Tripp Yates, CFP®, CPA/PFS Eaglestrong Financial

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About Tripp Yates, CFP®, CPA/PFS

Tripp has extensive experience in financial planning and investment management, and he diligently uses his credentials of CPA and CFP® to benefit his clients. Over the last ten years, he has managed over $100 million in assets for individuals and families.

Tripp’s interest in investments started when he was young and was intrigued by his grandfather’s savvy investment knowledge. When he realized staying in public accounting was not his ultimate goal, he was excited to take his career in this direction.

His passion for financial planning is evident to each and every client he meets with. His desire is to help his clients organize their finances, save taxes, and invest wisely. Tripp strives to work in a humble and transparent way.

When he is not managing his firm and his clients, Tripp enjoys spending time with his family, running, and cheering on the Rebels and the Cubs.

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Recently Published

How to Close the Gap

February 18, 2019

I recently finished the book The Behavioral Investor  by Daniel Crosby – a great read with so many pieces of wisdom. With the volatility in the stock market over the last several months, it is an opportune time for me to share the highlights from the book. Our investment philosophy is to focus on what we can control – diversification, low costs, and tax efficiency. However, all of those important decisions are irrelevant if we cannot manage our emotions during volatile times. Understand, I am in no way minimizing the frustration and anxiety that stock market declines can cause, but rather stressing why our understanding of human nature can help us avoid catastrophic investment mistakes.

 

Our brains and emotions are geared to respond to events by taking action. This makeup is beneficial to us in fleeing danger or fighting for survival. However, it is a detriment to successful long-term investing where sticking to a plan is of utmost importance.

  

Asking someone built for short-term survival to become a long-term investor is a bit like trying to paint a room with a hammer. You can do it, but it’s not pretty.”

 

Most of you have personal experiences with investing. Whether it is participating in the tech bubble in the early 2000s, financial crisis in 2008 or maybe some experience being exhilarated or disappointed in a promising stock with a family member or friend. Whatever the experience, your view of markets is most likely shaped by those experiences. A person that started investing in 1980 would have a much different view of investing compared to a person that started investing in 2000. The key is to understand your experiences and not let them cloud your view but instead become a student of market history. The future will always be different but history gives us a good idea of what to expect.

 

There are four areas that the author points out affecting our behavior risk – Ego, Conservatism, Attention and Emotion. I’ll give a brief summary on each area.

 

Ego

 

Our world today is filled with news stories to grab our attention. We feel we need to stay updated on the latest headlines. However, the author points out what we really crave is “olds” not “news.” We want to validate what we already believe to be true. This is called confirmation bias. It is what helps us maintain our ego. This is why many of us choose to get our news from networks that are more biased towards our political views. In investing, our ego does not like the uncertainty involved. Therefore, people have a tendency to invest in companies they are familiar with even if it's not the best investment strategy. 

 

Solution: Recognize our confirmation bias. Understand that nothing is certain in investing. Diversification allows you to manage risk while achieving return.

 

Conservatism

 

At the heart of conservatism is that the fear of loss has more effect than the chance of gain. If pain is expected, it is much easier to tolerate. Because the financial markets subject our investments to ongoing volatility, our thoughts can easily focus on conservatism. Many times, we are faced with so many decisions that conservatism causes paralysis. We avoid making a decision out of fear of regret. No decision at all does allow us to avoid loss or regret in the present, but may bring to pass the very thing we were trying to avoid in the first place. The author recently posted on Twitter that this is his favorite paragraph in the whole book:

 

“Think about the most meaningful thing you have ever done. I would wager that it took a measure of risk, uncertainty and hard work to achieve. In this, as with all risk, comes a valuable lesson: to strive for certainty is to doom oneself to mediocrity. Nothing is less safe than playing it safe and nothing guarantees loss like trying to avoid it. Consider the person who remains unattached to avoid risking heartache and finds loneliness in the process. Or the would-be entrepreneur who never makes the leap of faith and wastes a career working at jobs they hate. Or the investor paralyzed by a fear of volatility that arrives at retirement with resources inadequate to meet their needs. Indeed, the irony of obsessive loss aversion is that our worst fears become realized in our attempts to manage them.”

 

Solution: Invest with a view of tomorrow over today. Understand that market downturns happen and are a natural part of investing. Accept volatility as a long-term investor in order to achieve returns.

 

Attention

 

The power of story has much more impact on our brains than facts. The author uses the example of IPOs (initial public offerings). Everyone wants in on the stock that is going public because they don’t want to miss out on a big gain. An IPO is usually surrounded by lots of media attention. The facts tell us a different story.

