Broker Check


February 06, 2017

Are Your Assets Diversified with Your Taxes in Mind?

If the answer to this question is “I don’t know,” then you may want to explore some financial vehicles that are designed to fill the void between stock market investments and lower-yielding interest accounts.

The stock market can be risky, that’s no secret, which is why the best way to invest in the stock market is by being an informed investor. An informed investor knows that market diversification is a well-known way to deal with the often volatile marketplace. Diversification can be a great way to potentially increase your stock market returns, while allocating your risk among a greater number of investments.* You might ask, “How do I make sure that my stocks are diversified?”

Let’s first explore what the term diversification means….

What is Diversification?

Diversification as defined by Diversification is a risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.

That’s quite a mouthful.

If you ask a financial professional for a definition of diversification, simplify it by saying: “Spread your dollars among various different asset classes.”

But this asks the question:

What is an Asset Class?

Asset class as defined by A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.

Some common understandings of what asset classes are…

Examples of generic asset classes**

  • Protected Principal
  • Income
  • Growth and Income
  • Growth
  • Aggressive Growth

Examples of more specific asset classes and categories:

  • Cash or Cash Equivalents
  • Treasuries
  • Government Bonds
  • Corporate Bonds
  • High Yield (Junk Bonds)
  • Stocks
  • Large vs. Small Cap
  • Growth vs. Value
  • International Investments
  • R.E.I.T.s
  • Natural Resources
  • Precious Metals
  • Foreign Currency

Each asset class is expected to reflect different risk characteristics, reflect different return characteristics, and perform differently in any given market environment.

Do you know which asset class will perform best this year? No. Money managers across the country search for the answer to this question on a daily basis. Some believe that your account should be actively managed, while others believe that your account should be passively managed. We’re not trying to determine which strategy is best for you or anyone else.

We want you to ask yourself the following questions:

Have you ever considered the significance of taxes when it comes to the different asset classes?

Are your investments diversified to maximize your assets based upon your individual tax situation?

There are several reasons these questions are so important to consider. Let’s look at a few things that we know to be true. We know that we can’t control the stock market. We know that we can’t control income tax brackets and we know that we can’t control estate tax rates. So, you’re probably wondering if there is anything that we can conceivably control. We can control the amount of money that the income tax and estate tax rates are applied to and/or levied against.

Have you ever heard of the “tax ladder”? What is it and what does it mean to the average investor? How could climbing the tax ladder improve your individual situation?

Most financial professionals focus on which asset class to invest your money into. This type of diversification is important, but considering the importance of being diversified with taxes in mind is just as important. If you think about the tax ladder in terms of wealth, the more wealth that each individual creates, the more he/she should be considering having their assets divided between different steps or rungs on the tax ladder.

The fact is, very few financial professionals will argue the merits of diversification when it comes to investing. However, many advisors and investors fail to consider the importance of having their assets diversified with the tax consequences in mind.

So what’s the next step?

Your receipt of this report entitles you to a no cost or obligation one-hour session to explore the benefits of diversifying your assets with your taxes in mind. Any customary hourly planning fees associated, will be waived for this one-hour session.

What should you expect at this session? Below are some frequently asked questions about what we call the “59-Minute Financial Wellness Consultation.”

Q: What will this meeting consist of?
A: This meeting is simply an opportunity for you to ask any questions about the diversification of your assets with taxes in mind, as well as your personal finance and retirement Throughout the course of the meeting, we will ask questions about you and your situation. We’ve found that everyone’s definition of a comfortable retirement is a little different, and that everyone’s situation is unique. Our goal is to learn aboutyour personal goals as we explore how to help you retire the way you want

Q: Why do you offer this no cost or obligation consultation?
A: Simple. It gives us an opportunity to meet folks from around the area that may have questions about financial matters. It’s no secret that we would bye new clients. Gaining new clients is the way that our business grows. However, we want to provide a comfortable environment for exploring a new, potential professional relationship — for you and for us. By offering an hour of our time for no cost or obligation, it provides a comfortable way for us to spend some time with you to see if it makes sense for us to continue discussions into the future.

Q: Will there be a sales presentation?
A: Not at all. It is important for us to understand your goals and desires about what retiring or investing for your future means to you. We feel it would be premature to begin exploring solutions. We tend to look at the first meeting as an opportunity for you to ask some questions, and for us to get to know each other. Furthermore, we can both be more informed by the end of the meeting, which will help determine whether or not it will be beneficial for us to meet again.

Q: How long will the meeting last?
A: One hour. Future sessions may require more time, but we’ve found that an hour, initially, provides a good basis for getting to know a little more about each other.

Q: What should I bring to the meeting?
A: We are sensitive to the fact that your personal financial information is just that — very personal. However, it is hard for us to help if we don’t, at least, have a fundamental understanding of your financial position. We ask that you bring information regarding your financial accounts, and your previous year’s tax return. However, we follow a pretty strict policy of not looking at any of this until you are comfortable with us doing so.

Q: What will happen after the meeting?
A: If we both decide that it would be beneficial to meet again, we’ll schedule another time to get together. At that meeting we would introduce to you the various areas in which our firm may be able to provide value to your situation. Again, there would be no solutions offered at the second meeting. That would still be a discovery meeting. At that point, you should be in a better position to make an educated decision as to whether you wish to engage the services of our firm.

Q: Who should come with me?
A: We do ask that if you are married, you bring your spouse with you. If you wish to bring any children with you to the meeting, you are welcome to do so. Anyone helping you with your retirement and personal finances is welcome to join.


*Diversification alone cannot prevent loss or create a profit but is generally considered a sound investment strategy. Investing in securities carries an inherent element of risk, even if employing diversification strategies, including investing among multiple asset classes. Past performance is no guarantee of future results.
**The asset classes presented in this report are not designed to be all-inclusive. There are many different asset class categories available from which investors can choose.