Estate planning is a topic that often comes up in investment discussions. The complexity of this area and the potential ramifications of doing something wrong makes getting advice from a qualified expert (not me) crucial. Recently I had the opportunity to pass along some of your questions to a highly qualified specialist and expert in the field, Nadine Davison. Nadine is an estate planning attorney and shareholder with the Corvallis law firm of Smith, Davison & Brasier, PC.
Originally from Bethesda, Maryland, Nadine moved here twenty years ago when her husband accepted a position as an English professor at OSU. She has two teenagers, a seventeen year old son and a fourteen year old daughter.
Before moving to Oregon, Nadine practiced for eight years in Washington, DC, representing corporations and individuals in all aspects of complex commercial litigation. After moving west, she continued her litigation practice in Eugene for three more years, and then took a few years off to be home full-time with her children before joining Jeanne Smith and her practice in 2003.
Below Nadine answers many of the questions that have been posed to me over the years. Hopefully, this discussion sparks some thought in your household on whether or not your current plan is up to date and adequate to the task.
1. What’s the danger of not having a plan – let’s say I have fairly typical assets and I die? What’s the danger in terms of my heirs?
Actually, everyone already has a plan – Continue reading
So I understand that stop loss is used to protect gains/limit loss. But is it really necessary like during a time of crisis? Example: I buy a share of company A for $100 and put a stop loss at $90. Stock closes at $101. Something occurs in premarket, and stock goes down to $80. How has that protected me when it sells at the market open when everyone else is frantically selling?
In the example you’ve outlined, it hasn’t protected you, at least not in the manner you were hoping for. I am an enthusiastic proponent of setting pre-defined protective exits, but will be the first to tell you that they are not perfect.
Investing is a process of making decisions in an environment of uncertainty. Everything we do is a tradeoff. For example, a stop loss order on an ETF of technology stocks will be more reliable than a stop loss order placed on a single technology stock. Which is more important to you – Continue reading
How much % cash (dry powder) do you leave in your portfolio? As a general rule, one should always save some dry powder for good buying opportunities. How much reserve do you usually keep in your portfolio?
I think there are two reasons to hold cash in an investment account:
1. To fund regular monthly/quarterly withdrawals (source of income).
2. If the alternative to cash is a bad bet.
For this discussion, let’s just focus on the second reason. I disagree with the idea that you should always save some dry powder. When good opportunities present themselves, there is no reason to pass them up in favor of some vaguely defined better opportunity that might come along someday.
It’s important to acknowledge that the best opportunities are almost never obvious in advance. If you lay in wait for an ideal circumstance where everything feels just perfect, you will be waiting for a very long time. Fortunately, we don’t have to find perfect investments – we just have to find investments that are superior to cash.
For example, let’s say that my asset allocation plan dedicates up to 20% of my portfolio to Continue reading
At what percentage would you consider the investment a successful one and begin to look for an exit point? I am aware this hinges on a lot of variables but let’s just make an approximation.
When making an investment, I am looking for one of four possible outcomes:
• A small loss
• A small gain
• A medium gain
• A large gain
A successful outcome would be one of these results. To understand why these can all be considered successful, let’s turn your question around – what is a bad investment outcome? Continue reading
I have too much cash but I am feeling scared to put it into the market, what should I do?
Here is my current portfolio breakdown:
• Cash 16.5%
• International Bonds 0.8%
• US Bonds 1.7%
• International Stocks 21.8%
• US Stocks 56.7%
• Alternatives 2.5%
I know I need to dump that cash somewhere as it is growing mold and inflation will eventually eat it. I am just not sure where I should be putting it. I know it is bad to time the market but I personally feel the market will be coming down soon, and I don’t want to throw it all in along with my other cash. But I don’t want it to sit either.
Where is best to put it for the time being? CDs suck, Savings suck. What is best?
Decision paralysis is usually the result of not having an adequate plan. Your asset allocation indicates the presence of a partial plan, but it’s missing an important piece.
The missing piece is the part that that protects you from being wrong, which is a perfectly natural consequence of making decisions in an uncertain environment. Every investor spends a lot of time being wrong because the future of complex systems like markets and economies is unknowable. Being wrong is OK – if you plan for it.
For example, let’s say you found something you’d like to invest in but were nervous about the overall valuation of the market Continue reading