Stellar Capital Management, LLC
Stephen Taddie is co-founder and Managing Partner of Stellar Capital Management. His primary investment responsibilities involve establishing the firm's economic outlook and forecast and using that research to provide input to the Investment Committee regarding asset allocation, sector, and industry weighting decisions for stocks, and yield curve analysis for bonds.
Stephen has over 30 years of professional experience in the investment field. Beginning his career as a Merrill Lynch Financial Consultant in Arizona, he finished his brokerage industry tenure in branch management with Prudential Securities on the East Coast. In the early 1990's he established a Phoenix, Arizona branch office for a mid-sized investment advisory firm, and in the late 1990's established S.J. Taddie, Inc., Investment Counsel, prior to co-founding Stellar Capital Management in July of 2000. He has worked with a select group of clients ranging from publicly traded corporations, government entities, and Native American Indian Tribes, to high net worth individuals and families across the country. He is frequently asked to speak on economic and investment management trends, has authored numerous articles and has often been quoted on the same subjects.
Stephen is a member of the National Association for Business Economists (NABE), a Panelist for the NABE Outlook (National Forecast) and the NABE Financial Industry Roundtable, the Western Blue Chip Economic Panel, the Arizona Blue Chip Economic Panel, and a member of the Arizona Legislative Finance Advisory Committee. He is a member and Past President of the Arizona Economic Round Table, a member and Past President of the Central Arizona Estate Planning Conference, a member of the CFA Institute and the Phoenix CFA Society, and an Arbitrator for FINRA. He is a past member of the Economic Club of Phoenix, the Western Pension & Benefits Conference, Arizona Town Hall, and the Madison School District Financial Oversight Committee. He has served on the Executive Board of the Desert Botanical Gardens Foundation, the Advisory and Executive Boards of the Foundation for Burns & Trauma, the Executive Boards for the Foothills Foundation, the Phoenix Camelback Rotary Club, and the Finance Committee for the Desert Botanical Gardens. He has also volunteered with Junior Achievement and coached youth sports teams.
Stephen holds a Bachelor of Science degree in Business and Economics from Lehigh University, and a Master of Business Administration from the University of Phoenix. He has earned The Certified Business Economist™ (CBE™), which is the certification in business economics, and data analytics developed and owned by the National Association for Business Economics, and the Certified Financial Manager (CFM), which is the certification in financial management issued by the Merrill Lynch Institute, Donald T. Regan School of Advanced Financial Management.
BS, Economics, Lehigh University
MBA, University of Phoenix
Assets Under Management:
Percent of assets managed
Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in newsletters, articles, or responses to questions, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your specific situation. Due to various factors, including changing economic or market conditions and regulations, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information serves as the receipt of, or as a substitute for, personalized investment advice from Stellar Capital Management, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Please remember that past performance may not be indicative of future results. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.
Investopedia Video: What Are Stocks?
A bear market can happen in stocks, bonds, or commodities, and of course, it is never announced in advance. In any case, if you think one is coming, you have to define how large of a valuation drop constitutes a bear market (many opinions on this), and how long the bear will stay around.
Deciding to defend against a bear market can be complicated if your invested assets are in a taxable account. Uncle Sam will want a piece of your realized gains if you sell investments and go to cash, the piece he takes depends on whether the gains are long-term or short-term, and what your marginal tax rate will be.
The most direct answer would be, investors move some money to cash, not so much to defend, but to create the ability to be opportunistic, and this move is ideally made prior to a market being defined as a "bear market" by the press. I say defend, because most "investors" remain mostly invested for the long-term, because constantly jumping in and out of the market is often ineffective and expensive from the standpoint of opportunity cost, transaction cost, and tax cost.
Long-term investors would seek to offset some of the general market risk by adjusting allocation to less at-risk sectors of the specific market they are invested in. e.g. favoring government bonds over corporate bonds, short term maturities over long term maturities, value stocks over growth stocks, underweighting and/or overweighting specific sectors, etc., etc.
