Fund Trader Pro, LLC
Chief Investment Officer
William 'Bill' DeShurko started in the investment industry in 1987, learning early the financial perils of bear markets during Black Monday (October 1987) when the DOW dropped more than 20% in a single day. That lesson has guided Bill's investment strategy ever since. During the "Tech Wreck"in 2000 - 2001, frustrated by the losses in typical "buy and hold/diversified" portfolios, Bill created the computer based algorithm used today at www.FundTraderPro.com. The strategy behind the algorithm was tested using data from 1972 - 2005 by Professors Samuel L. Tibbs and Stanley G. Eakins. The results were co-authored with Mr. DeShurko and resulted in the paper, "Using Style Index Momentum to Generate Alpha" that won the Charles H. Dow Award in 2007. The Charles H. Dow Award is the most prestigious annual award given for the best paper that advances technical analysis in the year. The award is granted by the Market Technicians Association, the home of the Chartered Market Technician® (CMT) Program, the preeminent, global designation for technical analysis.
His blog can be found at: www.deshurkoblog.com
Author of: "The Naked Truth About Your Money" a primer for the Millennial Generation and all new investors to help with making responsible financial decisions. Available at: https://www.amazon.com/Naked-Truth-About-Your-Money/dp/1592576508/ref=sr_1_1?ie=UTF8&qid=1485467128&sr=8-1&keywords=deshurko
Contributor to multiple financial news sites including; www.HorsesMouth.com, www.MarketWatch.com. www.Kiplinger.com, www.theStreet.com and more...
Bill is also a board and finance committee member for Homefull Inc. a non-profit group seeking to end homelessness in Dayton Ohio.
Managing Member and owner of 401 Advisor, LLC a registered investment advisor, since 2004
BA. Economics, University of Rochester
The opinions expressed are those of Bill DeShurko. Past performance is not a guarantee of future success. Consider all risks before investing and it is always advisable to consult with a professional before making investment decisions.
AI Marketing Video Bill DeShurko
No, please wait! Just kidding!!!!
My words of advice are this: Avoid any insurance product that is pitched for "tax deferral". May sound good now but such products are ridiculously overpriced, destroy liquidity and just push you into higher tax brackets when you do want your money. Let me broaden that to say, don't invest in anything that does not stand on its own investment merits without any alleged tax benefits. Never invest in anything where you need to borrow back your own money to spend it. Other than municipal bonds, in 30 years I can't think of a tax advantaged investment that I didn't regret using for my clients.
What to do: Start building a very solid boring portfolio of high quality large company stocks. Stocks are tax deferred until sold. Unlike annuities and insurance products, when cashed in you pay lower capital gains taxes instead of higher ordinary income rates. Individual stocks have no insurance or management fees. In 30+ years every single account of substantial size that a client has inherited looks nearly the same - filled with bellweather stocks (yes many pay dividends that are taxable, but like capital gains at a lower tax rate). Reinvest dividends when paid and take advantage of compounding.
Read about investing - not the BS "How To..." books, but focus on books about or that interview real successful investors. Read about Warren Buffett. Read the series of books by Schwager - The Market Wizards, The New Market Wizards... Also "Just One Thing" by John Mauldin. Anything by Michael Lewis. By 40 you will be your own market "guru"!...and pretty darn wealthy!
Not only are taxes lower on dividends then an IRA withdraw, but think of it this way; if you take regular distributions from a mutual fund within your IRA, what happens if the market declines? You would be liquidating shares of your mutual funds to meet your distribution requirements. This depreciation accelerates the lower and longer the market declines. When the market does recover, your account will be worth less than what you started with because you have fewer shares.
On the other hand, if you have a portfolio of solid dividend stocks, you can live off your dividends and not sell any shares of stock even during a market downturn. When the market recovers, your portfolio should too.
Even though you lose the tax advantage, I recommend using dividend stocks in your IRA as well and match your distributions to the portfolio's dividend yield.
If only it were that easy everyone would be driving a Mercedes! Just for background info understand that anyone can create an index...and sometimes I think about everyone has. An index is simply a rules based systematic way of buying and selling a specific set of investments. An index fund then replicates the buy and sell rules created for the index. Most Exchange Traded Funds are based on some index.
Index funds are generally inexpensive, a big plus. But the most popular index, the S&P 500 is also very volatile. Yes it is doing great now...but only a fool would invest assuming it will do nothing but go up in value into the foreseeable future. From 2000 - 2002 the S&P 500 dropped about 50% and again from 2007 - 2009. A holder of the index on January 1, 2000 did not see their account show a permamnet gain until 2013! Despite this, the S&P 500 has historically outperformed other asset classes over the very long run - 20 year+ periods of time. Just want to make sure you understand the risk before jumping in.
One way to lower your risk is to dollar cost average into the index. One way to do this would be to move money into a savings account. Open an account directly with Vanguard, and make an initial investment into their S&P 500 index fund. On the application you can sign up for systematic investments. Have them take an amount from your savings account every month to invest in the fund. I would divide the amount you want to ultimately put in the fund by 36 and have that amount invested monthly over the next three years. If the market crashes you'll have cash available to buy in at the bottom.
How about both? Invest in a portfolio of stocks that pay a dividend and have historically increased their dividend over time. Receive the dividends as cash and use the added income to pay extra on your mortgage, or reduce your out of pocket mortgage expenses. In the end, you will have a paid off home AND a nice portfolio.
The RMD for a 74 year old on $25,000 is just over $1,000. So by contributing $25,000 to a 401(k), you defer taxes on $25,000 of taxable income. According to the IRS life expectancy table, that $25,000 will be withdrawn from the IRA over the next 23.5 years, which allows you to continue to defer taxes on the gains made on the balance over that time.
As long as you have more than $25,000 of taxable income, I would make the contribution.