At Passive Capital Management (PCM), we like to remind our clients and prospects to focus on things they can control. We can’t control the financial markets; we can’t control political policies and we can’t control the future… but we can plan for it. While we won’t bore you with a 35-page financial planning document, financial planning is a part of everything we do at PCM. This ranges from the initial information received from a prospective client to the ongoing life changes that our clients experience. Financial planning is an ongoing, evolving process that changes with our clients’ needs throughout their lives, not a single snapshot report that is printed out and handed to them.
Download PDFQualified Charitable Distributions (QCD) allow individuals 70 ½ or older to donate funds to a charity of their choosing directly from their IRA. This strategy can be used in place of, or to reduce, a client’s Required Minimum Distribution (RMD) for any given tax year. This direct “distribution” to a charity would result in less “earned” income realized by the client, and potentially help them avoid being pushed into a higher tax bracket or triggering higher taxes on their Social Security income.
Download PDFStaying the course – A few thoughts on Asset Allocation
This weekend my daughter and I headed out for an evening soccer game down in the DC metro area, it was Saturday night around 6pm. I found myself on Interstate 495 (Washington Beltway) approaching a slowdown and immediately looked to either side of me to see which lane I should move to next. I had somewhere to be and there had to be a decision I could make that would get me to my destination faster! After looking around and not seeing an opening my lane started moving again, then I had to slow. I stayed in my lane as it seemed like I was just going to be guessing if I moved to the right or left. While I drove, all lanes took their respective turns speeding up and slowing down, but we all really moved at the same pace at the end. Some just slightly quicker than others. About 15 minutes later traffic was flowing freely again. No doubt many of us have been in this situation before, sometimes guessing correctly, but often not.
The investment advisor representatives at Passive Capital Management, LLC do not like to make things unnecessarily complex. When evaluating various fixed income alternatives, we believe that high-quality, short-duration, liquid bonds are the best tools to use for a variety of reasons. We believe that bonds should be used to preserve capital and dampen the overall volatility of a portfolio, not to assume additional credit risk in an effort to “chase yield.”
Download PDFThe investment advisor representatives at Passive Capital Management, LLC will serve as a fiduciary on your behalf and we will always provide advice that we believe to be in your best interest.
Download PDFThis newsletter will introduce you to the SPIVA U.S. Scorecard, Morningstar’s Active/Passive Barometer, and The S&P Persistence Scorecard. These three (3) studies provide strong evidence that the probability of active managers consistently earning excess returns is extremely low. We use these empirically robust third-party research reports as our basis to measure the success of active vs. passive investment philosophies.
Download PDFThe diversification of a portfolio is a controllable factor of investing that allows us to capture returns from various correlated and uncorrelated global asset classes. While we cannot know in advance which global asset classes will zig and zag during a given period, you must have exposure to each to capture the various returns offered by the global equity markets.
Download PDFLooking at market returns is similar to looking at a Seurat painting. Up close (annually) it may seem chaotic and confusing, but when you take a step back (long-term), a clearer picture presents itself.
Download PDFThe mass media of late has given full coverage to the benefits of using low-fee passive investment vehicles – ones that do not try to pick individual positions, but rather represent broad asset classes. The next logical step, building a passive portfolio, is a much more difficult proposition. Which asset classes to choose? Which vehicles to buy? What allocations?
Download PDFThink you or your financial professional can beat the market? What you’re really up against is the actions of millions of investors every day who have access to the very same information you have. Are you or your financial professional smarter than millions of investors? Instead of trying to outsmart the market, PCM’s strategy allows you to reap the benefits that capital markets have provided over time.
Download PDFThis is one of the first questions we ask investors when we begin discussing the benefits of a passive investment strategy with them.
Download PDFWe value our relationships and know that informed clients will be happy clients. As a result, we encourage every client to ask questions until they understand all that they care to know.
Download PDFOne of the most important aspects of the passive investment philosophy is maintaining an appropriate asset allocation throughout all phases of the market cycle. How your assets are allocated across various investments is determined by how much risk you need to take in order to target a certain return and accomplish your goals. There are several ways in which we can rebalance a portfolio and the methods used are influenced by client circumstances, cash availability, tax efficiency, account type, and transaction costs.
Download PDFInvestor interest in dividend-paying stocks has increased substantially in recent years, in part because of the implicit stability of the companies in question, but primarily as a potential source of steady income as historically low bond yields have made income from investment-grade bonds difficult to come by. Focusing only on dividend-paying stocks limits an investor’s options to approximately 20% of the total US stock market. With hindsight, we also know that taking this approach 25 years ago would have eliminated some of the best-performing stocks in the period since, including Cisco, Starbucks and many others.
