What Kind of Goals Can I Achieve with an Estate Plan?

Most people are under the impression that estate planning is all about distributing your assets after you pass away or believe that it’s only for extremely wealthy families. However, all individuals and families can benefit from creating an estate plan. By ensuring that you have a comprehensive estate plan aligned with your needs, you are able to accomplish multiple goals at once.

Without an estate plan, the issues associated with passing on your assets will be left to the courts and an appointed administrator to handle. Most people want to exercise some layer of control beyond that with their personal planning.

Some of the goals that you can accomplish with your estate planning include:

  • Allowing you to enjoy your current lifestyle or your intended retirement lifestyle.
  • Keeping your affairs private when you pass away.
  • Leaving behind a lasting legacy for your loved ones.
  • Dramatically lowering your estate, gift, income and generation skipping taxes.
  • Protecting your assets not just today but for many generations to come.
  • Ensuring that your wishes are carried out in an end of life situation.

From irrevocable trusts to wills to powers of attorney, life insurance trusts, family limited partnerships and more, the support of an experienced estate planning attorney can prove invaluable when it is time to accomplish your estate plan.

Need more help or have other questions about your personal plan? We’re here to guide you through that process or help you with updating an existing estate plan. Schedule a time to speak with our NJ estate planning lawyer today to get assistance with your needs.

What Documents Should Be Kept in a Place Easy for My Loved Ones to Find?

Planning ahead is a critical aspect of your comprehensive estate planning and it doesn’t stop just at the creation and signing of your documents. While creating and signing these documents is certainly a key component of ensuring that your wishes are respected and that you have answered many of the most important questions around the topics of estate planning, it’s imperative that your loved ones be able to access the information necessary to carry out these wishes.

These documents need to be stored and quickly located if something happens to you. Either your spouse or other family members should have access to the following materials in case of an emergency:

  • Email account information.
  • Pins or passwords to access your phone or your computers.
  • A list of insurance policies and financial accounts, including passwords, login details and websites to access that login information.
  • List of your intangible and tangible property.
  • Your health care and financial power of attorney documents.
  • Any estate planning documents that outline your wishes, including a will or a trust.

In the immediate aftermath of an accident impacting your ability to take care of yourself, or in the sudden event of your passing away, you need the support of your family members to be able to take action quickly. If they don’t know where to find these important documents, their ability to take action for your estate plan could be extremely limited.

 

How to Tell if a Will Was Revoked or Replaced

While you’ll create your will while you’re still alive, it will be one of your loved ones sorting through your paperwork to find it once you pass away. If you have multiple documents or it’s not easy for them to find, it’s easy to make mistakes about what the will includes or if it’s the most recent version.

Storing only the most recent version of your will makes it simpler for your personal representative to be completely clear that they have the right version. Previous wills should ideally be destroyed.

If you’re keeping copies of old wills as possible evidence that your executor might need if a family member comes forward with those older wills, sort them by date with the newest at the front. You might even leave behind a letter for your executor stating that there are previous but invalid versions of your will if you are concerned about the possibility of a will contest. If you’re the executor right now, check the dates on all the wills. If they all include a statement about revoking prior wills, the most recent one is the accurate one.

If you find a will that has handwriting on it, such as notes in the margins, this might be notes for editing. See if you can contact the estate planning lawyer who helped your family member draft the will. If you can only find a copy of the will, keep searching. You’ll want an original to submit to probate court.

If no valid version of the will can be found intestate succession rules might apply.

 

What Is the Role of a Fiduciary in My Estate?What Is the Role of a Fiduciary in My Estate?

There are many different terms associated with the administration of a trust, a will or an estate. One common example is the term fiduciary. This refers to an individual who has the legal obligation and power to act on behalf of someone else in situations that require honesty, trust and loyalty.

Fiduciaries have a legal responsibility to act in the best interests of the person who is delegated this responsibility or the beneficiaries associated with the strategies in question.

Fiduciaries can serve in a variety of roles in your estate, both during your life and after you pass away. Fiduciaries can include professionals like bankers, accountants, real estate agents, mortgage brokers, business advisors and financial advisors. One of the most common ways that you will come into contact with a fiduciary is by determining who will serve in the role of executor of your estate.

The executor of your estate should be someone that you trust to handle the important aspects of closing out your formal estate. This requires careful consideration of the beneficiaries and assets in play and the complexities associated with administering your estate.

 

 

 

The Next Normal

A year ago, at the end of March 2020, the S&P 500 was down nearly 20%1 and the world was scrambling into lockdown. Many experts wrote articles telling us where we would be in a year. I don’t remember reading any that said the S&P 500 Index would be up 56% over the next 12 months. But that’s what happened.

I didn’t predict any of that. I never do. Last June, I spoke about the Old Normal and how we should be prepared for market downturns once or twice a decade, while accepting we just can’t know when they’ll happen. We can’t predict financial crises, but we should plan for them. That’s why I always recommend having a trusted financial advisor, a fiduciary who puts your interests first, who can help you understand the range of possible outcomes and create a plan tailored to your goals and acceptable levels of risk.

