Thanksgiving is not normally the time to talk taxes. Yet, here we are. With single party rule coming to Washington, expect to see real tax policy changes ahead. With these changes, you should consider a few steps before the new year begins.

Let’s review the possible – I’d say, very probable – tax law changes for households.

First, expect to see fewer tax brackets. The current 10% and 15% brackets will collapse into a single, new 12% tax bracket. And, in place of the current 25% and 28% brackets, expect a new, wider 25% tax bracket. You are right if you feel these changes appear inconsequential.

The more interesting changes will be for taxpayers in the current 33%, 35% and 39.6% tax brackets. If you fall into this slice of households, you should expect only the lower 33% bracket to survive, among other tax cuts.

Next, instead of keeping track of your various deductible expenses – a practice called, itemizing – you will no longer need to account for things quite so closely. Most people will fall into the camp that uses the “standard” deduction as it is slated to double in size.

If you stay in the camp of taxpayers who will still itemize, it’ll only be because you have a very large mortgage or you donate a lot of money. All other deductible expenses – property taxes, state income taxes, medical expenses and professional fees – will be a concern of the past.

This will make things much simpler, but not necessarily more lucrative to most households – here’s why.

The current plans also call for you to lose all of your personal exemptions. This will work to hike your taxable income. For most, the doubling of your standard deduction will only work to offset this hike. For most households, the final result of these changes will be a wash.

As Shakespeare once said, for most people, these changes will feel like “much ado about nothing. “ The substantial changes will be for high earners.

With the lower tax rate on higher income, a far lower, special tax rate on self-employment and small business income, the elimination of the extra tax on investment income, the possibility of higher earners now getting to claim the larger standard deduction and with a possible elimination of the estate tax, the proposed changes beginning in 2017 are, indeed, consequential for high earners.

As with any changes in tax law, proactive moves can help to lower your tax bill before the start of next year. For many households who will no longer be able to itemize, these moves may include paying your winter property taxes early and making planned charitable donations now. Pausing now to anticipate these possible changes before year-end could very well put money in your pocket.

For more tips on year-end financial planning and beyond, join Jason P. Tank, CFA and local attorney, Greg Luyt, on Wednesday, December 14 at 6:30pm for their joint presentation for the Front Street Foundation’s Money Series held in the McGuire Room at the Traverse Area District Library. Visit FrontStreetFoundation.org or call (231) 714-6459 to register.

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As the holidays approach, it’s a natural time to reflect on the meaning of generosity. While today’s needs should rightfully capture our immediate attention, it is inevitable that tomorrow’s needs will make an equally compelling case. Like most things in life, there is a place for striking a balance between these competing interests. In the world of philanthropy, this balance is achieved through the use of legacy giving.

What is legacy giving? How does it work? Can anyone do it? These are a few of the questions I considered as I thought about the upcoming Money Series presentation by Phil Ellis, Executive Director of the Grand Traverse Regional Community Foundation on how people can create a plan that supports the causes that have shaped their lives or those of their loved ones.

Legacy giving is about extending into perpetuity your passions and causes in ways that can benefit those who will inexorably follow in your footsteps. When legacy giving is done well, it’s a wonderful thing to see.

Compelling stories of legacy giving jumped off of our community foundation’s website as I perused the long list of local charitable funds. In a world of unfiltered cynicism, it was frankly a refreshing exercise to undertake.

For example, Andrew Shotwell, attorney with Smith & Johnson, recounts his experience from the planning through the giving stage of the Ernest B. Isaacsen Scholarship Endowment. Mr. Isaacsen was awarded our local Chamber of Commerce’s distinguished citizen award 67 years ago. His story certainly shows the power of legacy giving. So much so that Mr. Shotwell’s musings about how those charged today with choosing scholarship recipients often say, “What would Ernie think of this application?”

Other stories include those of Cleo Purdy of Central Lake, who had a passion for providing enriching experiences for young children and their families. Following her death, her planned giving now supports playgroups, preschool and the literacy of young children in our region. In another example, following the passing of Karolina Holtrey in 2000, her legacy giving still provides ongoing support for Frankfort’s library, senior care, and various other educational opportunities in her former community. Finally, Traverse City’s own Dr. Ken Taylor believed in the need for excellent and available health care for everyone. Since his passing, his daughters have worked to ensure that his guiding vision extends well beyond his lifetime.

