The Investment Scientist

Special Need Planning

[A client of mine has two special need kids, so I know how important it is. This is an article I got from a estate planning attorney James Braswell.]

Understanding the pitfalls associated with special needs planning is a must for all who assist families with children, grandchildren or other loved ones (such as parents) with special needs.

Keep in mind these nine tips for Special Needs Planning:

Tip #1: Don’t disinherit your special needs child.  Many disabled persons receive Supplemental Security Income (“SSI”), Medicaid or other government benefits that provide basic food, shelter and/or medical care. The loved ones of the special needs beneficiaries may have been advised to disinherit them – beneficiaries who need their help most – to protect the public benefits. But these benefits rarely provide more than basic needs. And this solution (which normally involves leaving the inheritance to another sibling) does not allow loved ones to help their special needs beneficiaries after they themselves become incapacitated or die.  The best solution is for loved ones to create a special needs trust to hold the inheritance of a special needs beneficiary.  A properly drafted special needs trust will protect public benefits a disabled beneficiary may be receiving, and it will provide for proper care of that individual throughout their lifetime.

Read the rest of this entry »

Like to hurt yourself?

Like to hurt yourself?

In 2009, Morningstar did a study comparing mutual fund returns vs investor returns. Here is what they got:

Fund Category Fund Return Investor Return Investor Lag
Large-Cap Blend -1.4% -5.7% -4.3%
Large-Cap Growth -1.7% -7.7% -6.0%
Large-Cap Value -1.8% -2.2% -0.4%
Mid-Cap Blend 0.4% -3.0% -3.4%
Small-Cap Blend -0.5% -6.9% -6.4%
Europe/Pacific 3.1% 0.5% -2.6%
Emerging Markets 15.6% 3.8% -11.8%
Financials -10.5% -28.6% -17.9%
Health Care -1.3% -3.1% -1.8%
Communications 1.9% -3.7% -5.7%
Energy 8.6% 4.0% -4.6%
REITs -2.5% -11.8% -9.3%
Technology -2.6% -8.3% -5.7%
Utilities 5.5% 2.1% -3.4%
Total and Simple Averages 1.0% -3.5% -4.5%

Source: Morningstar

We can make a few observations about these data:

Read the rest of this entry »

Many families face hard questions as they decide how to manage the needs of their disabled child after death.

[I got this cautionary tale from a newsletter sent to me by William Fralin, Esq and President of The Estate Planning & Elder Law Firm.,P.C.]

Often, during the parents’ lives a disabled child’s siblings can hold the mantle of responsibility, especially as the parents grow into their golden years. However, this harmonious family dynamic is likely to change after the death of the parents. While many caretaker siblings feel a sense of duty while their parents are alive, and express this sense of duty through the proper care and oversight of the disabled child, this sense of duty often ends when the parents are no longer in the picture. A generation ago, it was common to leave assets to the caretaker sibling in a family in order for that caretaker sibling to see that the needs of the disabled child are met. In fact, this technique was standard practice. However, with so many options available within the realm of modern estate planning it is not necessary, and somewhat risky, to give away assets directly under a moral obligation. One family in California recently experienced the downside of what can occur after the death of a parent.

Read the rest of this entry »

【 Copy from a comment on this news: ]

The scary thing is how easily the American people are conned, again. All it takes is some headlines, no facts, or knowldge of the situation and the people start foaming at the mouth wanting war. Has anyone been paying attention for the last 100 wars and police actions we were conned into, started just like this. Months of intense demonazation of an imagined foe, and then surprise, the evil person does just what was warned about… This classic Iraq and Afghanistan, Iran, Viet Nam, dozens of S.American foes that no one even knew about yet started foaming at the mouth on cue.

Read the rest of this entry »

Ken French

Professor Kenneth French

Last month I did a study to understand why equally weighted the S&P 500 index RSP has outperformed value weighted S&P 500 index SPY by almost 3% a year since its inception. My conclusion is that it’s mostly due to Fama French risk factor loading.

However, my research also found after removing the effect of risk factors, RSP has a slight alpha advantage over SPY. I conjecture this alpha advantage is due to the fact that RSP requires annual rebalancing and SPY does not. In other word, this could be the so-called “rebalance bonus.”

To test its robustness, I extended my study to six pair of Fama French “indices.”

Read the rest of this entry »

(I got this from Cal Klausner, a CPA friend of mine.)

Small Biz TaxAfter recent tax changes, owners of small businesses face a question: Should the business continue to function as an S corporation, or should the entity revoke its election under Subchapter S of the Code?

Despite a number of statutory constraints, conventional wisdom has generally favored an S corporation classification. An S corporation is a pass-through entity whose shareholders are subject to personal income tax based on the income of the corporation. A C corporation, by contrast, is taxed as a separate entity at corporate rates, and its distributions to shareholders are subject to the personal income tax. A small business corporation electing under Subchapter S may have no more than 100 shareholders, and may not have more than one class of stock. There are no similar constraints on C corporations. Nevertheless, an S corporation classification provides business owners a superior degree of flexibility and is therefore generally preferred. Specifically, by having its income flow directly to its shareholders, an S corporation is not subject to the double taxation that a C corporation may be unable to avoid.

Read the rest of this entry »

Last year after the market was up about 5% in January, I wrote a newsletter to introduce my clients to the so-called “January Indicator”:

According to research done by Cooper and McConnell, what the market does in January has a strong predictive power for what the market will do for the rest of the year.

Using data since 1940, they found that if the market is up in January, it will rise an additional 14.8% for the rest of the year; if the market is down in January, it will rise only 2.92% for the rest of the year. This gives rise to a spread of almost 12%, a highly statistically significant number.

According to Sam Stovall, chief equity strategist at S&P Capital IQ, the S&P 500 since 1945 has risen 56% of the time following a down January. That is lower than the 84% frequency of February-through-December gains following a higher market in January.

Firm | Youtube | Facebook | Twitter | LinkedIn | Newsletter

Read the rest of this entry »


Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.

You may also get his monthly newsletter, or join his Facebook page for regular wealth management insights. Michael's email is info[at]

Twitter: @mzhuang

Error: Twitter did not respond. Please wait a few minutes and refresh this page.


Get every new post delivered to your Inbox.

Join 67 other followers

%d bloggers like this: