Laurel Tree Advisors
Assistant Portfolio Manager
Alexander (Alex) Rupert is an Assistant Portfolio Manager at Laurel Tree Advisors. Alex joined the firm while earning his Bachelor of Business Administration degree focusing on Finance. He graduated from the University of Akron and joined Laurel Tree Advisors in his current role in 2014.
Alex is very active on the firm’s investment research committee, providing in-depth reports on securities and economic topics. He also reviews and analyzes investment portfolios as well as preparation and presentation of financial plans. He has developed multiple templates and tools that streamline portfolio allocation and apply investment research that the company currently uses in their business processes. Maintenance of the company website, social media and other various technological tasks are part of Alex’s routine.
In addition to creating financial plans and managing portfolios for clients that are nearing or in retirement, Alex specializes in creating financial plans for the younger demographic who want to maximize the efficiency of their income and resources.
Alex is a member of the Financial Planning Association of Northeast Ohio where he leads the technology committee and develops website strategies. Alex participates in virtual financial planning through Nerdwallet’s Ask an Advisor. Alex also participates in the Steering Committee of the Muldoon Partners at the Muldoon Center for Entrepreneurship where he helps with the strategy and direction of the group. Alex is also a member of the Estate Planning Council of Cleveland.
Alex is enthusiastic and creative, with an interest in health and fitness as well as developing relationships and becoming part of the Cleveland community.
Assets Under Management:
Answers given on Advisor Network do not include all of the information required to create a financial plan or take an official tax position. Advisor Network questions and answers will probably not apply directly to each situation. Before implementing any advice on Advisor Network, you should seek the advice of a professional expert.
In most circumstances, the answer to this question is no, but depending on your circumstances, this question could get complicated. The maximum you, the employee, are permitted to contribute to a 401(k) in the year 2016 is $18,000. If you are the age of 50 or older, you will be permitted to contribute an additional $6,000 for a total employee contribution limit of $24,000. This $6,000 is often referred to as “catch-up”. Essentially, your employer's matching contribution doesn't necessarily count towards the maximum you can contribute to your 401(k), but your employer's overall contribution can count towards how much is overall contributed to your 401(k).
Besides employee contributions, there are other forms of additions that can come into your 401(k). All forms of additions are listed below:
- Employee contributions
- Employer matching contributions
- Employer nonelective contributions
- Allocations of forfeitures
Employee contributions have a threshold of $18,000 ($24,000 catch-up) that is permitted in a year - employer matching contributions, employer nonelective contributions and allocations of forfeitures do not have individual thresholds, but all of them combined together have a threshold of $53,000. If your compensation is less than $53,000, 100% of compensation will be the threshold.
Here's an example to better understand this concept. Assume we have an individual that is 40 years old, earns $75,000 and receives a 100% employer match up to 4% of compensation. This person contributes the annual maximum they are permitted to them of $18,000. Their employer matches 100% of contributions up to 4% of compensation which, in scenario, is $3,000. Currently, we have total annual contributions of $21,000 ($18,000 + $3,000), this leaves $32,000 ($53,000 - $21,000) remaining that could potentially be contributed through employer nonelective contributions or allocations of forfeitures.
I hope this was helpful.
The first step is to create an emergency fund of the 3-6 months of non-discretionary expenses earmarked for life’s unpredictable circumstances. The next step is to properly position yourself for retirement and other future goals by saving an appropriate amount. I'm going to assume you're already on track with these important financial aspects and the $22K is essentially disposable - you can afford to lose it. If this is not the case, please look into establishing an emergency fund and a retirement fund before choosing to invest aggressively.
Considering you are new to investing; if you also do not have much of an interest in investing, then investing in a low-cost and diversified mutual fund or exchange traded fund (ETF) with prominent exposure to US and world equity can be a good option. Vanguard, along with many other companies, have multiple low-cost investment options in this category. In the process of building capital and as your portfolio grows, a good rule of thumb is to gradually transition from an equity-heavy portfolio to a more conservative fixed income portfolio. Generally, equity is perceived more aggressive than fixed income.
If you are interested in getting more involved with investing than just investing in funds, then you have an ocean of philosophies and options. Some investors may argue that you cannot take on more potential for return (become more aggressive) without taking on more risk. Risk can be defined in many different ways and not every investor can agree on a default definition. Some would call investing in something less diversified than a fund to be adding to your amount of risk, thus being more aggressive. An example of this would be investing in individual stocks. I wouldn't recommend investing in individual stocks unless you possess a strong interest, are very ambitious to learn, and have an adequate source to provide you with the information that you would need to learn the trade.
