The Investment Scientist

Archive for October 2019

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How would you feel if you were told by your broker that your IRA had to pay $60k in taxes to the IRS? This is not just some grim fairytale, this is actually happening to a new client of mine. I share this horror story so all of you can learn something.

The IRA account was transferred under my management last year. The entire amount was invested in a private partnership, something I have never thought highly of. They are an investment vehicle that is unregulated and not registered with the SEC and thus is not supposed to be sold to the public. They nevertheless find their way into wealthy investors’ portfolios since brokers love to peddle them due to their exorbitant fees. My client invested in 2006, long before he became my client. After 13 years, it has a grand total return of only 40%. A 50/50 portfolio of stock and bond index fund would have more than doubled his money over the same period of time.

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.

Twitter: @mzhuang

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