 

“…the average IPO in the US has gone on to underperform the market benchmark by 21% per year in the first three years following its release.”

 

We crave information constantly because technology today allows us to access it. However, we must screen media and news stories as an informed consumer. The author tells a story about appearing on a major financial news network to discuss the markets during a volatile time. He shared some thoughts right before going on air and then the producer spoke into his ear piece.

  

“Don’t be a nerd, we’re selling news here.”

 

It is up to us to sort out the facts and not get caught up in catchy stories.

 

Solution: Market prognosticators and complicated stories must be ignored. You must cling to facts and evidence to support new information.

 

Emotion

 

Many of our decisions are made based on emotions. A familiar saying is “they will forget what you said but always remember how you made them feel.” The extreme emotions in investing that come to mind are fear and greed. It is clear that money affects our emotions but it also evident that emotions are not healthy for investment decision making.

 

“…investors who mire themselves in the day-to-day minutiae of the markets and experience all the accompanying emotions are likely to make a thousand tiny decisions that end in a penniless retirement.”

 

Solution: Determine an asset allocation and investment strategy that you can stick with during the ups and downs in the market compared to making changes around volatile disruptions. Having a goals-based investment approach allows us to separate our money into buckets for short, mid, and long-term time horizons with various levels of risk. This approach can really help us compartmentalize risk.

 

Our best advice is to have a sound investment plan in place while realizing it will take the right mindset and behaviors to stick with that plan through volatile times. If we learn to recognize and manage our thoughts and emotions surrounding investing it will most likely lead to much success. This success is likely to produce not only sound investment returns over the long-term, but also a more satisfying and fulfilling life with proper expectations.

 

We believe good investing behavior does not come to anyone naturally.  It needs to be taught and learned over time and will be a constant battle. As advisors, one of our most important roles is to help our clients understand this side of investing. Our emotions have to be kept in check; otherwise, they cause us to do the exact opposite of what is wise.   

 

 

 

 

If you would like to discuss or learn more, schedule a call or meeting with me using the link below:  

Tripp Yates, CPA/PFS, CFP®

901.619.3599  tripp@eaglestrong.com

 

Tripp's passion for financial planning is evident to each and every client he meets with. His desire is to help his clients organize finances, reduce taxes, and invest wisely. Tripp strives to work in a humble and transparent way.

 

Tripp has extensive experience in financial planning and investment management, and he diligently uses his credentials of CPA and CFP® to benefit his clients. Over the last ten years, he has managed over $100 million in assets for individuals and families. When he is not managing his firm and his clients, Tripp enjoys spending time with his family, running, and cheering on the Rebels and the Cubs.


 

References

The Behavioral Investor by Daniel Crosby 

Behavior Gap image: https://behaviorgap.com  

 

 

 

Disclaimer

Eaglestrong Financial, LLC is a Registered Investment Advisor offering advisory services in the states of TN and MS and in other jurisdictions where exempted. The information contained herein is not intended to be used as a guide to investing or tax advice. This material presented is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Past performance is no guarantee of future results.

 

 

#eaglestrong #eaglestrongfinancial

 

 

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Volatility

December 10, 2018

 

Last week volatility in the markets returned. News stories surrounding the China Trade talks, U.S. Fed policy on interest rates, and the status of the economy overall were blamed at one time or another. The headlines were flashing orange with how many points the market dropped as the media knows that grabs attention. Anyone that follows our thoughts on investing knows that we believe it is wise to not pay attention to the noise in the news headlines.

 

The reality is that we all participate and invest in the markets to get investment returns. In order to get investment returns over the long-term, we will be subject to volatility. That is why, historically, a higher return is achieved in stocks and bonds vs. cash over the long-term. There will be periods where markets underperform and prices fall; that is part of the process. But never lose focus on why you are investing. It is to achieve the long-term investment return to accomplish your financial planning goals. That may be annualized returns of 6%, 7%, or 8% depending on your specific plan. For some, you may only need 5% and are afforded the ability to keep more of your money in cash equivalents with lower returns and minimal volatility.

 

For a clearer picture, what if the news illustrated the movement in the markets each week with a longer-term perspective. The CLARITY Market Monitor in the chart below does just that. It keeps things in perspective. 

  

 

There have been and will always be negative headlines that give us reasons not to invest. The chart below shows the most publicized reasons going back to 1950 while the U.S. market (S&P 500) continued its long-term trend upward. We have the choice of what we listen to and focus on.

 

 

For an even shorter period of time that might be clearer in your memory. The chart below goes back to the current recovery since March of 2009. The negative news and upward trend of the market is the same.    