If you stayed in the market, it might be time for a victory lap. Dimensional’s US Core Equity 2 Portfolio, which holds a diversified mix of broad US equities and is Dimensional’s largest core portfolio, returned nearly 72%, as Exhibit 1 shows. Within the US market, small cap value stocks2 were among the hardest hit. Dimensional’s US Small Cap Value Portfolio was down 39% in the first three months of 2020 and subsequently returned a showstopping 112% over the next 12 months.

Sticking to long-term investment plans in the face of such extreme uncertainty wasn’t easy. I have so much appreciation for what the financial advisors we work with went through to keep their clients in the market, and nothing but admiration for what they achieved.

We were all stressed out last March. There was pressure to “do” something, to make changes just for the sake of reacting. People might get out of the market in an effort to reduce uncertainty. But getting out of the market can actually increase uncertainty because it can force investors to make a difficult decision: choosing the best time to get back in.

This highlights something I’ve long believed to be true: while all investments have risk, many people who think they’re investing are actually gambling. It is a really simple distinction for me; if you’re trying to time short-term market movements, you’re gambling.

Staying focused on a long-term strategy during times like the past year is hard work. Short periods like the first quarter of 2020 and the past year are not signals of future performance, but reminders of just how hard being a long-term investor can be. We didn’t know returns like that would come this year, but we knew we needed to be in the market to capture them when they do show up.

As I’ve said before, every crisis is different, but I think the best way to deal with them is always the same. We can’t control crises, but we can control our response to them. You want to be prepared to deal with the unexpected before it happens. Not when you’re stuck in the middle of it.

What is the Next Normal? It’s expecting uncertainty and committing to a plan that addresses it. It’s rising above the temptation to make changes when things get tough. It’s understanding the difference between investing and gambling. And it’s remembering how good it feels when things work out according to plan.

If you don’t already have a plan that includes crises among the range of possible outcomes, it’s never too late to create one. This is not the last crisis any of us are likely to experience. If we make thoughtful planning the New Normal, we’ll all be ready for the Next Normal.

By: David Booth
Executive Chairman and Founder

References: 

Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission. Consider the investment
objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other information about the
Dimensional funds, please read the prospectus carefully before investing. Prospectuses are available by calling Dimensional Fund Advisors
collect at (512) 306-7400 or at us.dimensional.com. Dimensional funds are distributed by DFA Securities LLC.

Investing risks include loss of principal and fluctuating value. Small cap securities are subject to greater volatility than those in other asset
categories. These risks are described in the Principal Risks section of the prospectus.

Shorting Stocks and the Open Market

In 1984, 33-year-old Gary Kusin started an educational software retailer named Babbage’s. Started in Dallas, Texas, Babbage’s quickly expanded from educational software to focusing on Atari and Nintendo video games. Little did Gary know at the time, but his company would one day become a symbol of a market movement and capture the attention of households, Congress and regulators across the United States. But before we get into what Gary Kusin’s small company became, we need to understand a few key terms and mechanics of a stock market.

Stock markets are exchanges, and in their simplest form are simply open-market auctions. Think Sotheby’s or a local estate auction, where potential buyers raise their paddle until only one buyer remains – but at a much larger scale. Thousands of buyers meet thousands of sellers every day through brokers on stock exchanges,(2) and the items of interest are shares of a company’s stock. Generally, none of the money in these transactions goes to the company; rather the two parties barter for existing shares of the stock. Most of this activity has moved digitally, but the fundamentals are the same: every transaction has a buyer and a seller, and presumably both sides think they are getting a good deal.

Occasionally an investor may see a stock that they believe is overvalued. In other words, they believe that buyers are willing to pay more for that stock than what it is actually worth. For those brave investors who are so convicted that a stock price is trading higher than its true value, a process exists for them to bet against the company. Through a broker, the investor connects with another investor who owns shares of the stock, borrows the shares and then sells them. This is called shorting the stock. Assuming the price of the stock declines, the investor can buy back the shares at a lower price and return them to the lender, pocketing the difference in price. However, just as a bank may monitor a borrower’s creditworthiness, the lender of the shares needs protection to ensure that the borrower will eventually be able to repay the loan. The broker of the deal monitors how much it would cost for the borrower to purchase the shares compared to how much money the investor has available in their account. If the price of the stock rises too much, the broker can demand the investor either put more cash into their account or return the shares. If the investor is forced to return the shares, they must go back out to the market, find a buyer willing to sell, and repurchase them. This, known as a margin call in financial jargon, essentially just protects the lender against someone taking on a loan they can’t repay.

So, what does all this have to do with a software retailer from the 80s? In 1999, fifteen years after being founded, Barnes & Noble purchased Babbage’s for nearly $200 million.(4) Three years later, Babbage’s was combined with other similar retailers, and the company went public under a new name, GameStop.(5) Now, nearly 20 years after going public, GameStop has become a stock market phenomenon with the stock price jumping from $18.84 on December 31, 2020 to $325 at the end of January, a 1,625% jump in a single month.

For those watching the financial media (or social media for the matter), the obvious question is how can this happen? Well, a lot of investors were betting against GameStop at the end of last year – a lot. In fact, every share of GameStop had been borrowed and sold, at least once. In January, more investors started to take interest in buying shares of GameStop, partially spurred by speculative investors in an online forum, and that demand pushed the price of GameStop higher. As the price continued to climb, the investors who had borrowed shares were forced to either put more money into their account or buy shares at a higher price to close their loan. As the price of GameStop’s stock climbed, more investors bought shares to cover their loans, which created more demand for shares of GameStop’s stock, which continued to push the price higher. This phenomenon is called a short squeeze, and the cycle continued throughout January, with the stock hitting a high of $483 on January 28.

What does this all mean for your portfolio? Honestly, not a lot if you are our Investment Management client. You own thousands of stocks to mitigate the risk of any short-term dysfunction of any single name in the markets. Investors who bet against GameStop were wrong, at least for now, and they had to buy a lot of GameStop stock to make up for their error. If margin calls didn’t exist, January may have looked very different for the price of GameStop’s stock. But, margin calls exist to protect lenders and they functioned as expected. Thousands of buyers met thousands of sellers, and they agreed to exchange shares of a stock for an agreed-upon price. And if you are not our client & need to know what it does mean, feel free to contact us.

We know that on any given day, the stock market can look like a casino with random outcomes. But, when viewed over longer horizons, the outcomes are logical. That is why we continue to encourage our clients to look past the daily noise – no matter how entertaining – and keep a long-term focus. And in case you’re wondering, I don’t think that it’s a good time to buy GameStop’s stock.

Sincerely,

Neel Shah

 

Resources: 

This information is for educational purposes only and should not be construed as specific investment, accounting, legal or tax advice. Investing involves risk including loss of principal. Information from sources deemed to be reliable but its accuracy and completeness cannot be guaranteed. IRN-21-1776

What Do I Need to Do to Amend a Revocable Living Trust?

The very definition of a revocable trust means that you are able to make changes to it in a few different ways. You can, for example, prepare and sign a trust amendment that is valid under your applicable state law.

This makes an amendment or an update to the existing trust so if further substantial changes are needed you might wish to revoke the original trust agreement and create a new trust. The second option available to you is to sign a complete trust restatement valid under your state law. 

Your third option is the most expensive, time-consuming, and radical. This involves revoking the original trust agreement and any amendments, then transferring the assets that were stored in the revoked trust back into your own name. You could then create a brand new revocable living trust if you wanted. This third option might only be required if you are making significant changes to the initial trust agreement.

In most cases, restatements or amendments are appropriate if you just wish to add or change beneficiaries, if you divorce or if you marry or have a child. Make sure that you have a relationship with a trusted estate planning lawyer to protect your best interests.   

Tales from the Crypto: How to Think About Bitcoin

“Everything you don’t understand about money combined with everything you don’t understand about computers.”—HBO’s Last Week Tonight with John Oliver, March 11, 2018

Bitcoin and related cryptocurrencies (now numbering in the thousands) are the subject of much debate and fascination. Given bitcoin’s dramatic price changes, it is not surprising that many are speculating about its possible role in a portfolio.

In its relatively short existence, bitcoin has proved extraordinarily volatile, sometimes gaining or losing more than 40% in price in a month or two. Any asset subject to such sharp swings may be catnip for traders but of limited value either as a reliable medium of exchange (to replace cash) or as a risk-reducing or inflation-hedging asset in a diversified portfolio (to replace bonds).

Assessing the merits of bitcoin as an investment can be problematic. Adding it to a portfolio could mean paring back the allocation to investments such as stocks, property, or fixed income. The owner of stocks or real estate generally expects to receive future income from dividends or rent, even though the size and timing of the payoff may be uncertain. A bondholder generally expects to receive interest payments as well as the return of principal. In contrast, holding bitcoin is similar to holding gold as an investment. Even if bitcoin or gold are held for decades, the owner may never receive more bitcoin or gold, and unlike stocks and bonds, it is not clear that bitcoin offers investors positive expected returns.

Putting aside squabbles over the future value of bitcoin or other cryptocurrencies, there are other issues investors should consider:

  • Bitcoin is not backed by an issuing authority and exists only as computer code,
    generally kept in a so-called “digital wallet,” accessible through a password chosen by the user. Many of us have forgotten or misplaced computer passwords from time to time and have had to contact the sponsor to restore access. No such avenue is available to holders of bitcoin. After a limited number of password attempts, a user can permanently lose access. Since there is no central authority responsible for bitcoin, there is no recourse for the forgetful owner: a recent New York Times article profiled the holder of more than $200 million worth of bitcoin that he can’t retrieve. His anguish
    is apparently not unusual—a prominent cryptocurrency consulting firm estimates that 20% of all outstanding bitcoin represents stranded assets unavailable to their rightful owners.
  • Mt. Gox, a Tokyo-based bitcoin exchange launched in 2010, was at one time the world’s largest bitcoin intermediary, handling over one million accounts in 239 countries and more than 90% of global bitcoin transactions in 2013. It suspended trading and filed for bankruptcy in February 2014, announcing that hundreds of thousands of bitcoins had been lost and likely stolen.
  • The UK Financial Conduct Authority cited a number of concerns as it prohibited the sale of “cryptoasset” investment products to retail investors last year. Among them were the inherent nature of the underlying assets, which have no reliable basis for valuation; the presence of market abuse and financial crimes in cryptoasset trading; extreme price volatility; an inadequate understanding by retail consumers of crypto assets; and the lack of a clear investment need for investment products referencing them

The financial services industry has a long tradition of innovation, and cryptocurrency and the technology surrounding it may someday prove to be a historic breakthrough. For those who enjoy the thrill of speculation, trading bitcoin may hold appeal. But those in search of a sound investment should consider the concerns of the Financial Conduct Authority above before joining the excitement.

By: Weston Wellington
Vice President

———————————————————————————————–

Resources: The opinions expressed are those of the author and are subject to change. The commentary above pertains to bitcoin cryptocurrency. Certain
bitcoin offerings may be considered a security and may have different attributes than those described in this paper. Dimensional does not offer bitcoin.

This material is not to be construed as investment advice or a recommendation to buy or sell any security or currency. Investing involves risks including possible loss of principal. Stocks are subject to market fluctuation and other risks. Bonds are subject to increased risk of loss of principal during periods of rising interest rates and other risks. There is no assurance that any investment strategy will be successful. Diversification does not assure a profit or protect against loss.

The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information
only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide
a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform
themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this
document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.

“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.

UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

How to Avoid a Trust

Asset protection, tax planning, or legacy control are just some of the numerous reasons why trusts can be used. However, the most common use for a trust is to avoid probate, therefore allowing for an easier transition of assets. This is most likely accomplished using a revocable living trust.

For some, it may be important or even desirous to avoid or sidestep the use of a trust. This may be because individual circumstances do not allow for planning using the trust due to factors such as cost considerations.

The benefit of a trust is that it allows the creator to establish their own set of rules, rather than rely on those of a beneficiary designation or probate courts. The biggest detriment of trust planning typically is the creation and fermentation of it. If it is not done properly, it could have disastrous impacts, or at a very minimum, be a waste of time and money to create.

Often, folks will resort to using legal strategies or titling strategies to avoid a trust. This might be done by adding beneficiary designations, transferring on death/payable on death titling, or just including family members or other beneficiaries on title during lifetime. But taking a shortcut is not without its unintended consequences. For example, naming someone as a beneficiary means they will get the asset outright. There is no guarantee that the asset will be protected against creditors, lawsuits, divorcing spouses, etc. Additionally, if the beneficiary were to pass away, you can then see the assets making their way to individuals or organizations who may not have been intended contingent beneficiaries. A trust can prevent that. You may also want to avoid having certain classes of beneficiaries receive assets outright, such as feeling members, receiving government benefits, or have special needs or substance abuse issues. In such cases, one should strongly consider using trust planning.

When asset protection is a concern, one should consider trust planning, but they may also consider using certain legal planning strategies. In many states, life insurance proceeds are protected from creditors and lawsuits. In other states, one’s home may be protected from creditors. Individual retirement accounts are treated differently from state to state, while ERISA governed plans such as most 401(k)s and defined-benefit plans have federal asset protection rules built in already.

If you are not sure if a trust is right for you & would like guidance, please feel free to call us at 732-521-9455. 

YOLO, Meme, and EMH: What’s Your Investment Style?

You only live once! Social media investors have banded together on unconventional platforms to drive up the prices of a handful of “meme stocks,” seemingly without traditional evaluation of investing risks and rewards. They made headlines with their “short squeeze” of GameStop (GME), and, as they garner media attention, their tactics continue. While it’s not the intended victim of the YOLO traders, will the efficient market hypothesis be a casualty of these events? The answer depends a lot on your definition of efficient markets. Perhaps long-term investors would be better served questioning the potential impact on their investment philosophy.

Fama (1970) defines the efficient market hypothesis (EMH) to be the simple statement that prices reflect all available information. The rub is that it doesn’t say how investors should use this information. EMH is silent on the “correct” ways investors should use information and prices should be set. To be testable, EMH needs a companion model: a hypothesis for how markets and investors should behave. This leaves a lot of room for interpretation. Should asset prices be set by rational investors whose only concerns are systematic risk1 and expected returns? It seems implausible to link recent meme-stock
price movements to economic risks. Rather, they seem fueled by investor demand to b part of a social movement, hopes to strike it rich with a lucky stock pick, or plain old schadenfreude.

There is a vast ecosystem of investors, from individuals investing in their own accounts to governments and corporations who invest on behalf of thousands. Ask investors why they invest the way they do, and you’ll likely get a range of goals and approaches just as diverse. It’s this complex system that generates the demand for stocks. Another complex system fuels the supply of stocks. Supply and demand meet at the market price. People may contend that the market is not always efficient, or rational, but the stock market is always in equilibrium. Every trade has two sides, with a seller for every buyer and a profit
for every loss.

There are plenty of well-studied examples that show supply and demand at work. The huge increase in demand for stocks added to a well-tracked index often creates a run-up in the stock price. Some of this price increase can be temporary and reversed once the tremendous liquidity demands at index reconstitution2 are met. Index reconstitution is just one example; instances of liquidity-driven price movements happen all the time. It is well documented that liquidity demands can produce temporary price movements.
Investors may wonder if temporary price dislocations motivated by users of r/
WallStreetBets differ from those caused by changes to an index. Lots of buying puts temporary upward pressure on prices, which later fall back to “fundamental value”–it sounds familiar. The more relevant observation may be that markets are complex systems well adapted to facilitate the supply and demand of numerous market participants.

There are numerous reasons people may be willing to hold different stocks at different expected returns. Can all those differences be explained by risks? Doubtful. To quote Professor Fama, “The point is not that markets are efficient. They’re not. It’s just a model.” EMH can be a very useful model to inform how investors should behave. We believe investing as if markets are efficient is a good philosophy for building long-term wealth. Trying to outguess markets might be a quick way to destroy wealth.

It’s true, you only live once. The good news is that investors can look to market prices, not internet fads, to pursue higher expected returns. Theoretical and empirical research indicate higher expected returns come from lower relative prices and higher future cash flows to investors. Long-run investors can be better served by using markets, rather than chatrooms, for information on expected returns.

– Marlena Lee, PhD
Global Head of Investment Solutions


Resources: The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information
only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.

“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong 2 Dimensional Fund Advisors
Please see the end of this document for important disclosures.

Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.

Named securities may be held in accounts managed by Dimensional. This information should not be considered a recommendation to buy or sell a particular security. Diversification does not protect against loss in declining markets. There is no guarantee strategies will be successful.

Eugene Fama is a member of the Board of Directors of the general partner of, and provides consulting services to Dimensional Fund Advisors LP.

UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

Entrepreneurs Cannot Afford to Neglect Succession Planning

Starting a business is an exciting and sometimes overwhelming proposition. Founders of companies often spend years putting most of their focus, planning and attention in building the business, scaling it and making it sustainable. One big way that too many entrepreneurs fall short is planning ahead for what will happen after they exit the company.

One study recently published by Wilmington Trust found that nearly 60% of privately held businesses in the United States had never even considered succession planning. An exit strategy should be discussed with key members of your team and this involves considering a few different priorities. 

These priorities are continuing to meet customers’ needs, ensuring that employees still have jobs and a future within the company if they wanted and making sure that the company remains viable over the long term future. Given that more than 8 out of 10 business owners have not engaged in succession planning, you need to carefully consider what key talent in the company would be eligible to step up and take on these important leadership roles. You might assume that a child or other member of your family will be the natural successor to taking over the company but it is often the case that some businesses do not survive into the second or third generation. You need to have careful succession planning strategies in place to avoid these potential pitfalls and ensure a smooth transition when you decide to leave.       

Think Investing Is a Game? Stop.

It’s easy to view the stories of market speculation that have dominated the news recently as cautionary tales for individual investors. But we can also look at the current moment as an opportunity to welcome a new group of investors to the market: those who have been drawn in by all the high-stakes action, and yet may want a consistent, long-term investment solution that doesn’t keep them up at night. This is probably a good time to mention that investing and gambling are not the same thing.

If you’re not the type of person who feels comfortable betting your life savings on a long shot, the good news is that you don’t have to find the next big stock to win in the stock market. Concentrating your whole investment on one or two companies means the stakes are high enough to expose you to unnecessary risk. Even if you manage to land a few big winners, our research has found that good luck is unlikely to repeat throughout a lifetime of investing. For every individual who got in and out of a hot stock at the right
time, there’s another who bought or sold at the wrong time. If you treat the market like a casino, not only do you have to pick the right stock, but also the right moment.

I’ve always believed you’re better off betting with the whole market than on individual stocks, through a low-cost, highly diversified portfolio. Then let time and compounding do their work. Compounding is the investor’s best friend: if an investment grows at a rate of 10% a year, that means a dollar invested has doubled every seven years.1 As a point of reference, the S&P 500 has grown at rate of 10.26% since 1926, though it’s worth noting that the path is rarely smooth.