To learn about legacy giving, join Phil Ellis on Wednesday, November 16 at 6:30pm for his presentation for the Front Street Foundation’s Money Series held in the McGuire Room at the Traverse Area District Library. Front Street Foundation is a nonprofit with a commitment to provide open-access to financial education, for all. Visit FrontStreetFoundation.org.

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The problem of financial fraud and exploitation of seniors continues to grow day by day. With many billions of dollars stolen from retirees each year, more must be done to help minimize the damage inflicted by financial scammers.

This effort will take a combination of public awareness through education and a concerted effort to protect the most financially vulnerable among us.

In my career, I have personally witnessed two financial frauds involving my own clients. In both cases, the perpetrator used popular scams, known as the IRS scam and the Grandparent scam.

Most financial frauds have a common thread. The crook probes for a targeted victim’s emotional vulnerabilities – from outright memory loss to a general limitation in understanding financial concepts – and then expertly exploits it.

Studies have shown that a person’s ability to grasp semi-complex financial situations “on the fly” – known as fluid intelligence – tends to steadily diminish with age.

Interestingly, as people grow older, their fluid intelligence can begin to diverge markedly from their overall mental skills and knowledge built-up in other important areas of their life. This divergence helps to explain why otherwise intelligent people fall for seemingly obvious scams. It also explains why many victims keep the crimes a secret due to their embarrassment and shame.

Through increased public awareness – not only for the elderly but also for their loved ones and caregivers – I believe we can help to combat scammers and to arm future victims and their families before a crime is committed.

To begin raising that awareness, here are some tell-tale signs a potential scam is underway.

The first sign is the con artist will pressure the victim to either act quickly or they will downright scare the victim, such as the threat of imminent arrest or even the revocation of their driver’s license.

In addition, the scammer may impersonate someone in a position of authority, pretend to be a loved one in need of financial help or will fake romantic interest in order to gain the victim’s trust.

Certainly, the challenge of prevention is complicated given advances in technology that allow criminals to easily mask their true identities and to avoid prosecution. Given this, developing proactive strategies and practices is our best line of defense to help protect the most vulnerable among us.

To learn more about how to better protect yourself or your loved ones against financial fraud, join Jason P. Tank, CFA, on Wednesday, October 19th at 6:30pm for his presentation for the Front Street Foundation’s Money Series held in the McGuire Room at the Traverse Area District Library. Front Street Foundation is a nonprofit with a commitment to provide open-access to financial education, for all. Visit MoneySeries.org.

With summer now in the rear-view mirror, the process of closing down the family cottage in Northern Michigan is underway. This inevitably sparks thoughts of next year’s plans and family travel schedules. But, for some, it also sparks lingering thoughts about the need to develop a plan to ensure your cottage will remain in the family for decades to come.

The decision to embark on estate planning for your cherished cottage is often less about financial maneuvering than it is about emotional considerations. After all, the memories made on the lake or on the banks of the river are no doubt deeply engrained in your family’s culture.

The importance of this was summed up nicely by Dan Penning, a local attorney with expertise in succession planning for family cottages, ”One client showed me a large oak tree in the side yard of his family’s cottage, which had a peculiar pronounced branch protruding about halfway up the trunk. A tire swing on a chain hung from the branch.”

”Through the years, the chain became embedded into the branch and my client told me that the swing had been there when he was a child and that he had played on it just as his children, grandchildren and now great-grandchildren were playing there 75 years later!”

Mr. Penning continued, “Stories like these are not at all uncommon over my career in assisting families in their planning for the protection and continued use and enjoyment of their family cottages by themselves and future generations.”

The unique factors involved in a successful cottage plan often requires honest, self reflection. For example, not all families are great candidates for cottage succession planning. It may simply be that the kids don’t share the same affinity you have for your cottage. In addition, the financial means necessary to maintain a robust cottage succession plan may not exist. If this is the case, there is no point in trying to fit a square peg into a round hole.

However, when your family’s structure points to both the desire and the means to ensure continued enjoyment of the family cottage for generations to come, the legal planning to create a lasting success naturally takes on the flavor of business planning.

Beyond the final legal structure chosen to transfer the ownership of your family cottage, the nuts and bolts of business operations must also be explicitly defined. These operational considerations take the form of shared financial responsibilities, cooperation on usage for each family member and their guests as well as the legal protection of the asset against future creditors or divorce, and many more.

