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.
First, you should be commended for wanting to learn more about investing. I’m 100% for learning about capital markets, how they work and the principles of investing. While I won’t dissuade you from taking any of the aforementioned courses, I will make a few comments.
Day trading is a highly speculative endeavor that pits you against millions of other market participants seeking to profit from fundamental mispricing’s or technical analysis. In order to be successful you would have to believe that you knew something that millions of others didn’t. For arguments sake, lets suggest that you did. What are the chances that you will be able to act on that information prior to everyone else? News travels in milliseconds and even small mispricing’s can be arbitraged away very quickly.
I don’t have much advice for speculators largely due to the huge amounts of evidence suggesting you’re highly unlikely to outperform the market. Furthermore, even if you did, it would take years to determine whether your efforts were the result of skill or luck.
Lots of charts or data mining systems appear intuitive in hindsight. I tend to be skeptical of any company selling their methodology on becoming a profitable day trader. After all, if they truly had a formula that produced superior results, it would stand to reason that teaching it to others would only diminish its value because everyone would use it.
Happy St. Patty’s Day!
This is a question on the minds of many during a turbulent election year. You’ll hear numerous opinions on the correlations between markets, elections, and political parties. However, the vast majority of talking heads are purely speculating.
Markets continually adjust to news, which by definition is unpredictable. We have to assume that current market prices are good estimates of underlying value because they represent the collective interpretations from millions of investors. In essence, markets are currently pricing in all the ramifications. Timing the market is a dangerous endeavor mainly because you have to make two perfect decisions (when to get in, when to get out), and you have to make them over and over again. Markets often react violently in both directions. Missing even a few of the best days can seriously impact performance.
Risk and return are inextricably related. Modern Portfolio Theory takes into account the specific risk characteristics of various types of assets and how they move in conjunction with one another. It actually defines diversification. It’s fairly easy to gain inexpensive exposure to US markets, International markets, Bonds or Government securities in the form of a low cost index funds. While systematic (market) risk cannot be diversified away, heavy exposures to any one particular company, asset class or country can be.
Any discussion of risk should be in the context of long-term goals and your emotional tolerance for it. Asset allocations shouldn’t change for reasons related to things beyond your control such as the outcome of elections. That being said, staying the course with a well diversified, risk appropriate asset allocation is the sensible thing to do.
Your understanding of Business Development Companies is correct. They’re basically venture capital funds that that are made available to non-accredited investors in the form of a closed end company. 90% of their taxable income is distributed to shareholders in the form of dividends. At the time of this writing there are only about 60 public and privately traded BDC’s.
In terms of there appropriateness for retirement assets, I tend to air on the side of caution when looking at any one particular company. While, the underlying BDC holdings can have a degree of diversification, you are still taking on manager risk. In 2008 a lot of these companies saw significant losses. In evaluation any investment it’s important to understand the historical volatility. I’d suggest looking at standard deviation as compared to a good benchmark associated with it like the S&P BDC Index. When would they be reasonable? Looking at the S&P BDC Index, these companies have collectively had a rough go of it over the last 10 years. In my opinion, there’s not enough data and constituents to suggest inclusion. I don’t often see these as an investment option in the fund menu for many 401(k) plans unless someone is selecting the self directed brokerage option.
Your participation in the 401k plan makes you an "active participant" and therefore by IRS rules, you may not be eligible to claim a deduction for a “Traditional IRA” contribution due to your compensation level.
For emergency purposes I generally recommend keeping 3-6 months of expenses in liquid vehicles such as savings or money market accounts. This may not be the case for you, but taking distributions prior to age 59.5 from a Traditional IRA carries a 10% penalty along with regular income tax liability.
While “Roth IRA’s” do not offer deductible contributions, they are not affected by an individual’s active participant status. Distributions of your original contribution amounts plus the growth from a Roth IRA are tax free providing the Roth has been open for a 5 year time period and you are over 59.5 years old. An investor can still withdraw the original contribution (not the earnings) out of a Roth IRA without tax or penalty, even if the five-year period hasn't passed.
The annual limit for 401k contributions is $18,000 with an addition catch up contribution of $6,000 if you are over 50 years old. Given that you seem to be contributing at least $3,000 under the limit, you could increase your 401k contribution level to receive an added tax benefit. It is general advisable to maximize 401k contributions prior to opening an IRA, especially is your employer has a favorable contribution matching formula.