Dan Danford

CFP
Personal Finance, Investing, Small Business
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“With over three decades of experience in the financial industry, Dan Danford is fully committed to his clients' investment success, rather than earning sales commissions or lavish prizes. He started as a bank trust officer in 1983.”
Firm:

Family Investment Center

Job Title:

Principal/CEO

Biography:

Dan Danford is a gifted communicator. He has written hundreds of articles and several books. He has taught classes for high school, college, and community groups. He speaks often and served as commentator for a local ABC affiliate television station.

Dan founded Family Investment Center in 1998. In total, he’s been a successful senior officer in five different banking or investment firms since 1984. He earned a Master’s degree in Personal Finance from Kansas State University and an MBA from Northwest Missouri State University. Today, Family Investment Center manages well over $200 million for clients in a dozen states.

Dan is quoted extensively about investing. He’s written for or been quoted in the Wall Street Journal, New York Times, Chicago Tribune, Kiplinger’s, U.S. News & World Report and dozens of other newspapers, magazines, and media outlets.

Dan has served in numerous leadership positions for civic and professional boards including the Missouri Western State University Board of Governors and as treasurer of the St. Joseph Area Chamber of Commerce. He was Chairman of the Friends of the Free Clinic, a support group for the Social Welfare Board in St. Joseph.

Dan has been president of the Missouri Western State University Alumni Association and was honored in 2003 with the Missouri Western State College Distinguished Alumni Service Award.

Education:

MS, Personal Finance, KSU
MBA, NWMSU
BS, Marketing, MWSU

Assets Under Management:

$200 million

Fee Structure:

Fee-Only

CRD Number:

3067053

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  • Dan Danford / Family Investment Center
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3 weeks ago
    Estate Planning, Retirement Savings, Retirement Plans, Retirement
August 2017
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August 2017
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last month
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    Investing, 401(k), Bonds / Fixed Income, Stocks, Taxes
Should I keep my bond funds in a 401(k) or a brokerage account?
100% of people found this answer helpful

Putting bonds or bond funds in tax-free accounts is a very common suggestion. But I think it is kind of dumb. Or, at the very least, it places focus on the wrong thing.

It is always a good idea to consider taxes. But my experience says that many people place too much emphasis on taxes, to their detriment. Municipal bonds are a great example of this … many people who buy them are in lower tax brackets where the interest rate spread doesn’t really work. But they are so strongly opposed to paying tax that they buy them anyway! (Of course, the broker selling them couldn’t be happier.) They’d be better off after paying taxes on taxable interest.

So, let’s assume bonds are paying 3% a year. It’s right that you’d pay annual income taxes on that interest in a brokerage account. Truthfully, though, that’s not a lot of tax because it’s not a lot of income. Today’s rates are lower than usual, but a diversified investment portfolio will nearly always beat them on a long-term basis.

Put them in a 401(k) or IRA and you’ll save that bit of tax every year. But you’ve also limited the tax-deferred compound growth of your 401(k) or IRA to just 3% a year! The opportunity cost of that choice is huge. You’ve given up compounding (tax-deferred) at a much higher rate for decades. Compare the compound growth of $50,000 for 20 years at 3% to 20 years at 6%. The difference is over $30,000 in growth. And 6% estimated returns could be low for a diversified portfolio.

It is also true that the extra $30,000 will be subject to taxes when withdrawn, but those can be mitigated though good decisions when that time comes. In fact, 401(k) and IRA money stays in tax-deferred status for decades and decades.

The point of this entire discussion is to shift your thinking from tax savings to opportunity cost. Both should be considered in reaching solid investment decisions.

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