Depending on which form of investments you choose, and the type of account in which those investments are held, will determine how your taxes will be handled. You could very easily invest in an aggressive mutual fund or ETF inside of a Roth IRA with favorable tax treatment - assuming you qualify for a Roth IRA. Although, a Roth IRA is a retirement account and if you are planning to use this money for something other than retirement, a Roth IRA will most likely not be the best choice. An individual brokerage account can be used for investing purposes other than retirement. If you use an individual brokerage account, you will be taxed annually by the amount of gains you realize inside the account.
Bottom line: the securities you choose to focus on will depend on your anticipated level of involvement and how aggressive you actually want to be. The precautions you should take when considering tax planning will depend upon your goals for investing (as well as many other factors that may require you to meet with a professional CPA depending on how intricate your personal situation is).
This is a very complex question, but I hope that I have helped to get you thinking in the right direction. Best of luck!
One might get the impression that dividends are passive income because owning a stock and receiving dividends is passive in nature. Often times, portfolio income, interest, and even lottery winnings will be confused as being passive income by investors. There are only two sources of passive activity: rental activity income or business income in which the taxpayer does not materially participate.
Dividends can be classified as either ordinary or qualified. Ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates. Ordinary dividends are the most common type of distribution you would receive from a corporation or a mutual fund. You can assume that any dividend you receive is an ordinary dividend unless the delivering firm tells you otherwise.
For a dividend to be considered qualified; the dividend must be paid by a US corporation or a qualified foreign corporation and you must meet a specific holding period. For the holding period to qualify you must hold the stock that is paying the dividend for 60 days during the 121-day period that begins 60 days before the ex-dividend date. There is also a list of distinct types of dividends that are automatically considered non-qualified. Some popular examples on this list are dividends paid by:
- Real estate investments trusts (REITs)
- Master limited partnerships (MLPs)
- Employee stock options
- Tax-exempt companies
I hope you found this helpful.
The stock market is a complex animal, taking the initiative to start learning young is smart. There are a few ways you could approach thinking about this, I will list a few basic tips to get you started on the right path.
Online stock market simulators can be useful in getting yourself familiar with the market. Simulators can be even more valuable if you understand how they are different than actual investing. Usually, simulators will start you off with a large sum of money which would be unrealistic for someone that is trying to start investing from the ground up. A lot of simulators often don't include trading costs, which is something that needs to be considered when trading and investing. Above all, simulators negate most of the emotions of investing because it's not real money. There are a lot of emotions that come along with investing and should be considered, this is called behavioral finance.
Besides becoming familiar with the market, start educating yourself about it. Don't focus too much on one strategy; if you are interested in growth-style investing, make sure you learn about value investing as well. Moreover, make sure that your knowledge is well versed because you don't know how your investment philosophy will change as you age. You can start learning about various investing strategies by reading books, reading articles online, or talking to more experience investors. A good first book about investing I recommend people read is, "The Little Book That Beats the Market" by Joel Greenblatt. The book breaks down the complexities of investing and makes the concept easily relatable and understandable.
The last thing you should consider is to make yourself accustomed to the idea of saving. Most people have to slowly step their way into the stock market through IRAs, 401(k)s, or brokerage accounts by deferring a portion of their income or cash flow month to month. Not many people get the opportunity to dive into the investing world with a large sum of money, most people have to accumulate it over time. Starting to save early, along with getting yourself used to the idea, can prove to be beneficial once you are ready to start investing.
Overall, there is no right answer of where to start and starting can be very hard since there are so many opinions floating around. My advice would be to familiarize yourself with the investing world, start saving, learn from all different types of sources, and keep an open mind.
I hope you found this helpful.
There is a difference between speculative trading and investing. Trading is a tactic used in trying to anticipate market movements and to take advantage of short-term market opportunities. Investing is a strategy in which you are anticipating to profit from the long-term growth and prosperity of a company. Mutual funds are designed for long-term investing and penny stocks are often associated with short-term speculative trading. Because these concepts are opposite of each other, when combining them, you may find that you attain neither the long-term growth nor the short-term profitability.
If you wish to invest in an aggressive long-term strategy, look into small cap (domestic or international) funds. By definition, some of the small cap companies inside of a small cap fund may actually be penny stocks, but they are likely to be limited. Penny stocks tend to be classified as either Micro or Nano Cap stocks. Micro Cap stocks are defined by having a market cap (size of the company) of $50 million - $300 million, Nano Caps are under $50 million. These "micro" companies are often hard to analyze because of their size and lack of transparency, this makes investing in these companies complicated. A small cap company is defined as having a market cap of $300 million - $2 billion. Generally, investors can do better analysis on these companies when compared to the micro caps. Small cap investments are theoretically more risky than large cap (over $10 billion) investments, thus have potential to offer more of a reward over an extended period of time.
I hope you found this helpful.