The Investment Scientist

Archive for August 2016

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Between 2000 and 2002, I worked as head weather derivative trader at PG&E National Energy Group. On the side, I also traded stocks for my personal account.

By the time the Enron Debacle happened, I had already become the third largest weather derivative trader in the country. Given another year, I am quite sure I would have become #1 in this field. Well, that’s a story for another time.

My stock trading, however, was a lot less successful. All the stocks I picked lost money, except for one. The one exception was PCG, the company I worked for. Granted, the time between 2000 and 2002 was a time of market collapse due to the burst of the dotcom bubble, but there is still an important lesson I learned and that I want to share with you.

The lesson was about  information advantage.

Though I was not in management and therefore was not privy to any material insider information, just from the ambiance noise of the trading floor I know so much more about my company than folks outside of the company.That’s why I was able to make money on PCG. That’s also why I didn’t make money in all those other stocks  – I didn’t  have any information advantage. Read the rest of this entry »

charity-1940x1259.jpgI visited a physician client in Wisconsin while on vacation in Chicago this week. He has been my client for several years now and his personal finance is in very good order. As I was driving the four hour stretch of highway, I thought: What idea I could bring to him that could make his situation tens or even hundreds of thousands of dollars better?

This physician client of mine is easily in the top income tax bracket, meaning marginal tax rate for him is nearly 50% combining federal and state. He also gives away about $10k to various charities a year. He plans to retire in about 10 years.

When he retires, he will continue to give away $10k a year. In fact, there is a good chance he will give away more since people become more charitable inclined when they get older and having a meaningful impact becomes much more important to them.

If he lives another 30 years after retirement, he will give away a minimum of $300k. Here is the problem, he will have little income to write off, thereby wasting up to $150k worth of tax savings.

Alas, but there is a way to recapture these tax savings, it’s called Donor Advised Fund or DAF.

Read the rest of this entry »


Author

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]mzcap.com.

Twitter: @mzhuang

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