To learn more about planning for your family cottage, join Dan A. Penning, founding member of The Penning Group on Wednesday, October 12th at 6:30pm for his presentation for the Front Street Foundation’s Money Series held in the McGuire Room at the Traverse Area District Library. Front Street Foundation is a nonprofit with a commitment to provide open-access to financial education, for all. Visit FrontStreetFoundation.org.

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Today’s annuities are so complex, it’s safe to say most people who’ve been sold one have little understanding of how they work. To help, let’s cover some general and specific features of both indexed and variable annuities, the types sold about 80% of the time.

During the accumulation phase, before you start to draw out money, variable annuities basically allow you to invest in mutual funds that rise and fall with the markets.

With an indexed annuity, your return is very loosely linked to a chosen stock market index. When stocks rise, you often receive just a small portion of the gain. In exchange, when the market drops, you don’t lose.

In essence, indexed annuities equip investors with training wheels along with knee, elbow, wrist pads and a helmet. All that protection can leave little to be desired. Often, indexed annuities give you only a small return, even in a good year for the market. While you might not lose, there simply isn’t much upside offered.

Becoming an educated investor in indexed and variable annuities requires you to decipher terms like, participation rate, cap, spread, crediting rate method, step-up feature, premium bonus, roll-up period, accumulation value, protected benefit base, living benefits, contingent deferred sales charge and guaranteed minimum rate, among many others. It’s like learning a whole new language.

Within many annuities, insurance companies also offer add-on insurance features that provide protections, at a cost, sometimes significant. These riders are designed to sweeten the annuity for the income phase, but they do require you to keep the product for a set number of years.

The most popular riders available for variable and indexed annuities are generally referred to as, living benefits. They often go by names that include the word, guaranteed. Put simply, among your normal annuity account balance, living benefit riders present you with a steadier “phantom” account balance that you cannot tap into unless you are willing to accept installment payments. These riders frankly make you feel a bit schizophrenic as you must follow multiple alternative account balances – both real and phantom – at the same moment.

Despite the sheer complexity of today’s annuities – whether you already own one or you don’t – gaining a working knowledge is a wise move. Based on the fact that about $250 billion of these annuities were sold last year, there are a lot of sales pitches to handle.

To learn more about annuities, join Jason P. Tank, CFA on Wednesday, September 14th at 6:30pm for his presentation for the Front Street Foundation’s Money Series held in the McGuire Room at the Traverse Area District Library. Front Street Foundation is a nonprofit with a commitment to provide open-access to financial education, for all. Visit FrontStreetFoundation.org.

Annuities are not typically purchased. They are most often sold. While annuities can be a valid solution for some, they can be entirely inappropriate for others. In my experience, annuity sales are too often sold to people who fear for their financial future. This is about to change and it couldn’t come a day too soon. Given the complexity of annuities, this is the first of two installments.

The Department of Labor, under their new and expanded fiduciary duty rules, clearly agrees with me. Once fully implemented, their new rules will subject many annuity salespeople to a much thicker layer of regulatory scrutiny. This will undoubtedly mean more objective advice is given to people facing important retirement decisions.

With that, let’s first define what an annuity is by describing the trade you’re making when you purchase one.

When you buy an annuity, you hand over your money to an insurance company. In return, you are promised a set of payments in the future. The point in time you begin receiving those payments can range from right away to decades later.

Let’s next categorize annuities by the way your money grows after you hand it over to the insurance company. Your return is either fixed or it’s variable.

With a fixed annuity, the insurance company promises you a set return on your money, like you’d get with a CD or a bond. With a variable annuity, your return is linked to stocks and bonds, like your typical investment account.

What makes annuities hard to evaluate are the extra features insurance companies build in. These features are often band-aids designed to soothe the real pain inflicted by your separation from your money – “Will I still have access to my money, if I really need it?” Or, annuity contracts contain bells and whistles designed to sweep away your pre-existing worries – “You no longer have to gamble at the stock market casino.”

Of course, the more flexibility and protections you desire in an annuity, the higher its cost and the lower your benefits. As much as they’d like you to believe it, the annuity industry has not yet discovered financial alchemy, unless you count their ability to consistently turn your fears into their fortunes. With a little education, your personal annuity decision – yes or no – will end up being what’s best for you alone, as it always should be.

