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LAW ADVOCACY FAMILY FINANCE A monthly newsletter providing your family with insight about the law and finance (with an occasional dose of humor) from your friends and advocates at DuPont Wealth Solutions and the Law Offices of DuPont and Blumenstiel.
18 SEPT
MY SUMMER ADVENTURE
THROUGH THE WILD WORLD OF FINANCE
The school buses are back on the road, and the weather is finally cooling off. I’m not going to lie; I’m happy to see this summer go. From the opening monsoon at the beginning of the season to our sweltering August, you’d be forgiven for thinking our fair city had been moved to Fort Lauderdale. While the weather may have been stifling, I found relief by immersing myself in all things financial planning. I know that, for many, attending fiduciary seminars and conferences on investment strategies doesn’t exactly sound like the “coolest” way to spend the summer. But today, the tools and strategies of financial management are constantly shifting. And that’s what I love about this field — it pushes me to broaden my horizons and plumb the depths of my knowledge. There are those in the industry who are content to simply tread water. They pick the channels and inlets they are most comfortable with and stick to them. Advisors with insurance backgrounds, for instance, will tell you that a life insurance program is the right way to save for retirement, while a former Wall Street investor will say that building a portfolio and growing your money is the best way to do it. Whether it’s due to official association with their former institutions or plain human bias, these professionals cling to their go-to solutions like life preservers — to the detriment of themselves and their clients.
risky investment portfolios on you. We’re here to help you chart the path to better wealth.
I must admit this is not a purely selfless exercise. While I honestly believe that having a constantly evolving, personalized approach to financial advocacy is the best thing for our clients, I’d be lying if I didn’t mention there was something in it for me. I cannot stand stagnation, pure and simple. I’ve always felt the need to learn more, delve deeper, and find new ways of doing things on a personal level. Looking back, it’s no surprise that I structured this agency in a way that allows me to constantly incorporate new knowledge, tools, and strategies into our processes. Is it tedious at times? Of course. Tax regulations and wealth management software manuals don’t come in a “Reader’s Digest” format. But at the end of the day, sorting through that complexity and charting new routes keeps my job fresh and interesting. I wouldn’t want it any other way. I did not have a particularly adventurous summer visiting theme parks or vacationing to far-off lands, but attending seminars on the latest in investment philosophies and IRA strategies was my own odyssey. I’ve come out of this summer with a wealth of new perspectives, strategies, and tools, including a certification as an Ed Slott Elite IRA Advisor. I may not be returning to shore with fabulous treasures, but I’ve drawn the map to get you there.
To me, advisors should always see themselves as guides for their clients, and you can’t be an effective guide if you
I’VE ALWAYS FELT THE NEED TO LEARN MORE, DELVE
only commit to one route. That’s why I founded DuPont Wealth Solutions as an independent agency, free from the constricting channels of institutional biases. We aren’t here to
DEEPER, AND FIND NEW WAYS OF DOING THINGS ON A PERSONAL LEVEL.
funnel you through to insurance programs or push
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MAKE LIKE A TREE The Best Fall-Themed Leaf Crafts
A CRAFT FOR GROWN-UPS: CLAY LEAF BOWLS These simple little bowls bring an elegant touch of fall to the indoors and can be used to hold candles, keys — or pretty much anything!
Summer is over, and when there’s a chill in the air, it’s tempting to stay inside all day. Don’t let your family hibernate in front of a screen for the next six months. Get active with these fun crafts, using the most abundant resource of the season: leaves! A CRAFT FOR KIDS: LEAF CRITTERS With this fun project, the leaves in your backyard transform into works of art featuring your kids’ favorite animals.
MATERIALS • Air-dry clay • Leaves • Clay roller • Clay scissors or craft scalpel • Aluminum foil
MATERIALS • Paper • Glue • Lots of leaves
DIRECTIONS 1. Roll your clay out to a 1/4-inch thickness and place each leaf, vein side down, onto the clay. Run your roller over the leaf, pressing it into the clay and making your clay thinner at the same time. 2. Cut the excess clay from around the leaf to produce the desired shape. 3. Create a small bowl out of aluminum foil to cradle the clay leaf while it dries into a bowl shape. Remove the tree leaf and let the clay dry overnight. Be sure to flip the clay over at some point so the underside dries too. 4. Once the clay is dry, you can paint your bowls or coat them in a clear varnish to enjoy a minimalist look.