 

 

While giving perspective, I do not overlook or minimize the anxiety and frustration that a downturn in the market causes us to feel. That is why we always have to go back to our long-term plan. That is why we plan. Otherwise we subject ourselves to trying to time the market and that does not have good implications for your plan. As the chart below shows, only missing the best 20 days in the U.S. stock market (1998 – 12/29/2017) would have caused the annual investment return to be 1% vs. 7%. That is a big difference. Not only that, six of the best 10 days occurred within two weeks of the 10 worst days. The bottom line – stay the course and stick to your long-term plan.

 

 

One advisor came up with a simple way to keep our emotions in check during periods of downturn in the market. He fit his key points all in a note card. It’s simple but it provides the context we need.    

 

 

At Eaglestrong, we are here to help you stay focused on the long-term. We will endure great market advances as well as declines but know it is our mission to keep you focused on your plan. We believe emotions and behavior may be the biggest factor in achieving your overall investment success. My current list of books to read includes The Behavioral Investor.

 

 

I look forward to sharing my highlights from the book soon. Click here for more information on our investment philosophy.

 

 

 

If you would like to discuss or learn more, schedule a call or meeting with me using the link below: 

  

Tripp Yates, CPA/PFS, CFP®

901.619.3599  tripp@eaglestrong.com

 

Tripp's passion for financial planning is evident to each and every client he meets with. His desire is to help his clients organize finances, reduce taxes, and invest wisely. Tripp strives to work in a humble and transparent way.

 

Tripp has extensive experience in financial planning and investment management, and he diligently uses his credentials of CPA and CFP® to benefit his clients. Over the last ten years, he has managed over $100 million in assets for individuals and families. When he is not managing his firm and his clients, Tripp enjoys spending time with his family, running, and cheering on the Rebels and the Cubs.


 

References

https://twitter.com/ConcentusWealth/status/1072153303797153792

 

https://twitter.com/morganhousel/status/1070034783911198720

 

http://blairbellecurve.com/crisis-du-jour/

 

J.P. Morgan Asset Management – Guide to the Retirement 2018 Edition page 40

 

https://www.marketwatch.com/story/panicked-about-a-stock-market-crash-what-you-need-to-remember-can-fit-on-a-single-notecard-2018-02-08

 

 

 

 

Disclaimer

Eaglestrong Financial, LLC is a Registered Investment Advisor offering advisory services in the states of TN and MS and in other jurisdictions where exempted. The information contained herein is not intended to be used as a guide to investing or tax advice. This material presented is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Past performance is no guarantee of future results.

 

 

#eaglestrong #eaglestrongfinancial

 

 

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Investing Wisely

December 4, 2018

Financial advisor financial planner Memphis dentists business owner fiduciary fee-only CPA CFP investment management diversification

 

If we had to summarize the three main things we do for our clients, it would be to help:    

Financial advisor financial planner Memphis dentists business owner fiduciary fee-only CPA CFP invest wisely diversification

This is the third of a 3-part series covering these topics in more detail.

Read part 1 here: Organizing your finances

Read part 2 here: Reducing taxes (whenever possible)

 

With investing and life, we believe you should focus on things that matter and things that you can control. That is the basis for each of the three pillars of our investment philosophy. We recognize we cannot control or predict the direction of the stock market even though we are all bombarded constantly with breaking news and prognostications. We choose instead to rely on evidence-based investing from years of history and academic research. This is knowing that the structure of your portfolio and the amount of risk you take is directly correlated to the amount of return you achieve over time. Taking on risk requires watching your portfolio values fluctuate. Having the proper expectations can go a long way in keeping your emotions in check and staying the course. Over the long-term, we believe that is the wise approach to investing.

 

Diversify Through Asset Allocation

 

Investing wisely starts with diversification. That may sound simple but it doesn’t minimize its importance. Your allocation of stocks, bonds and cash may be the most influential decision you will make aside from sticking to your plan. On the stock side, diversification goes further into the asset classes of small, mid and large size stocks with value and growth characteristics. We also look at spreading risk by investing in developed international and emerging market countries. Diversifying your portfolio is in contrast to investing in one or a few particular stocks where you take on uncompensated business risk. On the bond side, we invest in short, mid, and long-term maturity bonds of corporations and governments. Corporate bonds are subject to the credit worthiness of the company while government bonds are issued by the government. The goal with diversification is to capture the power of the overall markets without placing too much emphasis in one particular company or area of the market. This allows you as the investor to achieve market returns and avoid concentration risk. This short video on The Power of the Markets explains it best: 

  

 

Utilize Low-Cost Investments

 

We believe it is important to use low-cost mutual funds or exchange-traded funds (ETFs) to accomplish diversification. Studies have shown that excessive costs of underlying investments may have a negative impact on overall investment returns. To illustrate, we have included a chart below of The Mutual Fund Landscape study conducted in 2017 by Dimensional Fund Advisors LP. In each of the time periods (5, 10, and 15 years), the lower the expense ratio in the funds the more winners or outperforming funds vs. their benchmarks. 

