Business Update:

Tax Loss Harvesting:  We completed our tax loss harvesting trades for all clients with taxable accounts. As a reminder we did these trades to reduce your taxes while maintaining your portfolio’s asset allocation. We did these trades in taxable accounts where we could offset the significant taxable gains being distributed by mutual fund companies.

Our goal was to eliminate the tax on the gains and potentially reduce ordinary taxable income (up to $3,000). Below is an example assuming a $10,000 capital gain distribution.


D3 is Looking to Hire Another Financial Planner in 2016: Due to our rapid growth we are looking to hire another financial planner. Our criteria for this new hire, is that they have between 5 and 10 years of experience. We are in the final stages of our interviewing process.

Asset Allocation Model Revisions: We are refining our asset allocation models for 2016. More details below in Investment Strategy section of this client update.

Market Insight:

This is what we said last month:

“Ignoring headlines and looking at the markets from a fundamental perspective we can sum them up as follows:

  1. The U.S. stock market, based on historic price/earnings metrics look to be fairly valued.
  2. The U.S. bond market, based on historic inflation adjusted interest rates, looks expensive.
  3. International markets, based on historic price/earnings and dividend yield metrics look inexpensive.
  4. Emerging markets based on historic price/earnings metrics look cheap”

Nothing during the past month changed this perspective. Even though the Federal Reserve raised short term interest rates by .25%, 10 year U.S. treasury rates barely moved.  The Fed’s move had more of an impact on 10 year international rates and on short term rates in the U.S. (CDs etc.). Whether this rate rise negatively affects the U.S. economy will determine when the next Federal Reserve rate increase happens.

Investment Strategy:

Semi-annually, we review our asset allocation models for client portfolios. This year we have decided to revise our asset allocation models emphasizing risk, rather than return as the key decision criteria. In mid-January, after we have refined and tested these revisions, we will share with you these changes. Our goal is to simplify the asset class categories and focus on risk metrics, so that all of our clients better understand the risk/reward and volatility dynamics of their portfolios.

This approach continues to emphasize our financial planning perspective that clients should take the least amount of risk necessary to achieve their long term goals while also taking a long term perspective when investing in the financial markets. We have asked all of you to take our new risk survey to develop a risk score. We will use your risk scores to compare to the risk score of your portfolio so we can better manage your expectations.

Our primary purpose is to make sure your portfolios are designed to achieve their long term objectives.  We want to design portfolios that reflect the goals in your financial plan and that can withstand the inherent volatility of the financial markets. If anyone is concerned about how volatility affects your plan or if your goals or cash flow needs change, please give us a call.

Final Thoughts:

A happy and safe New Year to everyone! Let’s hope 2016 is more prosperous for the financial markets than 2015. Thank you for letting us serve your financial planning and investment management needs. Let us know if any of your friend or relatives have similar needs.