David Wattenbarger is the President at Drw Financial in Chattanooga, TN and has over 18 years of experience in the finance industry. He started DRW Financial as a fee-only financial advising and planning firm after working for twelve years “behind the scenes” in financial services, where he learned a great deal about how best to serve the needs of his clients.
David has found it valuable to continue learning, and earned his CFP® designation, as well as the Chartered Advisor in Philanthropy® designation, which aligns well with his desire to help clients align their financial lives with their own unique values. David's prior professional experience includes serving as a general principal, options principal, and municipal bond principal for an independent broker dealer, as well as extensive work with other financial professionals on a consultative basis.
David's personal values revolve around carving out quality time with his family and making the work he does worthwhile and valuable to his clients.
BA, College Scholars, University of Tennessee, Knoxville
Assets Under Management:
INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES PRODUCT, SERVICE, OR INVESTMENT STRATEGY. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER, TAX PROFESSIONAL, OR ATTORNEY BEFORE IMPLEMENTING ANY STRATEGY OR RECOMMENDATION DISCUSSED HEREIN
Your cost basis reflects your actual, net expense for the investment. The taxes paid on dividends received should have no bearing on the tax basis.
In a scenario where you bought 100 shares of a stock at $10 per share, your basis for that lot should be $1000 total, or the $10 per share. If the company paid a 1% cash dividend, that would produce $10 in cash for you...assuming the market price of the stock is still $10, you could use that cash to buy one additional share. Your overall basis is now $1010 on 101 shares, or still $10 per share. The $10 in dividend income will still be reported on your 1099-DIV and will be subject to income tax, provided the shares are held in a taxable account (as opposed to an IRA, 401(k), etc).
As always, it is best to consult a tax professional familiar with your specific case and the applicable local laws before taking action.
Does the ETF in question hold substantially more positions than just the five companies? If it is a hyper-specialized, "niche" focused fund, then the choice between holding the individual stocks or the fund hinges on one set of considerations. If it is a fund with a significantly broader portfolio, the decision framework looks different.
In the one case, where the fund is dominated by the same five companies you have identified as attractive -- does the fund hold them in approximately the same weighting you prefer? What is the fund expense ratio? How is the liquidity for the various stocks, and of the fund itself? Are your transaction expenses (to buy, hold, and eventually sell) the investments a material consideration to where the difference between five trades and one trade makes up an economically significant difference to your case?
If the ETF in question holds dozens or hundreds of stocks -- the overall expected risk and volatility of the fund is likely to be much lower than a situation where you hold just the five stocks. That also implies that your potential "upside" is far less in the ETF than in the smaller basked of stocks.
A consideration not addressed in your question is what percentage of your overall investment portfolio is appropriate to allocate to this one sector, and how much risk is appropriate to your current financial situation. Are your investments driven by "speculation", or by a longer term goal of asset growth based on a classic approach to diversified asset allocation? Being clear on your relevant goal, investment objectives, and risk tolerance can help to make the best decision in this case.
The United States income tax generally operates at marginal brackets, with your income taxed at different rates as each bracket "fills up". Only the income in the last bracket is taxed at that highest marginal tax rate.
Contributing to a tax deferred retirement savings account, like a traditional 401(k), excludes the amount of the contributions from the calculation for total income in that year for tax purposes. So in the case of your question, increasing your 401(k) contribution, holding all else equal, would lower your taxable income for the year. Your bonus may be large enough to push some of your income into a higher marginal bracket, but whatever you are able to put into tax deferred accounts will lower the total amount of income subject to income tax in that year.
As always, each person's situation may differ from the typical or general, so it is advisable to seek out a professional tax opinion on your specific case.
This is an interesting question, and has a few separate parts.
In very general terms, your state income tax(es) depends on where you are when doing the work, so per your example you would likely owe tax in your "home" state for the portion of your income earned while working from home, and from the "different" state when you are working in the office. There is additional complexity here because each state has its own particular approach to how the accounting works, and depending on the two states involved in your own case, there may be specific rules around reciprocal agreements, credits to your "home" state tax return for taxes paid in the other state, etc.
The question about the tax deduction for your travel expenses has its own complexity, and depends on the details of your situation. This topic is addressed at length by the IRS here. You will see there that you must determine whether your home or the office in the other state is your "main place of business".
Good luck, and as in most cases where complexity creeps into the situation, consider seeking out a qualified tax professional in your area to consult on details like this and in accurately completing your income tax returns.
The cash flows that occur in US dollars imply demand for those dollars; if, for example, Foreign Country X sends coupon payments to bond holders in dollars, they would have to buy those dollars in the currency markets first. Once the US dollars are in the hands of foreign bond holders, they must either (1) buy something denominated in US dollars (maybe more USD denominated investments or products imported from the US), or (2) sell the US dollars via the currency markets for "local" money.
At present, the US dollar is a major, world-wide "reserve currency", which makes it relatively more attractive for a larger number of global investors, and that attractiveness can be a somewhat self-perpetuating status. The more investments denominated in USD, the more important the currency is to global markets, which makes it more likely that future investments be denominated in USD.