For many of our clients, the idea that their portfolios should “never walk alone” is probably obvious enough.
When you need to withdraw cash from your investment account and you’re told the funds aren’t available, it can be a little unsettling, particularly when you know you have more than enough to cover the withdrawal. “What do you mean, the funds aren’t available? I can see them right there!”
The term portfolio management typically refers to investments and how assets are selected based on one’s time horizon and risk tolerance. This process of selecting the right allocation for your investments is essential for achieving a certain market return over time.
We are always looking for ways to improve the performance of our clients’ portfolios by providing high-quality investments while keeping fees low. All mutual funds and exchange-traded funds charge an expense ratio, which is the cost of operating the fund and includes the manager’s fee, as well as various other operating costs. These expenses are not the same as loads, so even a no-load fund has an expense ratio. While loads (sales commissions) are additional charges, expense ratios are internal costs that reduce the fund’s total return. We purchase no-load funds for our clients and endeavor to use funds with expense ratios that are low relative to peers. Still, within the universe of no-load funds, there are various share classes, each of which charge a different expense ratio. While an individual might be able to purchase a no-load fund directly from the fund family, the expense ratio for the available share class will be higher than for an institutional share class of the same fund. The latter is reserved for larger investors (or institutions with many clients) and generally has a large minimum investment requirement. In exchange for the higher minimum, the fund charges a lower expense ratio.
As a follow-up to the developing news on Silicon Valley Bank (SVB), we thought we would share some additional insight around questions we are hearing from clients related to FDIC insurance and the safety of their investment accounts at our custodians.
On Friday, Silicon Valley Bank (SVB) was seized by U.S. regulators after there was a run on the bank. This failure of the nation’s 16th largest bank raises several issues we want to address.
I heard about a study that found people were more likely to vote if you ask them, “are you a voter?” as opposed to, “do you plan on voting?” The way you view yourself matters. If you identify as a voter, then you are more likely to go to the polls or send in your ballot at election time. It’s the same with fitness – if you identify as a runner, you are more likely to run consistently, because it’s not just something you do, it’s who you are.
You may have heard about direct indexing, as it has become a popular topic in financial circles over the last couple of years.
In ranching country, experienced livestock raisers know that periods of drought are inevitable. Not only that, but they know that there are certain things that need to be done during the dry times in order to be able to take maximum advantage of the rains when they begin to fall again in the future. Knowledgeable ranchers will utilize drought cycles to make sure their water reservoirs are in good shape; sometimes they will dig new ones. They’ll give special attention to their pasturing plan, being certain to make the most use of their available resources in order to keep their pastures healthy and ready for the next rains.
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Should I Worry About the Banks?
While a full-blown banking crisis is not likely, the recent Silicon Valley Bank failure provides a great opportunity to review your cash management strategy.