With all the options now available to investors, putting together a solid investment plan —one that you can stick with—is key. Markets have never been so accessible, and information has never been so widely available. And despite the fact that stories of stockmarket gambling keep making the news, many investors have managed to enjoy growth in their investments using low-cost, highly diversified strategies like index funds

Indexing has turned out to be a good solution for many people. I was involved in the creation of one of the first index funds early in my career, and I’ve enjoyed watching the positive impact indexing has had on the industry. For those who want more customization and flexibility, there are ways to build on the strengths of indexing while correcting for some of its weaknesses. At Dimensional, we’ve been working on improving upon indexing for the past 40 years.

If you’re looking to become a long-term investor, commit to a long-term strategy that takes your own personal goals, situation, and risk tolerance into account. (A financial advisor can help with this part.) And remember that although the US stock market has returned about 10% a year on average, returns for individual companies and individual years can vary wildly. (We call these uneven distributions “fat tails.”) It’s always important to look at the big picture. A huge win on a stock bet today doesn’t mean much if you lose it tomorrow.

Investing is a lifelong journey. Making money slowly is much better than making—then losing—money quickly.

– David Booth
Executive Chairman and Founder

——————————————————————————————–

Resources: The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information
only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide
a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform
themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this
document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.

“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are
Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund
Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd, Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong
Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and
does not provide asset management services.

Copyright 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment;
therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

CANADA: These materials have been prepared by Dimensional Fund Advisors Canada ULC. It is provided for educational purposes only,
should not be construed as investment advice or an offer of any security for sale and does not represent a recommendation of any particular
security, strategy or investment product. Commissions, trailing commissions, management fees, and expenses all may be associated with
mutual fund investments. Unless otherwise noted, any indicated total rates of return reflect the historical annual compounded total returns,
including changes in share or unit value and reinvestment of all dividends or other distributions, and do not take into account sales,
2 Dimensional Fund Advisors
Please see the end of this document for important disclosures.
redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Please read
the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be
repeated.

UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

How Does An Estate Planning Lawyer Connect to My Strategy?

Many people avoid the process of estate planning because they either assume they don’t need it or that it’s not affordable for them.

Plenty of people are under the impression that estate planning is only for the wealthy but this is definitely not the truth as every individual family and business owner can benefit from at least some basic estate planning. You will likely find after consulting with a local estate planning attorney that this is a relatively simple process that can be made more complex only when you need it. 

Furthermore, the costs can be tailored to fit your specific needs and benefits people of all tax brackets and salaries. One of the primary reasons to consult with an estate planning attorney is because it will make the process easier. You’ll understand that probate is a legal mechanism of transferring your property from your ownership to another person. This means that you have some important decisions to make about what property you’d like passed on and to who.

Furthermore, you’ll need to think about important people who may be installed in critical roles as a result of your estate plan. Two common examples are guardians that you may choose for your minor children and the executor of your estate who is responsible for estate administration. 

Your attorney will help you walk through what you want to happen with your estate and execute the property legal documents to achieve that. Your attorney will also determine which items should be included in the estate, if a trust should be established, how much your estate might actually be worth, and consider any insurance policies and tax related issues associated with your estate. Schedule a consultation with an estate planning lawyer today to learn more.          

 

Think Carefully About How You Divide Your Estate with Children

If you have multiple children that you intend to be beneficiaries of or executors in your estate, be careful about trying to apply things equally rather than fairly. Having multiple children and leaving them each behind a stake in the house can cause more conflicts than you ever intended.

Imagine, for example, that you have six children and all of them now equally own a portion of a vacation home or original home once you pass away. This means that either all of them will need to come to terms about what happens with the property or the property will need to be sold and divided among six parties in the event that they cannot come to a conclusion. 

Furthermore, naming multiple children as executors of your estate also leaves challenges regarding unified decisions. Especially if the children you intend to install in this role have different personalities and views over how things should be handled, this can delay the administration of your estate and increase family conflict.

There is still the possibility that a fight could occur without a will in place since the state will determine who receives what property, but having multiple executors serve at the same time or attempting to divide property, like a home, equally over multiple people can create far more problems than it would ever be worth. It is better to consider consulting with an estate planning attorney about the creation of a trust to empower these unique decisions and have them all working together.      

 

The Three Major Elements Your Estate Plan Should Include

Most people are familiar with the basic idea behind a will. A will allows you to accomplish a couple of different things with your estate planning strategy. Some of the most important ones include the ability to name a guardian for your minor child and to decide who will receive your assets when you pass away.

However, there are other things you can accomplish in your estate planning strategy and three crucial elements should be included in the core of every estate plan. These include who receives what when you pass away, who is responsible for executing your wishes as it relates to the administration of your estate, and who is appointed to handle your affairs if you become incapacitated while you’re still alive. 

Each of these can create unique estate planning conflicts and issues but having a plan that addresses estate planning concerns both during your life and afterwards will ensure that you have thought through these complex issues and decrease the possibility of challenges that could arise for you or your loved ones in the future. 

