Founder & CEO
Timothy Baker, CFP® is the founder and CEO of WealthShape, an independent wealth management firm dedicated to fiduciary advice and evidence based investment management.
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 regularly appears 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.
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.
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!
Employers benefit in 4 primary ways:
- It allows them to attract new talent by offering employer matching contributions to a prospective employee’s retirement.
- It gives them a tax deduction for the contributions they make.
- Providing the plan remains in compliance with all required testing, it allows owners and other highly paid employees the opportunity to also defer funds for retirement.
- In some cases, matching contributions are not immediately vested, meaning the company gives them to you, but they don’t completely belong to you until you satisfy some period of time under continuous employment. Vesting schedules can encourage any employees who were considering a job change to reconsider or delay leaving, given the benefits they might be leaving on the table.
There are ETFs composed of other ETFs. In the same manner that a traditional exchange traded funds tracks a basket of underlying stocks or bonds, an ETF of ETFs tracks a collection of underlying ETFs. Typically you see these types of products built around a specific risk tolerance or time horizon. iShares Core Moderate Allocation ETF (AOM) is an example. It’s worth noting that these products often have additional fees above and beyond what it would cost to separately construct the underlying ETF mix.