDP. Let’s dive in.

Continue reading

Avoiding the Medicare Surcharge: What You Need to Know About IRMAA

Reaching Medicare eligibility solves one of the most expensive retirement problems for many retirees: healthcare. Once you’ve made the adjustment and selected all the various Parts and plans, the convenience and affordability of Medicare are one of the benefits of turning 65. However, Medicare is means-tested. If you make over a certain amount of income, surcharges on the Medicare Part B and Part B premiums kick in.

Making it a little more painful, it’s not a flat increase. The surcharges go up as incomes get higher and at the highest level can amount to hundreds of dollars a month in additional costs.

The key to avoiding or minimizing the surcharge is to control income levels. In early retirement, this may be reasonably easy to do. But if you’ve amassed a retirement nest egg in a traditional tax-deferred 401(k) or IRA account, once you hit 72 and required minimum distributions (RMDs) kick in, you can find yourself with a very hefty bill.

Continue reading

May Market Commentary: The Fed Owned It, But Can They Control It?

April Recap and May Outlook

COVID concerns took a definitive backseat as mask mandates on flights ended, and the concerns about the economy turned to how bad things will get. The concerns over the disruption of the ongoing war in Ukraine, 40+ year record inflation, and the resulting amping up of the Fed’s intentions on rate increases moved distinctly into the foreground. Let’s look at some headlines:

  • The IMF released projections for the impact of the war in Ukraine. Global growth will likely slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. This is 0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January.

  • The war isn’t just impacting growth. The IMF also reported that war-induced commodity price increases and broadening price pressures have led to 2022 inflation projections of 5.7% in advanced economies and 8.7% in emerging market and developing economies—1.8 and 2.8 percentage points higher than projected last January.

  • In remarks at a panel discussion at the IMF on April 21st, Chairman Powell reiterated that it is appropriate “to be moving a little more quickly” on rate hikes. That translated into guidance on the first 50-bps rate increase in 22 years.

  • Economists began talking about “stagflation.” Stagflation is high inflation, high unemployment, and slow or negative real economic growth. Stagflation fears rise out of the potential for the Fed to overshoot and tip the economy into recession. Another way to think of stagflation is a circular firing squad. In stagflation, the moves the central bank makes to rescue the economy push it further into recession.

Continue reading

GMB Episode #128: Using Technology to Drive Business Value With Chris Hood

 

We live in the era of tech giants, where technology-driven businesses keep innovating and newly emerging technologies are becoming a key factor in driving business value. Our guest today, Chris Hood, is the Head of Business Innovation and Strategy at Google Cloud. Throughout the conversation, Chris discusses how he assists enterprises in driving economic value through the smart application of technology.

 

 

Show Notes

[01:38] Chris’s Background – Chris shares his background, as well as some of his daily duties at Google.

[04:48] Digital Strategy – Chris describes how the process of deploying technology changes based on the desired customer experience and explains how difficult this can be to navigate in larger organizations.

[15:20] Frequent Technologies – Chris cites specific types of technology that he sees commonly employed and explains how they assist organizations in generating commercial value.

[22:56] API – Chris expresses his thoughts on API monetization.

[27:41] AI and Machine Learning – Chris describes common applications of AI and machine learning.

[39:12] The Future – Chris shares his predictions for the future.

[47:09] Business Owners in Transition – Chris provides some important considerations for business owners in transition.

[54:58] Twitter Deal – Chris comments on Elon Musk’s $44 billion offer to acquire Twitter.

 

Resources

GMB Ep #127 – Should You Adjust Your Bond Holdings Since Interest Rates Are Rising?

 

If you’ve been paying attention to the financial markets lately, you’ve probably noticed that interest rates have been increasing, resulting in a decrease in bond prices. Other recent developments, such as Elon Musk’s Twitter acquisition and the decreased performance of popular growth stocks, have a lot of people questioning if it is time to adjust their portfolios. In today’s episode, Grant reviews the relationship between interest rates and bonds, how investors should react to increasing interest rates, and some of the stock price behaviors related to acquisitions.

 

 

Show Notes

[03:30] Market Updates – Grant recaps some of the interesting developments in the financial markets.

[05:26] Growth Stocks – In recent months, some of the popular growth stocks, such as Netflix and Amazon, have not been performing very well. Grant shares his thoughts on the implications of this trend.

[07:18] Bonds and Interest Rates – Grant dives into how the value of bonds fluctuates based on the interest rates and some of the methods used to evaluate bonds.

[13:31] Responding to Interest Rates – How investors should respond to increasing interest rates and why this is not a good reason to sell your bonds.

[20:25] Bond Funds – How bond funds work, differences between stock funds and bond funds, and how to evaluate bond funds.

[27:14] 60/40 Portfolios – Grant shares his thoughts on whether 60/40 portfolios are a good asset class to invest in.

[29:46] Twitter Share Prices – Grant discusses Elon Musk’s acquisition of Twitter, and what this means for investors.

 

Resources