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!
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.
The average cost of living in the United States for a single adult with no children is approximately $28,000. With an average dividend stock yield in the S&P 500 of 2%, you would need to have $1,400,000 invested to produce $28,000 annually to cover your cost of living. Let's say you want to take on a little more risk and invest in some individual high yielding dividend stocks like; General Motors, Altria, Novartis, Phillip Morris and Ford. Currently, the yields of these stocks average 4% - 4.5%. This means investing in a high yielding stock portfolio like this would still require to have $625,000 - $700,000 invested to produce annual dividend payments of $28,000. Besides stocks, there are other income producing strategies like bonds, specialized funds, and alternatives. Due to interest rates being at historic lows, investors are searching for income producing investments anywhere they can find them. Because of this, when you do your research, you may find a lot of conflicting information.
Once you determine how much you will need to have invested, to produce a desired amount of income, you will need to save an appropriate amount in the 5-10 year time frame you stated. You may find that this is a short time frame to accumulate such a large amount of wealth, depending on how much you are able to save and the return of your investments. Reaching for investments with potentially higher returns generally means taking on more risk and should be considered. Let's assume you are starting from zero, have 10 years to accumulate $625,000, and your investments are providing you with an 8% average annual return. Note that 8% would be considered a high rate of return and shouldn’t be assumed by every investor. With these assumptions, you would need to save approximately $42,000 a year to accumulate $625,000 in 10 years.
Keep in mind that this analysis doesn't account for any tax ramifications which may be different from person to person and should be considered. This also anticipates that you would need to assume a substantial amount of risk that you may not be comfortable taking on to reach your goals.
There isn't necessarily a best method of investing, it depends on each individual's situation and desired level of engagement. If investing is a big interest to you and you don't want the burden of paying an advisor, then you should consider a discount online broker. An advisor relationship will be more appropriate if you want a professional to work with you to reach your investment goals. Not all advisors will, or can, help you with every aspect of your financial life, but many of them will cover the big investment questions. Questions like:
- How much should I be saving to retire?
- What investments are appropriate for the level or risk I'm willing to take on?
- How can my investments contribute towards me and my goals?
I am not familiar with Merrill Lynch's fees specifically, but you will be paying for these services in some form no matter what company you choose. If you have the time, ambition, know-how, and are seeking to have some fun in the stock market, then look into a discount online broker. If you are concerned with the big life events like saving for retirement then you should consider seeking out an advisor to get you on the right track.
I hope this was helpful.