DIRECTIONS 1. This project works best with leaves of different shapes and sizes. Does that big, round leaf look like a squirrel tail? Is there a long, skinny leaf that would be perfect for a butterfly’s body? Let your kids go through the leaves and think of what masterpiece they can create. 2. It helps to arrange all the leaves on a piece of paper first, then glue them down once your child knows how they want to piece their creation together. Cover the whole side of each leaf with glue and press it firmly onto the paper so that it lies flat. Repeat until all the leaves are glued down. Place the critter somewhere safe to dry before hanging it up for all to see.
Who says the fun has to end with summer?With a little imagination and a whole lot of leaves, your family can create amazing works of art together!
BEAT THE RISING COST OF TUITION The Ins and Outs of 529 Savings Plans
This September, a new generation of future thinkers, innovators, and leaders will be getting their starts as college freshmen. However, the vast majority of these bright young minds won’t just be taking in new knowledge — they’ll be taking on a mountain of debt. Because of this, more and more parents, grandparents, and guardians are seeking education investment strategies early in their children’s lives to meet the ever-rising cost of tuition. If you start saving early, you have several financial avenues at your disposal. 529 PLANS Otherwise known as “qualified tuition plans,” 529 plans are state-sponsored savings programs specially designed for those who want to make a long-term investment in a loved one’s higher education. Authorized by section 529 of the Internal Revenue Code, these are tax-advantaged plans that are looked on favorably by financial aid assessors.
Under the umbrella of 529 plans are two types of savings options: savings plans and prepaid tuition plans. Deciding which is right for your child depends on your risk tolerance and how many options you want to give your budding scholar.
SAVINGS VERSUS PREPAID TUITION
While both savings plans and prepaid tuition plans have the same tax and financial aid advantages, they take very different approaches to meeting your fiscal goals. Savings plans consist of one or more investment portfolios designed to grow more conservative as your student approaches college age. Prepaid tuition plans are usually offered directly by public schools and allow you to purchase tuition “credits” at today’s prices rather than waiting to find out the cost of education by the time your child comes of age.
WHICH IS RIGHT FOR YOU?
The savings plan/prepaid tuition divide boils down to this: Would you rather take on some risk with an investment strategy and be able to provide tuition payments no matter where your student goes to college? Or would you rather secure their education here and now, with the caveat that they may be limited to certain state universities? These are tough questions to answer, but a trusted financial advisor can help you find the best fit for you and your family.
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Estate planners around the country will tell you that probate court can be a nightmare, and in some cases, they’re right. However, thanks to the estate tax threshold being set at astronomic levels and various advantageous tax laws here in our state, probate is far less of a concern to the average Ohioan. That doesn’t keep certain local planners from pushing the fear of probate on their clients in order to convince them they need a costly living trust. IT’S ALIVE A living trust is exactly what it sounds like: A trust set up while you are alive, meant to grow and change along with your estate planning goals. While this offers a certain level of convenience to those with a substantial amount of wealth, the complex nature of these trusts makes them costly and ultimately worthless for most people in the middle class until they are in the later stages of life. The cost of creating a living trust alone can be upward of several thousand dollars, and that’s just the tip of the iceberg. In order for the trust to adapt as you age, you must continually return to your estate planner to have them amend the document, paying them to do so. These trusts are also unsuited to the needs of the average middle-class family. Retirement savings funds like 401(k)s can’t go into these plans. Furthermore, most homes are owned by couples jointly with the right of survivorship, meaning your spouse will automatically be passed the rights to your home without the need to pass through probate. NIGHT OF THE LIVING TRUST
DON’T FEARTHE PROBATE
Here in Ohio, we have an expedited probate process for most household items and assets. Vehicles don’t even enter probate unless they
have a combined value of $60,000 or more, so it’s not a concern for the average Joe. If you are married or
do not count yourself among the fabulously wealthy, regard any estate planner pushing a living trust on you with suspicion.
We pride ourselves on integrity here at DuPont Wealth Solutions. We know that estate planning is as emotional as it is complex, and the last thing we would ever want to do is take advantage of your concerns for the future. We’ll continue to dispel the most egregious myths we see in this industry, but if you have any specific questions or concerns about your financial future, please reach out to us.
SUDOKU
INSIDE-OUT GRILLED HAM AND CHEESE
Want to take your grilled cheese game to the next level? This recipe calls for cheese both inside and outside the sandwich, adding a crispy crunch to the grilled cheese experience. It’s a quick, delicious weekday dinner option the whole family will love.