To learn more, join Jason P. Tank, CFA on Wednesday, September 14th at 6:30pm for his presentation on behalf of the Front Street Foundation’s Money Series held in the McGuire Room at the Traverse Area District Library. Front Street Foundation is a nonprofit with a mission to provide open-access to financial education, for all. Visit FrontStreetFoundation.org to learn more.

I found this chart to be kind of comical in the sense that it signifies almost nothing. Yet, it’s been cited by a big bank and it’s hit the CNBC newsfeed. Could a 2.5% swing in the level of current cash holdings in mutual funds mean all that much? Seems like an insignificant squiggly line to me. 

After reading dovish remarks from Fed chair Janet Yellen last week, these comments from another Fed governor stand in stark contrast. 

It begs the question if the Fed believes that its primary tool is its ability to manipulate expectations for interest rates in the future through the power of its words, this type of cross-talking between officials certainly doesn’t help in that policy tool. 
Rosengren to markets: You have it all wrong on rate hikes http://www.cnbc.com/id/103518094

More goes into planning for and sustaining a retirement than meets the eye. On the surface lies plenty of generic advice from the financial planning industry. Yet, beneath the surface are a slew of assumptions about a largely unknown future. To understand how to manage your sustainable retirement clearly takes more than simple rules-of-thumb.

It should come as little surprise that your retirement decision may be dominated as much by feelings of insecurity as it is by feelings of excitement. Thankfully, the balance between these two emotional poles can be tilted in your favor with pre-retirement planning.

For example, one critical first step for a soon-to-be retiree is to develop a deeper understanding of your post-retirement budget. During your working years, budgeting is all-too-often dismissed. However, when your income becomes more-fixed and less-active in nature, spending choices take on a new sense of importance.

During meetings with soon-to-be-retired clients, my early fact-finding focuses on gaining a better understanding of the true cost of their lifestyle. Without that understanding, retirement planning – and the day-to-day services that follow from that planning – can feel like stumbling in the dark.

With your lifestyle’s financial obligation defined, the traditional survey of your assets and debts and the review of your various sources of income begin to take on the deeper purpose of building financial sustainability.

Of course, the financial obligation that springs from your choice of retirement lifestyle must be met by sustainable income. For most retirees, at the base rests Social Security and, for a shrinking number, pension income. Together, these are just two legs of the proverbial three-legged financial stool.

The final leg of a sustainable retirement is built from income earned from your personal savings. While some might be generated from real estate or even business interests, it often must be earned from traditional sources, such as IRAs or after-tax savings and investments.

It is here, within this portion of private savings, where you may have a lack of confidence of how much you can safely spend from private savings each year.

This central question about your safe spending rate, known in the industry as the sustainable withdrawal rate, is where financial planners toss around overly-simplistic rules-of-thumb. In reality, the assumptions that underpin rules, like the “4% Rule”, are complex and debatable. For good reason, this subject dominates the thoughts of many financial planners. Honestly, it rarely strays far from my mind when managing my clients’ investment portfolios.

As we enter the new year, it would be wise for you, a current or soon-to-be retiree, to establish your own personalized safe spending rate. Only then will a confident retirement – and, yes, a worthwhile New Year’s resolution – be sustained.

Jason P. Tank, CFA of Front Street Wealth Management will hold a free educational workshop on “Finding Your Safe Spending Rate” on Jan 13th at 6:30pm in the McGuire Room at the Traverse Area District Library. Call (231) 947-3775 with questions.

The Fed did it! After nine years since the last rate hike, and following seven years of near zero interest rates, the Fed and Janet Yellen last Wednesday finally raised short-term rates by a whopping one quarter of one percent. The financial markets, which had been displaying concern and worry during the decision’s build-up, largely sloughed it off.

Listening to Yellen during her follow-on press conference, what strikes me is the Fed’s propensity to represent the consensus view. As economic cheerleaders, this is quite natural for the Fed, of course. What else could they say and how else could they feel other than believe the near-term future will resemble the recent past? The past trend is always the future trend to consensus thinkers. This is precisely why the majority of investors fail to anticipate a change in the trend.