No one wants to find themselves in the position of not having completed appropriate estate planning documents as this could leave your loved ones in a difficult situation trying to sort out what you want. Schedule a consultation with an estate planning lawyer in your area to learn more about this process and what you can accomplish.       

 

Should I convert my Term Life Insurance to Permanent Life Insurance?

The decision as to whether or not to convert from a term policy to a permanent life insurance policy is very fact-specific and dependent upon the family circumstances.

There have been circumstances where term policies were taken for a temporary reason. It may have been because children were younger, or for a business purpose such as a buy/sell policy. However, as the term marches on, or sometimes comes close to expiration, the importance of those temporary reasons varies extremely. For example, if one has a child or spouse who is dependent on the insured and their earning capacity (such as a special needs situation or a nonworking spouse), there might be a need for financial security well after the term would have expired. In this situation, it does make sense to consider a conversion. However, many circumstances must be considered. In addition to the need, the financial means to pay for the insurance is a huge factor. Will the insured or the owner have the capacity to continue paying premiums on a permanent policy, which are generally higher than a term policy. What other insurances are available? What is the health situation of the insured-they qualify for a new policy today?

It is recommended that you do not wait until the end of the term or close to the end of the term to convert a policy if you have already recognized the need for permanent insurance. The insured health circumstance is unpredictable, as it might give rise to an increased premium, or even a lack of insurability, which is a high risk to take. However, if you choose not to convert your policies, you may elect to self-insure. This usually means allocating certain savings for potential future needs. The decision of whether or not to let a term policy expire should be made proactively. It is a factor in one’s financial plan just like any other financial consideration.

Feel free to contact us If you need help deciding whether or not you should convert a term life policy into a whole life, universal life, or other types of life insurance policy”

FANMAG: Because FAANGs Are So Yesterday

KEY TAKEAWAYS

  • FANMAG returns have been extreme relative to their contemporaries, but not their predecessors—their performance has been in line with the average top performers throughout US stock market history.
  • The FANMAGs were the big winners from a broader group of large tech companies, most of whom have lagged the market.
  • Following the popularity of the FAANG stocks, FANMAGs are the current fad. But history suggests fad-based investing is no substitute for broad diversification and a consistent approach.

A handful of large technology stocks have garnered attention for outsize returns in recent years. Collectively referred to by the FANMAG acronym, Facebook, Amazon, Netflix, Microsoft, Apple, and Google (now trading as Alphabet) all substantially outperformed the US market1 in the eight calendar years that they have all been public companies (Facebook went public in May 2012).2 Emerging as winners from among a large number of companies that fared less well during 2013–2020,3 these juggernauts bested most of their surviving peers with annualized outperformance versus the US market ranging from 7.31 (Alphabet) to 42.58 percentage points (Netflix), as shown in Exhibit 1.

While this performance dazzled investors and dominated headlines during 2013–2020, a more complete picture emerges when accounting for the many companies whose investors were less fortunate over the period. As shown in Exhibit 2, of the 10 largest US technology stocks as of January 2013, all but Apple, Microsoft, Alphabet, and Amazon underperformed the US market over the same period that elevated their tech peers to financial market stardom.

Exhibit 3 shows the hypothetical growth of wealth for an investor who put $1 in each of the 10 largest technology stocks and the US market in January 2013. While the $1 invested in Amazon and Apple, for example, would have grown to $12.63 and $7.18, respectively, by November 2020, the returns of their non-FANMAG tech contemporaries would have failed to even surpass the US market.

FANMAG returns certainly stand out among those of their contemporaries, but the range of individual stock outcomes has often been immense. A historical look shows that FANMAG performance has been quite ordinary in the context of past top-of-the-market performers. Drawing on stock return data since 1927, Exhibit 4 indicates that historical top performers often experienced larger outperformance relative to the US market than the FANMAG stocks realized during 2013–2020. For example, Apple’s 2013–2020
annualized excess return of 13.00 percentage points places it at the 93.67 return percentile among all US stocks that were trading in January 2013 and survived the eightyear period that followed. However, the average outperformance of stocks at the 93.67 percentile over eight-year rolling periods from 1927 to 2020 was 15.60 percentage points, or about 2.60 percentage points higher. With the exception of Netflix, the same holds for
the other FANMAG stocks, with historical outperformers at the same return percentile outperforming the market by more than the FANMAG stocks did in 2013–2020.

A defining trait of the FANMAG performance is that these outsize returns have come from among the largest companies in the US, implying they were meaningful contributors to the overall US market’s return. However, historical data show that this too is nothing new.
Defining a stock’s return contribution as its total return weighted by its beginning-ofperiod market capitalization weight, we see that Apple’s contribution to the US market for the period 2013–2020 was 19.68%. How does this figure compare to other top return contributors? Exhibit 5 illustrates the top return contribution and the annualized US market return over rolling eight-year periods since 1927, revealing instances of return contributions by the likes of AT&T, General Motors, and General Electric that were
comparable to, or even exceeded, that of Apple in 2013–2020.