INGREDIENTS
•
8 slices of bread (Pullman works best)
• •
8 ounces ham, thinly sliced
1/2 pound Swiss cheese, sliced 2 tablespoons Dijon mustard
•
4 tablespoons unsalted butter, room temperature 1/2 cup freshly grated Parmesan cheese (preferably Parmigiano- Reggiano)
•
•
•
1/4 cup apricot preserves
DIRECTIONS
1. Butter each slice of bread on the outsides and sprinkle with Parmesan. 2. Layer ham and cheese evenly on top of 4 slices of bread. 3. Spread apricot preserves and mustard across the other 4 slices. Press sandwiches together. 4. In a cast iron skillet or large sauté pan over medium heat, grill sandwiches until golden, about 3 minutes per side. 5. Cut in half and serve.
Inspired by Food &Wine magazine
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INSIDE Greg’s Financial Odyssey PAGE 1
Fall Fun for the Whole Family
The Best Avenue for College Savings PAGE 2
The Probate Boogie Man
Inside-Out Grilled Ham and Cheese PAGE 3
International Talk Like a Pirate Day PAGE 4
YO HO HO, LANDLUBBERS! CELEBRATE TALK LIKE A PIRATE DAY
Ahoy, matey! Wednesday, Sept. 19, is
which was Summers’ wife’s birthday (and the only date he could remember besides Christmas and the Super Bowl). In 2002, they pitched the idea to humor columnist Dave Barry, who promoted it in his syndicated column, and the concept quickly spread internationally. DID PIRATES REALLYTALK LIKETHAT? The “pirate-speak” popularized in movies and Disney attractions probably sounds nothing like real pirates did in centuries past. Today’s swashbuckling phrases delivered in a strong Southwest England accent can be traced back to Robert Newton’s 1950 portrayal of Long John Silver in the movie “Treasure Island.” Historically, English-speaking pirates probably sounded more like Johnny Depp’s Captain Jack Sparrow. Unfortunately, the pirates of the Golden Age didn’t leave behind anyYouTube videos to confirm this. LEARNTHE LINGO, LANDLUBBER Participating inTalk Like a Pirate Day is easy — you just need to know a few key phrases. “Ahoy, matey” means “Hello, friend!” “Blimey, that son of a biscuit-eater hornswaggled me out of me doubloons” means “Darn it, that jerk cheated me out of my money!” “Shiver me timbers, that old salt is three sheets to the wind” means “Wow, that old sailor has had too much beer.” And if a pirate (or your boss) says, “Swab the deck, ye bilge rat, or it’s Davy Jones’ locker for ye!” start mopping the floor immediately.
International Talk Like a Pirate Day. Brush up on your pirate vocabulary, grab your eye patch, get your puffy shirt dry cleaned, and bring a little seafaring fun to your office or classroom. THE HISTORY OFTHESE SWASHBUCKLING
SHENANIGANS The holiday began as an inside joke between pals John Baur and Mark Summers
in 1995. For reasons not even understood by themselves, they began speaking like pirates while playing racquetball, saying things to each other
like, “That be a fine cannonade” (“Nice shot, dude”) and “Now watch as I fire a broadside straight into your yardarm” (“But watch this”). They decidedTalk Like a Pirate Day needed to become official, so they chose Sept. 19,
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A few months ago, I started a new series of monthly articles called “BACK TO BASICS.” In each article, we examine one of the basics of financial planning and investing. Back to Basics #3: Investment Funds
While it’s possible to invest in individual stocks, bonds, and other securities, many investors prefer to use investment funds .