If you are a long-term investor, and can lose less when the markets retreat, and stay with the market when markets advance, typically you win the game.
Hope this helps,
As a Participant, don’t get too hung up on the expense details regarding 401k plans. Investment fees are but one part of the fee structure to pay for the administration of an employer sponsored retirement plan. Often revenue sharing from those fees are paid to recordkeepers, administrators, custodians, etc., to provide services to the plan. Talk with your firm’s management about when they last reviewed other plan providers, it might be time....
I think you have a decent idea of using lower cost funds that are available in the plan, if you can augment that investment with outside investments that give you a well-rounded overall portfolio. At 37 years of age and a 25% tax bracket, contribute as much as you can, and if your plan offers a Roth 401k contribution option you should seriously consider it. Money you put away now has a long, long time to grow!
Hope this helps.
You may not like this answer.
This was a loan you took on, for a Master’s degree that you will reap the rewards for. Unless you live in a commune, why should your mother pay off your loan? She may need it to pad her portfolio to support her in retirement.
If you are looking to reduce the interest expense, see what your refinanced rate would be first, then figure out if borrowing money from your mother to pay off your loan would be mutually beneficial. After all, it is her money, and she can invest it for her benefit anywhere she would like. An inter-family loan at an interest rate of 5% may be fair to all concerned, but, just make sure you intend to pay it off, as poorly executed family loans can be the start of much interfamily strife.
There may be more going on behind the scenes (usually is), but this is my opinion based on the information shared.
Hope this helps,
As you note, less diversified investments typically experience more price volatility than diversified investments. That said, a portfolio of more volatile individual investments can be constructed so that overall volatility of the portfolio is lower than any one of the individual investments. In a perfect world, a portfolio of sector ETFs allocated to match the sector weights of the S&P 500, should perform about the same as the S&P 500, less of course the investment expense associated with buying and selling commissions and management fees of the ETFs. If you are using a single sector ETF to lean a little heavier into one sector or another, I would contend that you are hoping to use forecasted volatility in that sector to your benefit, as positive volatility would enhance returns as compared to the market index. Just keep a handle on how far you lean.
The more focused the mutual fund or ETF is, the more responsibility is shouldered by the investor or manager to properly allocate the portfolio amongst sectors, industries, capitalization weightings, etc. That responsibility is magnified further when owning individual company stocks. There is nothing inherently wrong with investing in more volatile individual investments, as long as the portfolio maintains the proper risk level for the investor.
In my opinion, there are three types of risk involved when dealing with bonds; credit risk, liquidity risk, and interest rate risk.
Are US Treasuries free of credit risk? Most likely, as a US investor, it is the best credit one can get, as if a US Treasury bond cannot make a required interest payment, or pay principal upon redemption, it would be catastrophic for the exchange value of the US dollar, and catastrophic for the US and global economy. Many other things would go horribly wrong in short order should the US default on its debts.
Are US Treasuries free of liquidity risk? Most likely, due to the US currency being a global reserve currency and sheer number of bonds traded during a normal day. Something would have to change with regard to credit (mentioned above), status as a reserve currency, or lack of US Treasury bonds on the market to create liquidity risk.
Are US Treasuries free of interest rate risk? No. As one goes further out in maturity to capture yield, the interest rate risk on any fixed rate bond increases. An investor buys a specific coupon rate for a period of time when they buy a fixed rate, fixed maturity bond. If longer-term interest rates increase, the current value of a longer-term bond decreases, and if longer-term interest rates decline, the current value of a longer-term bond increases. This relationship is based on the relative value of the interest rate the investor bought versus the interest rate that could be bought presently on similar maturity, similar quality bonds in the open market.
In my opinion, interest rate risk is where investors should focus their efforts when dealing with US Treasuries.
A fourth risk would be currency risk, but that would primarily apply to foreign investors, or US investors evaluating portfolio performance via some measure of comparative global purchasing power.