For example, as the calendar turns, many will read market prognostications for the year ahead. Already I have noticed news stories that indicate stock market returns will be in the range of 5% to 10%. For as long as I can remember, I’ve seen this range of returns anticipated time and time again. Not coincidentally, that range fits the long-term historical return of stocks in the US.

Published along with the news release of the Fed’s decision last Wednesday, Fed governors made public their own individual projections of economic growth, inflation expectations and unemployment over the next few years along with their long-range expectations of these same measures. What’s striking about this report is their consistent lowering of economic growth and inflation relative to their prior projections. The Fed has consistently been too optimistic.

Like many economists and investors, the Fed has looked for inflation to rise back to its long range target of 2% per year. Today, that measure sits closer to 1%. The consistent undershoot of inflation is not a phenomenon of the US alone. Many of the largest economies in the world are also experiencing what’s known as disinflation – a decrease in the rate of inflation. This was true prior to the drop in oil prices and does raise questions about possible structural issues for the global economy that may lead to continued subdued inflation rates.

It’s fair to say that the largest concern of all central bankers is for disinflation to morph into deflation – that is, an outright drop in prices. This is what Japan struggles with today following their own financial crisis many decades ago. Global central bankers, through zero interest rates and asset purchases, responded to this prospect with an unparalleled monetary experiment.

The question is, did the experiment work? With the Fed finally raising interest rates off the floor, the largest impact may be in the confidence “signaling” impact for investors. In other words, if the Fed feels it’s safe to finally raise rates after seven years in credit crisis-recovery mode, they must feel the trend is their friend. Outside of asset price appreciation and a now-larger pile of low-cost debt, a definitive answer to the question remains unanswered.

In this second segment of in my series on the new rule changes within Social Security, I will delve into other aspects worthy of deeper analysis.

Where my previous column highlighted the late April 2016 deadline faced by a 66 year-old couple planning on using Social Security’s “file-and-suspend/restricted application” trick to maximize their benefit, this week focuses on how the new law affects two younger demographic groups; those age 62 to age 65.5 and those younger than age 62.

Over the next four years, Congress is winnowing down the filing options that Social Security now offers. As time passes, the available choices for retirees will become fewer and fewer. The upside of this narrowing of choices is the beauty of simplicity for future retirees. The downside, as you might have guessed, is your Social Security benefits over your lifetime will likely be less than those received by the prior generation.

To begin, if you won’t reach age 62 by the end of this year, you will not be allowed to restrict your filing to just your spousal benefits. If you fall into this younger group, Social Security will simply pay you the greater of your own earned benefit or the benefit you’re entitled to receive as the spouse of another then-collecting worker.

With these simplified rules, for the youngest among you, Congress just took away your ability to begin collecting your spousal benefit – which can begin at age 66 – while also simultaneously deferring the benefit you may have earned yourself. That “restricted application” trick is over for you.

This ability to collect only your spousal benefits – and watch your own benefits based on your work record grow year after year after year – is now only available to those who are at least age 62 by the end of 2015.

For this slightly older group – let’s call them the middle demographic – you will still have the right to collect your spousal benefit at your full retirement age, to continue to let your own benefit grow 8% per year until age 70 and then, finally, to switch over to your bigger benefit. But, there’s a catch to remember with this strategy.

Unlike the older retirees profiled last week, for this middle demographic to be allowed to restrict their filing to only their spousal benefit, their spouse must also be collecting their own benefit.

With deadlines approaching and with the key role Social Security plays in retirement income planning, understanding the rules has gained importance.

For those willing to pay attention, there’s more to the world of finance than the ongoing Greek tragedy. While Europe delays Greece’s inevitable default, China’s stock market is in the midst of a serious meltdown. Investors in the US might ask, why does this matter to me and my money?

Chinese budding focus on consumerism is a key supporting factor in US investors’ portfolios. In many ways, the pervasive assumption of the continuation of the Chinese economic miracle parallels our own real estate bubble.

As long as real estate was rising, everything was fine. As long as the Chinese consumer is alive and well – following the thought forward to its logical conclusion – the global economy will be fine too. And, remember when the subprime mortgage meltdown was small and contained? It sounds quite similar to the current commentary on the sudden decline in China’s stock market.

Finally, like our real estate market before reality struck, China’s astounding economic growth also stretches back many decades. And, importantly, it is now slowing. What once was greater than 10% growth in China, is now likely down to 5%, if that.

