Do you want to see and hear an investment legend interviewed by two of the nicest and smartest advisors I know? Tune into this episode of the Rational Reminder podcast with guest Charles Ellis, famous author, investing authority, and a top-notch communicator.

Cameron Passmore cohosts the Rational Reminder and is someone I consider a friend. He and his talented partner, Ben Felix, run one of the best podcasts related to investing. If you like this episode I suggest subscribing to their channel.

Here’s the rundown of what’s covered:

0:00 Intro

4:18 Charley defines a “Loser’s Game”

8:21 Why money management is a loser’s game

11:38 How the market has changed since writing about the loser’s game

19:09 Whether or not the sentiment toward active management is negative

22:03 Types of investor who should not invest in low-cost index funds

30:27 What investors and their advisors should be focused on

37:25 The importance of a well-defined investment policy statement

39:01 What investors can do to protect themselves from themselves

40:43 The most under-appreciated action investors can take to be more successful

50:16 Charley’s opinion on Vanguard’s entry into private equity

55:27 Where Charley sees the biggest future opportunities in the field of investment

1:00:15 What has made Vanguard successful as a company

1:08:14 What Charley has learned about personal motivation and productivity

1:12:04 Charley defines success in his life

1:14:12 Outtake

If you’d rather listen to the episode instead of watching on YouTube here is a link via Apple Podcasts.

Our good friend (and Matt Hall’s podcast guest) Carl Richards has been discussing a concept that may feel foreign to many people when they think about investing. It’s called a “Statement of Financial Purpose. “

Historically, we’ve talked to clients about goals – we help to set them, work to achieve them, cross them off the list, and move on to the next. A Statement of Financial Purpose is something more profound than just goals. It’s the why behind the goals. This statement is not lengthy; it’s usually a sentence or two and, typically, pretty simple, but it’s not easy. 

We have introduced this concept to clients over the last year, and the reception has been very positive. Initially, clients are a bit hesitant when we present the topic, but it has led to some great conversations, and, in certain instances, spouses have uncovered things they didn’t know about the other person! Additionally, we’ve found these conversations especially valuable in guiding the recommendations and decisions we make with our clients.

Please feel free to reach out if you’d like to learn more about creating your Statement of Financial Purpose. 

If it’s April, taxes are on the minds of most Americans. Based on decisions made throughout the prior calendar year, investors might be caught with a nasty tax surprise and need to write a large check to Uncle Sam. We consider your taxes daily to avoid these surprises at Hill Investment Group. Practices we implement, like tax loss harvesting and asset location (tax-inefficient asset classes in tax-deferred accounts), can meaningfully reduce the taxes an investor may owe annually. However, we are talking about one of the most impactful practices today: investing in ETFs rather than mutual funds.

ETFs and mutual funds are two types of investment vehicles and are simply different ways of holding a group of underlying securities like stocks or bonds. Most investment strategies can use either structure to execute their investment strategy. For example, Dimensional Fund Advisors and Avantis Investors, two companies we invest with, have both a mutual fund and an ETF for their US Small Value strategies. For each firm, the strategies are run the same way. However, they have a different legal structure that, in turn, has different tax consequences. 

ETFs rarely distribute capital gains at the end of the year because of the way they rebalance and trade.

On the other hand, mutual funds almost always distribute some capital gains. The table below outlines the capital gain distributions for four specific funds in 2022.

Both the mutual funds distributed ~5% of their value in capital gains, whereas the ETFs did not distribute any. This means that investors in the mutual fund owed about 1% (assuming a 20% capital gains tax rate) in taxes to the government. For every $100,000 invested in the small value strategy, they owed $1,000 in taxes this April. Investors in the ETF, the same strategy but with a different legal structure, owed $0 in taxes this April.

By investing primarily in ETFs across our models, we avoid capital gain distributions for our clients in those funds and meaningfully reduce their tax bills yearly.

Let me know if you have questions or comments about this or any other investment-related topics by emailing me at: zenz@hillinvestmentgroup.com.

Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here. Past performance is not indicative of future results.