Founder & CEO
Timothy Baker, CFP® is the founder and CEO of WealthShape, an independent advisory firm built on innovation, responsibility and the real world application of research.
He spent over a decade developing a new client investment experience to specifically address the major problems facing today's financial services industry.
Throughout his career he’s held positions as an advisor, consultant, portfolio manager, and vice president for institutional money management firms with billions of dollars in assets under management. These experiences led to a new way of thinking about personal finance based on a combination of three critical elements: digital age financial planning, low cost factor-based investment management and fiduciary advice delivered by CFP® professionals.
WealthShape works with clients in Connecticut and throughout the country to deliver evidence based investment solutions and high quality advice at a low cost. Clients receive access to all investments, goals and progress in one easy to understand, secure location. The company operates under the belief that financial planning shouldn’t be static but rather vibrant and ongoing all while upholding the highest level of fiduciary responsibility.
Tim’s appeared numerous times as a guest on SiriusXM Business Radio and frequently contributes to media outlets including Investopedia, The Wall Street Journal, Investment News, US News & World Report, Financial Advisor IQ and AdvisorHUB. He holds a MBA with a concentration in Finance, is a CERTIFIED FINANCIAL PLANNER™ professional and an active member of the National Association of Personal Financial Advisors (NAPFA). He guest lecturers on personal finance via electronic media and at various locations throughout the northeast U.S. including his home state of Connecticut where he resides with his wife Danielle and their daughter Ripley.
BS, Business Administration, Southern Connecticut State University
MBA, Southern Connecticut State University
WealthShape, LLC provides this communication as a matter of general information. No one should assume that any discussion or information contained in this material serves as a receipt of, or as a substitute for, personalized investment, tax or legal advice.
Advice and Investment Design Should Rely on Reason. Not Speculation.
Timothy Baker CFP® Advisor Insights
Both mutual funds and hedge fund are professionally managed investment vehicles, but there are a couple major differences. Just about any investor has access to mutual funds. They’re diversified, easy to buy and easy to sell. Hedge funds on the other hand are only open to accredited investors who have a net worth of at least a million dollars or an income of at least $200,000 over the last 2 years. Hedge funds often have lock up periods, where for a period of time you cannot get your money out of the fund due to their propriety trading methodology that often involves leveraging.
Although not always the case, hedge fund fees are usually much higher than that of mutual funds. The typical two and twenty fee represents the 2% fee on assets under management and the additional 20% of fund profits, which goes to the hedge fund.
A company called SPIVA releases their findings on this very topic every few months or so. Their study measures the % of mutual funds that are outperformed by their relative benchmark. For the S&P 500 you would be looking at US large cap funds. Through mid-year 2015 about 65% underperformed over a 1 and 5 year period, and about 80% underperformed over the 10 year period.
The difficulties in attempting to beat the market are well chronicled. Finding the next great fund manager before they fall into the small percentage of winners has proven just as difficult. Over short periods of time it’s almost impossible to determine if any outperformance was due to luck or skill.
There are many components to what I would consider constitutes sound financial advice. Estate, tax, insurance and retirement planning all come into play. On the topic of investment management, the easiest way to determine the soundness of decisions is to measure your portfolio against a standard benchmark like the S&P 500. Please note that your overall portfolio mix should be consistent with your goals and risk tolerance.
Most portfolios have a stock and bond component. For example, let’s say your portfolio is approximately 50% US equity, 50% US fixed income. A good benchmark for that mix would be 50% S&P 500, 50% US Barclays Aggregate Bond Index. This would give you a decent idea of how your portfolio would have performed over time against a standard benchmark. Hope this helps.
Assuming these mutual funds exist within a taxable account, capital gains are taxed when realized (when you actually sell them). They can be long or short term depending on the holding period. Short term gains are taxed as ordinary income. Dividends are normally taxed at long term capital gain rates, subject to certain holding periods, but can be taxed as ordinary income if they are non-qualified.
I think this is one of the biggest issues with the Robo advisors such as Acorns, Betterment, Wealthfront etc. The easy setup and investment process discounts some of the most critical elements to successful investing. They charge low fee’s and provide well diversified portfolios, both good, but not very useful when it comes to investment and financial guidance.
Here are a couple of good reads that address some basic tenants of investing:
"The Investment Answer": Goldie and Murray
"A Random Walk Down Wall Street": Burton Malkiel
I would encourage you to familiarize yourself with simple concepts such as compound interest, tax deferral, and diversification. However, the importance of discipline cannot be downplayed, as poor behavior can have a major impact on investment performance. There is a lot of noise out there. Cutting through it can be difficult but not impossible. I hope this helps.