Adding to the sense of mystery surrounding China’s official economic statistics is their ability to magically meet their own projected growth of “about” 7%. For example, on July 14, they announced exactly 7% growth for the just-ended June 30 quarter. Amazingly, they are able to compile and calculate their data much more quickly than the US.

The official statistics coming out of China are probably fake.

However, what’s not fake is the 30% decline in their stock market in less than a month. What’s not fake is the huge decline in global commodity prices. What’s not fake are the reports of a sudden drop-off in car sales across China. And, finally, what’s certainly not fake are the hard-to-imagine-here government actions taken to stop their stock market rout.

The Chinese government has not only cut interest rates, but also relaxed margin trading rules, suspended all trading – no buying and no selling – in 50% of all stocks in the market, banned all new IPOs, restricted short-selling, threatened short-sellers, pressured insiders and executives to not sell any shares, provided loans to companies to buy back their own shares, allowed insurance companies and pension plans to buy stocks for the first time and they’ve also arranged for all brokerage firms to buy, buy, buy!

So far, their efforts have worked to halt the market decline – for now. What comes following the re-opening of normal market forces? My hunch is, not Chinese consumer and investor confidence. Why does that matter? Remember, there’s no doubt we’re all in the midst of a global confidence game.

July 16, 2015 | Jason P. Tank, CFA

 

Reading today’s Barron’s, I spotted this little tidbit on the difference in returns – for 2015 so far – between dividend paying companies and non-dividend paying companies.

The uniformity of the effect on returns from one factor alone – recently rising interest rates – points to some level of automation or algorithmic trading, in my estimation. That is, computers simply programmed to all do the same thing at the same time; sell higher yielding stocks and buy low yielding small cap stocks.

If it’s not this, then – at the very least – it is a sign of investor group-think.

This article does a good job of summing up today’s jobs report……………

 

This is really kind of comical…kind of…………….

Given that I’ve been declared the world’s hardest person to shop for, my family finally threw in the towel this year and gave themselves an ice cream maker for my birthday!

We’ve particularly enjoyed that magic moment when the machine’s relentless churning begins to transform our mix into real ice cream. It’s a moment filled with sweet anticipation that’s been a welcomed break from the type of churning I’ve seen in financial markets in 2015.

Since the start of the year, stocks as measured by the S&P 500 index, have churned sideways, producing a small gain of less than 2%. And, bonds, as measured by the Barclay’s Aggregate Bond index, have declined a little less than 1%. Taken together, it’s not uncommon for a balanced portfolio to show close to zero return for the first half of the year.

The most cited culprit of this unproductive churn is the Federal Reserve’s public hemming and hawing about the future path of interest rates. Much as asset prices over the past six years have been positively impacted by abnormally low interest rates, the anticipation of the eventual rise in rates is now producing a chilling effect.

Think of interest rates as a barometer, of sorts. Interest rates, in part, set up the environment in which all assets are valued by investors. Since the Fed’s experimental zero interest rate policy began in late 2008, the Fed has imposed an artificial pressure on prudent investors to shun safety and embrace risk.

In my professional opinion, the Fed’s experimental policy of low rates was never about providing cheap money to spur demand for businesses to increase their productive capacity. Companies borrowed the cheap money, for sure. Yet, with much of it, they’ve repurchased massive amounts of their own shares and funded larger dividend payments. In essence, the Fed’s policy created a not-so-sweet mix of financial, rather than actual, engineering.

The recent churning we’ve seen in many financial markets – in stocks, bonds and currencies – is a sign the Fed’s mix is at that magic moment of change. The very nature of experiments – such as the Fed’s zero rate policy and their purchase of trillions of bonds – is the uncertainty of their outcome.

To pretend to know the outcome is pure hubris. However, to prepare and adjust is most certainly not. Unlike my homemade version of Ben & Jerry’s Sweet Cream, I get the feeling this Fed-induced churning of markets will probably not turn out nearly as tasty!

From Barron’s today……………………

 

Now that the NBA and NHL seasons are over – allowing me to go to bed at a more reasonable hour – it is an appropriate moment to talk a little baseball and money.

Like a steady drumbeat, the remarkable nature of high school students and those who mentor them was highlighted for me over three successive evenings last week.

