Sound Asset Management Inc.
Russell Wayne is a Certified Financial Planner and President and Chief Investment Officer of Sound Asset Management, Inc., an independent financial advisor based in Weston, Connecticut primarily serving clients in the greater New York tristate region and throughout New England.
Russell began his career with Arnold Bernhard & Co., Inc., the parent company of Value Line, Inc. Positions he held while associated with Value Line included Managing Editor, The Value Line Investment Survey; Portfolio Adviser, The Value Line Mutual Funds; Executive Editor, The Value Line OTC Special Situations Service; Business Manager, Value Line, Inc.; Portfolio Manager, Value Line Asset Management; and Director of Investment Software, Value Line Software.
From 1991 to 1995, Russell was Vice-President and Chief Investment Officer with Heine Management Group. He was also Vice-President and Secretary of the LMH Fund, Ltd. Clients for whom he has managed portfolios include Xerox, Texas Utilities, National Maritime Union, and United Cerebral Palsy Association.
Russell has been a featured guest on television, including CNN and the Bloomberg Network. He has been quoted in leading business print periodicals and well-known websites, including The Wall Street Journal, Barron's, BusinessWeek, The Wall Street Transcript, The New York Times, Investment News, MSNBC, Yahoo! Finance, NASDAQ, and Facebook.
Russell earned his B.A. and M.B.A. at Hofstra University. He earned his Certificate in Financial Planning from Florida State University and has pursued postgraduate studies at New York University School of Law. He is listed in Who's Who In The East, Who's Who In Finance and Industry, Who's Who In America, and Who's Who in the World. Russell has contributed to a number of published works. His own published works include Markets, Myths, and Memories (2010) and Live Well and Sleep Well With Your Investments Now and When You Retire (2016).
Russell is a proud member of the National Association of Personal Financial Advisors.
M.B.A. (Finance and Investments). B.A., N.Y.U. Law, Hofstra University
Certified Financial Planner, Florida State University
Assets Under Management:
Whether you have invested in a few stocks or a broadly diversified group of holdings spread among a number of asset classes, the returns will be measured on the rate of return for the period you are looking at. To get a sense of how well you are doing, you would need to compare that return to an appropriate benchmark. If your holdings are all large cap stocks, the Standard & Poor's 500 Index would be the appropriate benchmark. If the holdings are small caps, you might use the Russell 2000 Index. If there are international stocks, the benchmark could be the EFA (Europe and Far East) Index. If it's a combination, you can use combination of these benchmarks. In addition, you will need to compare the volatility of your returns to that of the benchmarks. That's done by calculating the standard deviation of price changes either on a daily or weekly basis. If your returns are above the benchmark and the volatility is also higher, it may be a wash on a risk-adjusted basis. Ideally, you would want returns that approximate the benchmark with volatility that is below that of the benchmark.
It's never too early to start, but I am confused by the apparent distinction between a portfolio and a stock or a bond. If what you mean is whether to buy a portfolio of investments rather than invest in a single stock or bond, the answer is most definitely yes. But at this point I have to wonder whether the investments will be for the child's education or some other purpose. If for education, you should consider starting a 529 plan, which allows the investments to grow tax-free until they are withdrawn and used for educational purposes. Please check to see what 529 plan is offered by your state.
If not for educational purposes, you would do well to invest in an S&P500 Index fund such as SPY (Spyder exchange-traded fund) or VFINX (Vanguard S&P 500 Index fund). Regular investments in this fashion would be a better opportunity than concentrating in one or a few stocks or bonds.
The tax liability on a withdrawal depends on your age and your tax bracket. If you withdraw before the age of 59 1/2, there will be a 10% penalty in addition to the ordinary income tax liability that will be due. Without having complete information about your income and deductions, it is impossible to zero on on what you will have to pay.
It would be helpful to get the details on the approximate cost of the home you hope to buy. If, for example, you would be considering a home in the $300,000 range, that would normally require a down payment of about $60,000. The rest would be financed via a mortgage. In that case, it might be worth considering drawing down only what you need for the down payment and, if possible, making the withdrawals over the separate calendar years to help reduce the tax bite.
This is speculation based on very limited information, but I hope it's a start.
As I'm sure you are aware, the interest rates of most investment vehicles offered by banks are quite low, so it's no surprise that the account has an effective yield of 0.90 percent. Given your need to mitigate risk, you might want to consider a floating rate exchange traded fund (ticker:FLOT), which has a current yield of 1.6% or perhaps the Eaton Vance Floating Rate Advantage Fund, which has a yield of 4.3%. Unlike other fixed income instruments, floating rate securities have a built-in bonus since their interest payout rises as the prevailing interest rate rises. For that reason, they tend to be quite stable.
Although there are other options available to you, they usually have significant risk exposure, which would be inappropriate in view of the relatively short horizon you are considering.
Stock prices rise over time in reflection of increasing underlying profitability. Although there may be other factors impacting stock prices, cash flow is by far the key determinant. Although a discounted cash flow model appears to be an appropriate measure of value, it is a fallacious argument that assumes all future cash flows can be known. Indeed, there are more variables than constants in the equation. It's a simplistic, largely flawed approach.
Stock prices rise as profits rise, but valuations of those profits rise and fall. A typical rate of yearly profit growth for a mature company might be in the mid to high single digits. A typical valuation of those profits would be a capitilization rate in the mid to high teens. That rate would rise as interest rates climb and fall as interest rates rise.
Valuations tend to be richer for companies with consistent past growth since that consistency tends to suggest there's reason for more confidence in what lies ahead. For companies with checkered records or those of companies in cyclical industries, valuations will be lower, on average.
Underestimated rates of growth are evidenced by earnings surprises. Earnings surprises, in turn, are often reflected in interim price spurts.
Competent efforts to project cash flows can be helpful in speculating on future stock price ranges. Changes in psychology, however, are often even more powerful influences on the direction of stock prices.
Formulas are interesting, but not great aids in looking ahead.