FOTW (FLAVOR OF THE WEEK)
If history is any guide, the FANMAG acronym will eventually be replaced by another trendy name. For example, stock market historians will remember the Nifty Fifty in the 1960s and 70s, a set of 50 blue-chip stocks like Coca-Cola and General Electric. The early 2000s witnessed increasing adoption of the acronym BRIC, representing investment opportunities in the fast-growing emerging economies of Brazil, Russia, India, and China. More recently, the WATCH companies—Walmart, Amazon, Target, Costco, and Home Depot—have also gained traction in the market’s lexicon.

While documenting trends in finance is entertaining, there is little evidence that investors can spot these trends in advance in a way that would enable market-beating performance. Moreover, concentrated bets on high-flying stocks can expose investors to idiosyncratic risks and a wider range of possible outcomes. By contrast, a sound investment approach based on financial science emphasizes the importance of broadly diversified portfolios that provide exposure to a vast array of companies and sectors to help manage risks, increase flexibility in implementation, and increase the reliability of outcomes.

–  Kenneth French, PhD
Director and Consultant

_____________________________________________________________________

Resources: The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information
only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein. “Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund
Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd, Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services. Named securities may be held in accounts managed by Dimensional. This information should not be considered a recommendation to buy or
sell a particular security.
UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.
CANADA: These materials have been prepared by Dimensional Fund Advisors Canada ULC. Commissions, trailing commissions, management
fees, and expenses all may be associated with mutual fund investments. Unless otherwise noted, any indicated total rates of return reflect the
historical annual compounded total returns, including changes in share or unit value and reinvestment of all dividends or other distributions, and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.
AUSTRALIA and NEW ZEALAND: This material is issued by DFA Australia Limited (AFS License No. 238093, ABN 46 065 937 671). This material
is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Any Adult Child with a Serious Illness Needs a Health Care Power of Attorney

Having a child who is critically ill is the worst nightmare for every parent. This can be even more problematic when your child is legally classified as an adult because once they turn 18, you do not have the automatic ability to make decisions for them or see their health care records.

If your child is of college-age or has turned 18 in their senior year of high school and is taken to the hospital when you were not around, the hospital legally is not able to provide you with information about their condition without proper consent. If your child is critically ill and has passed out and is unable to provide consent, this can create a medical nightmare for you and your loved ones.

Make sure that you consider the needs of the entire family when crafting a health care power of attorney and providing appropriate consent that aligns with HIPAA requirements.

An estate planning lawyer can help you create these documents based on who needs to receive what details and create these documents for your entire family including any adult children who are currently coping with a serious illness and rely on your assistance to manage it or help with their health care concerns. For more information, schedule a consultation with an estate planning lawyer.

Can I Revoke a Living Trust?

A living trust is also referred to as a revocable trust which, as the name implies, empowers you to make decisions while you are still alive about the purpose of the trust or even its existence. This is because a revocable trust is a flexible financial structure or legal entity that empowers the person who creates it to remove, alter or change the trust assets or to amend the trust itself or alter beneficiaries at any point during their lifetime.

The very nature of a revocable trust is such that you can decide in the future that the terms or beneficiaries need to be updated. These small changes can be accomplished through small amendments, bigger changes might need to be achieved through revoking the trust altogether. 

If you wish to dissolve a revocable trust, it’s important to take the necessary steps to do so. You will need to remove all of the assets that have been transferred into it as a first step in dismantling a revocable trust you have already created. You would then want to fill out a formal revocation form to create a paper trail and written evidence of your intention to dissolve the trust. 

Sign this and get it notarized. Your local area might also require an additional step of filing that paperwork with a local probate or estate court. To make sure that you have all of the details managed in the revoking of an existing living trust, work directly with an estate planning lawyer who has experience in this field.     

Need a NJ estate planning lawyer to help you create or revoke a trust? Reach out today.

Does My Executor Need to Have the Skills of an Accountant or Attorney?

Most people choose a family member or close friend to serve as an executor or a personal representative of their estate. This means that when you pass away, this person once approved by the court will be able to handle the administration of your affairs and the closing out of your estate.

You are not obligated to choose a friend or family member to serve in this role and many people turn to other individuals or organizations. A professional, such as an accountant or attorney might be the right choice in the event that you do not find anyone in your family or current net worth to serve in this role.

An effective executor should bring certain qualities to the table, including being ethical, organized, committed to doing the best possible job, careful about protecting the best interests of the beneficiaries, and being tactful. As an executor, it is not necessary to have the expertise or skills brought to the table by an accountant or an attorney. However, it is common for personal representatives who are dealing with complex estates or those who are not familiar with all the responsibilities of serving in this role to engage in the services of these professionals to help with the management of the estate.

When retaining these professional services to assist with probate administration, payments will be made to these individuals from the estate itself. Serving as an executor does not require any professional certifications or licensure but it can be beneficial to think about the financial obligations and understanding of the person that you choose to appoint in this role.