A week ago, at the Northern Michigan Mathematics, Engineering & Science Symposium, my wife and I visited the Hagerty Center to support our son and his classmates. At this event, a collection of students representing multiple ages and schools displayed their scientific endeavors to both the public and to an impressive set of volunteer judges with vast industry-specific experience.

From the venue to the spread of food, donated materials, equipment and awards made possible by generous adults and their businesses, the kids knew they produced important and valuable work. The symposium presented an opportunity for these students to interact with adults who clearly care about those who are next in line, as they say.

The following night, we attended the TCAPS’ Music Boosters annual benefit concert that brilliantly showcased both the middle school and high school music programs. From fantastic solos to large, multi-school, combined performances, these talented students and – yes, once again – dedicated adults helped produce a wonderful exhibition of student talent and the benefits of training.

What particularly caught my attention that evening were the usual retirement announcements of a few veteran music teachers. Surrounded by hundreds of already-accomplished young musicians and their families, it was clear that these teachers felt the importance of their careers.

When each teacher walked up to accept a bouquet, I envisioned the many thousands of kids they had inspired over the last three decades. From their visible emotion, you could see these teachers fully grasped the meaningful mentorship they provided to a very long list of students.

This very next night, I heard the loudest drumbeat marking the power of adult mentorship. In celebration of their recent state championship and 8th place finish at the world championship, the FIRST Robotics Competition program largely made up of students from TCAPS’ Central High School held a jaw-dropping season wrap-up dinner.

The FIRST robotics program is designed around extensive adult mentorship like few programs are today. The countless hours spent by busy adults with these students and the real-life professional knowledge transfer is something to behold.

Over the two-hour dinner and presentation, the two-way street of the experience became apparent. The mentors received as much as they gave to these students. And, that’s saying a lot, because these mentors gave a lot.

At each of these events, night after night after night, I watched students – very capable young adults, really – show they can accomplish great things with the help of meaningful mentorship. As we mark the end of another school year, I would like to officially salute all of the mentors – both the volunteers and the professionals – who show us and their students what’s possible with the power of mentorship.

May 26, 2015 | Jason P. Tank, CFA

 

Q: I have a 15 year-old grandson who I think is now ready to learn about money and how investing works. However, I would like to have him learn the right lessons to start so he can avoid some of the mistakes I have made over the years. I am not sure about how best to accomplish this and would like a few suggestions.

A: First, this is a great idea and I commend you for taking this step to provide your grandson with this type of an opportunity. He’s quite fortunate, in my book.

Before he commits too much money with hands-on learning, my thought is you should work to stress the right mindset of the world’s greatest investors. Speaking of books, thankfully there have been some wonderful books written that will help him develop good emotional habits for wise investing.

The late Sir John Templeton was one such great investor. One of his simple rules was to remind us that “an investor who has all the answers doesn’t even understand all of the questions.” Nothing could be truer with investing. The questions are never all answered and there is always something out there you may never know for sure. And, that’s okay to admit.

For me, Templeton’s rule is essentially a reminder to embrace humility and that developing the habit of asking questions is very far from being a sign of ignorance. To the contrary, as you likely know from your own life experiences, learning to confidently and freely ask questions is an important skill that will enable your grandson to become better at absolutely everything he does in his life, not just investing.

Next, Templeton urged people to, “Invest, don’t trade or speculate.” This rule stresses the importance of embracing the idea of evaluating and considering the probabilities of the various outcomes in any investing situation. Once you’ve taught him to double check his possible upside and downside – which includes the idea of reasonable diversification – investing won’t feel like a trip to the casino for him. If you can get this feeling to sink in at an early age, you’ll have done him a great service that will pay him dividends for a long time to come.

My list of recommended books always starts with Benjamin Graham’s, “The Intelligent Investor”. A master investor in his own right, Graham’s claim to fame is that his greatest pupil was Warren Buffett, the world’s most revered investor. The book isn’t too long and it begins by helping readers develop a framework for differentiating between speculation and investing.

Next, I thoroughly enjoyed an oddly named book written by Joel Greenblatt, “You Can Be a Stock Market Genius”. As you can see from the tone of the title, it is written from the standpoint of explaining real-life investment situations and is meant to be an entertaining read for regular people, not just investment analyst types! I do think you and your grandson might both like it.

April 2015 | Jason P. Tank, CFA