fees.These expenses can eat into your returns, thereby lowering your overall profit. For this reason, some people prefer to invest in:
An investment fund is when a group of investors pool their money together to collectively invest in a certain way.This makes it simple and easy for individuals to invest in a wide range of securities at the same time.There are several types of investment funds, and as you can imagine, each comes with different pros and cons. Funds are very popular, but in my experience, most people don’t know how they work or which type is right for them. I can’t answer that second question here, of course, but I can at least give you a breakdown on how some of the main types work. Quick disclaimer before we go any further: Every type of investment comes with risk. And nothing you’re about to read should be taken as an endorsement or a recommendation . I don’t do that sort of thing in an article. Mutual Funds Here’s how the Securities and Exchange Commission (SEC) defines mutual funds: A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt.The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds. Each share represents an investor’s part ownership in the fund and the income it generates. 1 There are two main types of mutual funds: actively-managed, and passively- managed. More on the latter in a moment. An actively-managed mutual fund means the fund employs one or more managers to perform investment research, select the individual investments in the fund, and monitor performance. • The possibility of “outperforming” the market. If a manager picks the right investments at the right time, it’s possible the fund could bring a higher return than the overall market. • Diversification. Mutual funds often invest in a wide range of companies and industries in order to lower your overall risk.This means that if one company or industry does poorly, you may not experience the same kind of loss that you would if all your money was invested in that company or industry. There are potential issues with mutual funds, though. Statistically, most funds do not outperform the market – or at least not for very long. Mutual funds often come with more expenses than other funds, too, including management Many investors flock to mutual funds because they offer several potential benefits: Okay, ready? Let’s start with:
Index Funds Remember how I said there were two types of mutual funds, actively managed and passive? Passive means the fund does not have a manager actively choosing investments. Instead, the fund tracks a specific index, like the S&P 500. Understand, it’s not possible to invest in an actual index. What an index fund does is invest in the same companies that make up a particular index. Some funds will invest in all the companies in an index, while others will rely on a “representative sample.” With an index fund, you’re essentially tying your fortunes to what the target index does. If the index goes up, so does the fund – and vice versa.The downside is that this makes investors particularly vulnerable to overall market volatility. During a bear market, for example, an index fund could suffer heavily. The upside is that the markets generally go up over the long-term. Another benefit? Index funds often have far lower expenses than mutual funds and “more favorable income tax consequences.” 2 Exchange-Traded Funds ETFs, as they are often called, can be similar to either mutual funds or index funds. Some ETFs are actively managed; most, however, track the companies in a specific index. But ETFs differ from other types of funds in a few key ways. For one thing, the shares each investor has in an ETF can be traded on the open market. That means you can buy or sell your shares in an ETF just like you would an individual stock.You can’t do that with regular mutual- or index funds.That’s a big advantage for investors who value flexibility and liquidity. But of course, nothing’s perfect. While ETFs can be traded like common stock, if you trade too often, you may find yourself paying more than you anticipated in trading fees.Then, too, some ETFs are thinly traded, meaning there’s just not a lot of activity between buyers and sellers.This can make it difficult to sell your shares. Conclusion There is a lot more information I could share on each of these types of funds that I just don’t have room for in an article. Keep in mind, too, that there are many ways to invest. Each comes with its own advantages and disadvantages. Different professionals may say that one is better than the other, but what’s important is choosing what’s right for you . That’s why it pays to take a little time to educate yourself on how they work and what they’re for. Most ETFs also come with lower expenses than mutual funds.
That’s why we’re going Back to Basics.
In my next letter, we’ll pivot away from investing to something a little more personal. In the meantime, have a great month!
1 “What are Mutual Funds?” Securities and Exchange Commission , https://www.investor.gov/investing-basics/investment-products/mutual-funds 2 “Index Funds,” Securities and Exchange Commission , https://www.sec.gov/fast-answers/answersindexfhtm.html
F R O M O N E O F T H E G R E A T E S T I N V E S T O R S O F A L L T I M E 7 R U L E S O F I N V E S T I N G 7 From 1977-1990, Peter Lynch ran one of the most successful mutual funds ever, posting an average annual return of 29%. There are many principles of investing Lynch has espoused over his career. Here are seven of the most important.
4 2 3 1 5 6 7
Invest in companies, industries, and funds you understand well. What do they do? Who uses their goods or services? Is it a company you would want to do business with yourself? No one can predict where the markets will go, or what the economy will do, so don't even try. Instead, focus on what you can control, like the types of companies or funds you invest in, how much you save, etc. Investing isn't a race. You have plenty of time to do your research and find outstanding companies to invest in. Follow the turtle's example, not the hare's. Investing isn't gambling, either. While we have no control over the markets, we do have control over how much risk we take on. Your portfolio isn't the place for speculation or bets. For that, head to Vegas. Invest in companies that have proven management, a strong business model, and that sell things people actually use. Otherwise, you're investing in companies you guess might prove popular...and that's just another form of gambling. Even the greatest investors sometimes get things wrong. When that happens, accept it humbly and try to determine how you can improve. Before investing, can you explain to a family member what you're buying and why? Can you describe how that company or fund works? If not, take your time and do more research.
k n o w w h a t y o u o w n
p r e d i c t i o n i s f u t i l e
t a k e y o u r t i m e
a v o i d l o n g s h o t s
B u y g o o d c o m p a n i e s
l e a r n f r o m y o u r m i s t a k e s
b e f o r e y o u b u y , b e a b l e t o e x p l a i n
Want to know more about how we invest, and why? Please feel free to give us a call at 614.408.0004
Reference: "The Greatest Investors: Peter Lynch" https://www.investopedia.com/university/greatest/peterlynch.asp
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