Deva Panambur, CFA®, CFP® is the founder of Sarsi, LLC. Sarsi, LLC is an independent, fee only, Registered Investment Advisor, serving individuals and institutions. We primarily provide the following services: 1.Financial Planning: Overall financial situation of the client including cash flow, debt management, risk management/insurance, estate planning and tax planning. 2. Investment strategy 3. Asset allocation and risk management 4. Manager/Investment product selection 5. Investment monitoring and reporting.
Prior to founding Sarsi, LLC in 2010, Deva was a Senior Vice President/Partner at Executive Monetary Management (EMM), a wealth advisor with over $2Bn in assets that was a part of Neuberger Berman, before being spun off into an independent firm in 2009. At EMM, Deva led manager selection and due diligence and had joint responsibility for economic analysis, strategy analysis, portfolio management and risk management pertaining to investments of ultra high net worth clients and institutions.
Prior to joining EMM, he was a portfolio manager at the alternative strategies group of Merrill Lynch; a research analyst at Chesapeake Capital Corporation- a hedge fund; and a risk and business analyst at Deutsche Bank Asset Management where he supported various investment groups. He began his career at International Seaports Pte. Ltd. in international project finance in the Far East and the United States.
Deva earned a Bachelor of Technology from the Indian Institute of Technology, India, a Master in International Management from the Indian Institute of Foreign Trade, India, and an MBA from Thunderbird School of Global Management, Glendale, AZ. He has been awarded the Chartered Financial Analyst designation and is a CFP® professional.
He regularly provides expert advisory services to top consulting firms and asset management companies regarding the business and investment aspects of the investment industry. He is an Adjunct Professor of Personal Finance at Montclair State University in New Jersey and in his spare time trains candidates appearing for the CFA exam.
MBA, Finance, Thunderbird (Arizona State University)
BTech, Metallurgy, Indian Institute of Technology
Fee only. Asset based and/or fixed.
Sarsi LLC (“Sarsi”) is a Registered Investment Advisory Firm regulated by the State of New Jersey in accordance and compliance with applicable securities laws and regulations. Sarsi does not render or offer to render personalized investment advice through this newsletter. The information provided herein is for informational purposes only and does not constitute financial, investment or legal advice. Investment advice can only be rendered after delivery of the Firm’s disclosure statement (Form ADV Part II) and execution of an investment advisory agreement between the client and Sarsi.
I would take a step back and ask you if you are sure you want to invest in individual stocks as opposed to broad market ETF or a low cost mutual fund. You can do very well with individual stocks, provided you have the time and the inclination to put in the effort required. While there are many examples of people who have done very well investing in individual stock, there are many more examples (especially of small investors) who have done very poorly. These small investors would have done much better dollar cost averaging (ie investing over time) into a broad ETF or low cost mutual fund, especially if they have a relatively small amount to invest.
Assuming you are convinced you want to invest in individual stocks, you have to decide what method you want to use to select stocks? You mention Beta, expected ROR and high/low price. These 'factors' are concepts that are used for technical/statistical analysis. This method is model based. Other factors you can use are momentum, trend, some fundamental factors like Price/Earnings, ROE, margins etc.
On the other hand, if you want fundamental analysis, then you have to understand the business and the industry, its growth prospects, and the quality of the management. You have to evaluate profitability/return on capital, cash flows, balance sheet quality, historical performance/future prospects, etc. If you use this method, then stick to businesses that you know and understand. If you use fundamental analysis, then the price per se is not a consideration. As they say: "Price is what you pay, value is what you get."
This is a great question. In general, it is never too early (or too late) to start saving for retirement and a 401(k) plan is a great way to do it in a tax advantaged manner. Contributions to a 401(k) are made with 'pre-income tax dollars' and the account grows tax deferred until you withdraw from it at retirement. At that time, you will pay your then applicable income tax rate on your withdrawal.
So, from a retirement planning perspective, if your cash flow situation allows for it, then you should contribute as much as posssible to your 401(k) (for 2017 you can contribute upto $18,000 pre-tax), irrespective of what percentage of your contribution your employer matches.
If you cash flow situation does not allow for maximum contributions, then you should strive to at least contribute as much as your employer matches or else you will be turning away free money.
