Deva Panambur, CFA®, CFP® is the founder of Sarsi, LLC. Sarsi, LLC is an independent, fee only, Registered Investment Advisor, serving individuals and institutions. We primarily provide the following services: 1.Financial Planning: Overall financial situation of the client including cash flow, debt management, risk management/insurance, estate planning and tax planning. 2. Investment strategy 3. Asset allocation and risk management 4. Manager/Investment product selection 5. Investment monitoring and reporting.
Prior to founding Sarsi, LLC in 2010, Deva was a Senior Vice President/Partner at Executive Monetary Management (EMM), a wealth advisor with over $2Bn in assets that was a part of Neuberger Berman, before being spun off into an independent firm in 2009. At EMM, Deva led manager selection and due diligence and had joint responsibility for economic analysis, strategy analysis, portfolio management and risk management pertaining to investments of ultra high net worth clients and institutions.
Prior to joining EMM, he was a portfolio manager at the alternative strategies group of Merrill Lynch; a research analyst at Chesapeake Capital Corporation- a hedge fund; and a risk and business analyst at Deutsche Bank Asset Management where he supported various investment groups. He began his career at International Seaports Pte. Ltd. in international project finance in the Far East and the United States.
Deva earned a Bachelor of Technology from the Indian Institute of Technology, India, a Master in International Management from the Indian Institute of Foreign Trade, India, and an MBA from Thunderbird School of Global Management, Glendale, AZ. He has been awarded the Chartered Financial Analyst designation and is a CFP® professional.
He regularly provides expert advisory services to top consulting firms and asset management companies regarding the business and investment aspects of the investment industry. He is an Adjunct Professor of Personal Finance at Montclair State University in New Jersey and in his spare time trains candidates appearing for the CFA exam.
MBA, Finance, Thunderbird (Arizona State University)
BTech, Metallurgy, Indian Institute of Technology
Fee only. Asset based and/or fixed.
Sarsi LLC (“Sarsi”) is a Registered Investment Advisory Firm regulated by the State of New Jersey in accordance and compliance with applicable securities laws and regulations. Sarsi does not render or offer to render personalized investment advice through this newsletter. The information provided herein is for informational purposes only and does not constitute financial, investment or legal advice. Investment advice can only be rendered after delivery of the Firm’s disclosure statement (Form ADV Part II) and execution of an investment advisory agreement between the client and Sarsi.
Sarsi, LLC Introduction
If you have dependents, then having insurance is extremely important. Pure insurance (Term life) is the cheapest form of insurance and if you get it for an appropriate amount and appropriate duration, then it should take care of your requirements. Whole life insurance adds an investment product to the pure life, and you get the benefit of tax deferred (Not tax free- more on that later) investment option. Personally, I am not an advocate of whole life, but I do understand that there are some benefits, the biggest being that it forces you to save, although you can do that using retirement products such as a 401 (K).
To see it makes sense for you consider the following:
1. Based on your numbers, it seems your whole life insurance will give you about 4-5% rate of return over about 30 years. If you think you can do better than that then obviously it is not for you.
2. Taxes: Have you maxed out your 401(K) to which you can contribute $18,500 or $24,500 over the age of 50? If you are self-employed, you can sock away up to $55,000 into retirement products such as a SEP IRA or a Solo 401 (K). These accounts give you the same tax deferred status as a whole life insurance (i.e. if you use it as an investment and not for your dependents- in the latter case there is not capital gains or income tax although there maybe estate taxes).
3. The dividends and cash value you receive from whole life are not taxed up to the amount or premiums you have paid. Anything over that is taxed as ordinary income.
4. Estate planning: Lifetime estate tax exemption is $11.2 MM for the next 7 years and will revert back to 2017 level of $5.49MM adjusted for inflation. The amount is double for a married couple. Your estate does not have to be through a life insurance to derive this benefit- in fact insurance proceeds are included in the estate if owned by the deceased. The point being you don’t necessarily have to buy whole life insurance for estate planning.
5. If you take withdrawals from the whole life then the death benefit is reduced by that amount.
6. Liquidity: Fees in life insurance are usually front end loaded which means you will be penalized if you withdraw or surrender early- moreover, your cash value only accumulates to a meaningful amount over several years. If you need more liquidity then you may want use other options
The biggest difference is the stage at which their target is in. Venture capital firms, for the most part buy stakes in companies that are young, usually pre-IPO including day one or even pre-operational. Private Equity firms usually purchase firms that are slightly more mature and established and have operations- they can be either private firms or public firms.
I once read an interesting quote on the difference between the two: “In Private equity you start with the numbers and then make everything else into the number. In Venture Capital you start with the people and then see what numbers you can make"
A Roth IRA does not have RMD (Required Minimum Distributions) requirements except in some cases when it is inherited.
With a Roth 401K, if you are retired or are a 5% owner of the company, you have to begin taking RMD at age 70.5.If you are not retired and not a 5% owner you don't have to take a RMD.
Distributions do not incur taxes if account is over 5 years old and you are over 59.5 years.
If you want to avoid RMD on your Roth 401K (If retired or a 5% owner)), then you should roll it over to a Roth IRA. The rollover, if done properly will not incur any taxes and you don't need to take an RMD on the Roth IRA.
If you have both a regular 401K and a Roth 401K then the the regular 401K can only be rolled over to an IRA, if you want to avoid taxes on the rollover. You will have to take RMD on the regular IRA. The Roth 401K can be rolled over to a Roth IRA as disussed above.
I don't remember the details in the movie, but when you buy credit default swaps on mortgage bonds you are required to pay a premium periodically (usually quarterly). This is very similar to the premiums you pay for any insurance such as a car or life insurance. The notional value is the value of bonds you are insuring. You don't need to own the bonds. (And hence the term 'financial engineering!)
If the price of the bonds falls, your counterparty (Banks who sold the credit default swaps) will make payments depending on how much the bonds fell from its initial value when the CDS was purchase.
For example, if you buy insurance on $100 worth of bonds and pay a premium of 1% you are required to make 25 cents every 3 months. If the value of the bonds falls to $75, you will get a payment of $25 (The amount by which the price of the bond fell). The $100 is called the notional value.
The $1.3Bn I believe is the notional value of the bonds on which Dr. Burry purchased insurance. Before the financial crisis the premiums were very low (Because most of the banks never thought the value of the bonds would fall- just as your car insurance will be low if the insurance company thinks you are unlikely to have an accident). So, he was paying a relatively low premium with very high expected pay off if, as he forecasted, the value of the bonds fell. It did fall and he reaped the benefit.
Knowledge is certainly important, and you should read and learn as much as possible and speak to people who could educate and guide you. However, if you keep your investing plan simple, the earlier you start and the more disciplined you are in creating and sticking to an investment plan the more likely you are to succeed in your objectives. Here is an article on the importance of starting early to allow the time value of money/compounding work in your favor. https://www.investopedia.com/advisor-network/articles/how-make-time-value-money-work-you/ Investopedia has several other articles that may help you as well.
You are way ahead of your peers in thinking about these things and asking questions like this- keep it up! All the best.