Where to put your savings… in the market or in your mortgage.

One of the most common questions I get from clients is, “If I have a little extra to save each month, should I use it to accelerate my mortgage payments or invest in the market?” First, I respond to the question with a question, “What is the rate of return you earn by paying down your mortgage…?” Answer – It’s your mortgage’s interest rate less any savings generated in the form of itemized tax deductions. I like examples so I’ll show one here: You have a $450,000 mortgage with a 4.50% fixed 30 year loan. You and your spouse have a combined top federal tax rate of 25%. Your rate of return paying down this debt is as follows: 4.50% X (1 – .25) = 3.38% The next step is to evaluate your alternative… investing in the market. To keep it simple, the S&P 500 index has averaged a total annual return of ~7.6% in the last 10 years, a range including 2008, the second worst stock market year in U.S. history. Let’s assume that’s an after tax return of 6.5% (dating back to the 1970s, returns have actually been significantly better than this). So why would anyone take a […]

Still Going Up

The Dow Jones Industrials are up 3%, the S&P 500 is up 5%+, and the NASDAQ 100 is up 8%+ since our last post in mid April. So much for fears of the Fed raising rates; so much for concerns about an expansive Russia; and so much for oil field takeovers in Iraq and Syria. Nothing seems to be able to stem the flow of capital into stock markets. Even emerging markets are up over 8% after an extended period of under performance. The social media stocks and other momentum names are still trading well beneath their highs of earlier in the year. This is probably a good sign in that the broader market seems to be lifting as the U.S. economy chugs along as opposed to chasing momentum. There have been only two market pullbacks of note since the beginning of the year, one in late January and the other, much shallower, in early April. Now the underinvested, who had been expecting a deeper correction, are worried about being left out of rallies and the pullbacks, like the one last week, are bought quickly. So, as has been the case, with almost invisible bond yields, institutional investors not fearful […]

Where Might We Be Going?

We suspect the Putin Show will add volatility to the markets as he tries to re-claim parts of the old Eastern Bloc countries. This could go on for some time. However, as Europe patches together how to re-distribute energy supplies, and it becomes somewhat less likely that Russia will invade someone, the markets should settle down some by fall. By back to school we likely will have had two decent earnings seasons (Q1 and Q2,) reflecting modest to good growth in the U.S. economy, and we may even see the Chinese economy somewhat stabilized around a 7% growth rate, which should be a level generally acceptable to the markets. What to do? We think stocks will provide solid returns in 2014, but probably most coming later in the year. We should try to maintain core positions during periods of volatility while avoiding heavy losses if the market suffers from an extreme geo-political event. * Maintain stops at critical, long term support levels on stocks and ETFs. (One can always re-enter key position when things settle down.) * If for some reason they haven’t been stopped out, clean out stocks that are serious earnings disappointers. * Add to key positions and […]

OK, We’re Finally Looking Pricey

After a relentlessly up market late in the year last year and a 5% pullback in late January, that we’ve recovered, we’re finally looking pricey: * We’re at or near all-time highs in most of the U.S. major stock market averages/indices. * Valuations on the most over-heated momentum stocks are more than anyone can justify. * Even stocks growing at less than 7% per year are trading at 16-19 times 2014 earnings estimates. * Dividend yields on Blue Chips have slipped closer to the 2% level from over 3% early last year. In addition, the last two jobs reports have not been good and will be pointing to a slower economy if they don’t rebound after the bad weather in the East. China’s economy seems to be slowing which can slow business for our biggest exporters. As well, retailers in the U.S seem to be suffering from more than just the bad weather. So, we think we’re at a point where it is difficult to keep adding to stock positions. Stops should be tightened on big winners and big laggards, and cash should be accumulated for the inevitable bargains. Valuations on most stocks are not extremely high and a general […]

New Home for Investip Blog

Over the next few weeks we’ll be transitioning our blog subscribers over to our new Marin Wealth Advisors Blog. As before, you’ll see simple, timely tips to help you with your investing and financial planning responsibilities. What’s new is that you will also see posts from my associates, Ed Burke and Wayne Best, as well as posts from our professional friends with deep knowledge in tax planning and estate planning. Thank you for reading and staying connected. Bob Hunter

Welcome to Our New Website

We are pleased to launch our new web site and celebrate the opening of our new office. Please contact us at Marin Wealth Advisors LLC 899 Northgate Drive Suite 300 San Rafael, CA 94903 415.458.5880415.458.5880 or 800.758.3768800.758.3768 info@marinwealthadvisors.com Call Send SMS Add to Skype You’ll need Skype CreditFree via Skype