Taking the example you have provided (i.e. 100% up 3% or 50% for upto 5%), both these result in an instantaneous return on your contributions (Because of the tax advantage and the matching). While, one is better than the other per se, that difference will be reduced if you contribute more and the money compounds over a long time. Besides, while what return you earn is important, HOW MUCH you save is more important. For example, I could get a 10X return on $100, but that still comes to $1000, on the other hand a 10% return on $100,000 leaves me with $110,000. So, bottom line is to contribute as much as possible.
Beyond this, it depends on your specific case (Salary level, cash flow, terms of your 401(k), etc.). For example, you may be able to contribute to an Individual IRA as well as a 401(k) so that you can take advantage of the higher matching % and still contribute more to suit your cash flow.
The simple answer is NO. But, this is a common misconception that people have- I teach a course at a university in NJ and I always get asked this question.
Income tax rates are called 'marginal' because each tax bracket is applicable on your next dollar earned. So, any incremental money earned at any level does not affect the tax on money earned below that level. Otherwise, as one gets to a higher tax bracket they would be motivated to earn less to pay lower overall taxes!
However, for planning purposes, especially as it pertains to withdrawal from your regular IRA, you may want to plan and see if you could withdraw some money during your ‘lean years’ when you are likely to be at a lower tax bracket. You are taxed on your 'yearly income’ (and capital gains realized in that year) so shifting your withdrawal to lean years can result in your paying lower taxes on your traditional IRA money. IRS rules however, dictate the minimum amount you are required to withdraw when you get to 70.5 years.
Thank you for your question:
Couple of definitions first: 1) A put option gives the buyer (holder) the right but not the obligation to sell the stock at a particular price (Strike price) at a particular time. (Limited loss, unlimited gain) Conversely, the seller of the put is OBLIGATED to honor the contract if the holder wants it. (Limited gain, unlimited loss). If the stock price is below the strike price at expiration, the holder's position is profitable and the seller's is unprofitable.
2) It is the reverse for a call option- call option gives the buyer the right to purchase the stock at a particular strike price. If the stock price is above the strike price at expiration, the holder's position is profitable and the seller's is unprofitable.
3) As a buyer of an option, you will be assigned the stock only if you exercise it. If not, if the option is profitable, you will get the $ difference at expiration. If the option is unprofitable at expiration, it expires worthless. In the case of a put, the seller will get 'assigned' the stock if the stock price is below exercise price and the buyer exercises it . If the seller does not want to be assigned the stock, she has to cover it (ie buy it) before expiration. The seller of a call gets the stock 'called away' if the stock price is above the strike price and she owns the stock. If she does not own it, she will be short the stock.
4) When you have the words 'to open' in an order it is the first leg of any trade. So 'buy to open' means buy first (And then sell). 'Sell to open' means sell first. 'To close' is the second leg, ie the trade to close the position.
In your case, as the seller of the put option you were assigned the stock because stock price was below the strike price. You had a few choices at that time a) Sell the stock at a loss. b) Hold on to the stock c) With the stock price below the original strike price, if you wanted to sell the stock at that original strike price and collect a premium for waiting, using an option, you would have had to sell a call at that original strike price. You would have received a premium and if and when the stock price went back up to that strike price, your stock would have been called away. On the other hand, if the stock fell, you would have suffered further losses. d) If your objective was to protect the stock that was assigned to you, you would have had to buy a put. But, you would ideally do it at the current stock price or below (you would do it at a higher price, paying a higher premium, in some cases).
Instead, you bought a call at that strike price by mistake- which essentially meant you had double the exposure to the stock. At expiration, if the stock price is higher than the strike price, you have a choice. 1) Do nothing, in which case as a holder of the call you will get the profits 2) Exercise the option in which case you will get to own the stock (In addition to the stock you already were assigned through the put).
At expiration, if stock price is below strike price, your call option will expire worthless.
Finally, having bought the call unintentionally, if you wanted to close the position out before expiration, you would 'sell to close' the call option and depending on the underlying stock price it would be at a loss or gain.
Apart from what has been discussed already below, I'll add my own opinion.
- Don't let the 'fee tail wag the dog.' Clients should be going for someone who is not only charging a reasonable fee (Under 1% if asset based fee), but also is providing good value for the fee charged. For example, many advisors include some amount of financial planning services for the asset based fee charged.
- Understand the importance of 'alignment of interest.' For example, some advisors are structured as fee-only. They do not get any commissions and, therefore, have an 'open architecture' in that they can use any product and usually choose the best available product for the client. Clients should look for advisors who will go to bat for them.