Download PDFBuilding a tradition of family philanthropy can be fulfilling and enjoyable. Discussing and setting philanthropic priorities is one of the many ways that parents and grandparents can pass on values to children and grandchildren. The team at Passive Capital Management, LLC is pleased to introduce PCM Charitable, a service for our clients to extend our investment philosophy to their philanthropic assets.
Download PDFBelieve it or not, most investors do not earn market returns due to excessive fees, poor diversification, trying to time the market, excessive taxes or a combination of all of these. A recent study by Dalbar, Inc., a Boston-based research firm, showed that for the 20 year period between 1989 and 2008 the S&P 500 had an annualized return of 8.42% while the average investor earned only 1.87%. That’s a lot of money left on the table.
Download PDFThe name of our firm often causes a moment of confusion for those learning about us for the first time. We frequently hear the question “why Passive Capital Management? Wouldn’t I want active management of my precious financial resources?”
Download PDFOne of the core tenets of passive investing is broad diversification and, in my opinion, this is best achieved by using asset class funds (ACFs) rather than index funds. Asset class funds aim to own every stock within a specific segment of the market such as large companies or emerging market companies. They are not obliged to track any arbitrary index. Managers can wait for favorable trading opportunities rather than being forced to buy or sell because an index dictates. This helps to minimize costs, reduce turnover and broaden diversification.
Download PDFHow do you know if you are paying too much in investment management fees? How do you know if your portfolio is tax-efficient and appropriately diversified? How do you know how well your portfolio is performing? You ask the right questions. Here are ten simple questions to ask the person providing you with investment management services. The answers will help you determine whether you are positioned to have an excellent investment experience over the long term.
Download PDFRecent days, weeks, months and even the past several years have left many equity investors feeling more than a little seasick.
Download PDFGiven what has recently occurred throughout our financial system and economy, there will undoubtedly be significant changes to many aspects of the financial services industry, including regulation, compensation, disclosure and risk assessment. What won’t change is human nature. This wasn’t the first “bursting of a bubble” and it certainly won’t be the last. Nonetheless, it is my opinion that the most recent financial turmoil will accelerate a trend toward a more skeptical and more educated investing public.
Download PDFMany investors have felt the temptation to exit the stock market over the past 12 months and hold cash or cash equivalents. Switching to cash may appear to be a safe strategy but, in reality, you are actually trading one risk for other risks. I believe that risk is best managed by a prudent asset allocation, not by trying to time short-term market movements.
Download PDFWhile every bull and bear market has some unique characteristics, market cycles are an inherent aspect of investing and cycles must be endured if investors want to harness the returns that global capitalism provides over time. We will come upon additional bear markets in the future and we must plan accordingly by controlling those things that can be controlled, such as costs, tax efficiency, asset allocation, diversification (including high-quality bonds) and discipline.
Download PDFMany investors spend a lot of time and money trying to predict the future movements of stocks and mutual funds or they hire people to make predictions on their behalf. Not only is this a costly strategy, it does not increase the odds of enjoying a positive investment experience.
Download PDFDiversified real estate funds have historically been effective tools to help lower the overall risk of an equity portfolio. Over the past 30 years the DJ Wilshire REIT Index has had a similar risk/return profile as that of the S&P 500 Index with relatively low correlations to other asset classes.
Download PDFRebalancing is done not necessarily to improve returns but to manage portfolio volatility and maintain a consistent level of risk throughout all phases of the market cycle. A disciplined rebalancing process will prevent emotions (fear and greed) from altering your previously established asset allocation.
Download PDFWhile many investors spend their time evaluating historical and prospective returns, we believe it is even more important to analyze and understand risk. We believe that the capital markets will reward investors over time if they take certain types of risk.
Download PDFWhile some investors are inherently opposed to having any exposure to the fixed income asset class, we believe a strong case can be made that it belongs in all portfolios.
Download PDFThe lag in marking-to-market the value of illiquid investments can overstate underlying values and understate the risk profile of the investment.
Download PDFThe primary sources of portfolio erosion include: excessive costs, market timing, tax inefficiency, and inflation.
Download PDFThere are important benefits to having your financial assets consolidated with one advisor, especially if that advisor does not accept commissions for simply generating activity in your account.
Download PDFIt remains very difficult to separate the skillful manager from the lucky manager and manager selection is a risk for which you may not be compensated.
Download PDFMany investors are paying phenomenally high fees and taxes for what is really beta, or market, exposure. Alpha remains elusive in the zero-sum (before fees and taxes) game of investing. It also remains very difficult to separate the skillful investor from the lucky investor.
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Passive Capital Management, LLC does not intend to provide investment advice through this site and does not represent that the securities or services discussed are suitable for any investor. Investors are advised not to rely on any information contained on the site in the process of making a fully informed investment decision. This site is not intended to render tax or legal advice.