  

Financial advisor financial planner Memphis dentists business owner fiduciary fee-only CPA CFP passive asset management DFA funds

 

For more information on investments and underlying cost, check out our blog post The Cost of Advice and Investments.

 

Prioritize Tax Efficiency

 

Taxes matter when it comes to investing. While not the most important element in investing, we believe prioritizing tax efficiency is a part of optimizing your entire portfolio. Tax efficiency can be the types of investments used such as mutual funds, tax-advantaged mutual funds, or ETFs. Another important factor is the location of your investments. For example, bonds or income-producing investments can be placed in your IRA to shelter the continuous income from your tax return each year until you pull money out of your IRA in retirement. This asset location strategy would likely require you to have a more conservative allocation in your IRA and more aggressive allocation in your taxable account to achieve your desired overall asset allocation.

 

When it comes to retirement savings, knowing where to put your money to obtain the most tax benefit depends on your specific situation. You may benefit more from contributing to a Roth IRA instead of a Traditional IRA. You may want to contribute to a 529 Plan for your child’s education savings. All these accounts have tax advantages either today or in the future. While it may be harder to keep up with the benefit from tax-efficient decisions, we believe they can have a material impact over the long-term. In a 2016 Vanguard study on advisor value, research found that strategic asset location could add as much as 0.75% annually to an investor’s overall portfolio. Additionally, a spending strategy organizing the order of an investor’s withdrawals from different account types in retirement could add as much as 1.10%. Both of these value-added financial planning strategies are directly associated with tax efficiency.

 

 

Financial advisor financial planner Memphis dentists business owner fiduciary fee-only CPA CFP free book the investment answer

If you would like more information on our investment philosophy, click here to receive a copy of the book – The Investment Answer. This book addresses the five key decisions that every investor must make. It gives greater detail and insight into our philosophy.

 

At the heart of investing wisely is having a solid long-term plan. By doing this, you will have the proper expectations of your risk and return to withstand the things that are outside of your control (market volatility, new tax laws, etc.). The same is true in life. If you focus on what matters (faith, family, health, purpose) and things you can control (expectations, attitude, daily habits), then you are positioned to best handle the ups and downs of life. Our desire at Eaglestrong is to bring clarity to your priorities to connect them with your financial decisions.   

 

 

 

 

If you would like to discuss or learn more, schedule a call or meeting with me using the link below: 

Financial advisor financial planner Memphis dentists business owner fiduciary fee-only CPA CFP Tripp Yates

Tripp Yates, CPA/PFS, CFP®

901.619.3599  tripp@eaglestrong.com

 

Tripp's passion for financial planning is evident to each and every client he meets with. His desire is to help his clients organize finances, reduce taxes, and invest wisely. Tripp strives to work in a humble and transparent way.

 

Tripp has extensive experience in financial planning and investment management, and he diligently uses his credentials of CPA and CFP® to benefit his clients. Over the last ten years, he has managed over $100 million in assets for individuals and families. When he is not managing his firm and his clients, Tripp enjoys spending time with his family, running, and cheering on the Rebels and the Cubs.


 

Sources

- The Mutual Fund Landscape study (2018) is conducted by Dimensional Fund Advisors LP. US-domiciled open-end mutual fund data is from Morningstar and Center for Research in Security Prices (CRSP) from the University of Chicago. The sample includes funds at the beginning of the 5-, 10-, and 15-year periods ending December 31, 2017.

 

- Francis M. Kinniry Jr., CFA, Colleen M. Jaconetti, CPA, CFP®, Michael A. DiJoseph, CFA, Yan Zilbering, and Donald G. Bennyhoff, CFA (2016, September). Putting a value on your value: Quantifying Vanguard Advisor’s Alpha®. Vanguard Research. 

 

- Goldie, CFA, CFP®, Daniel C. & Murray, Gordon S. (2011). The Investment Answer. New York, NY: Grand Central Publishing.

 

Disclaimer

Eaglestrong Financial, LLC is a Registered Investment Advisor offering advisory services in the states of TN and MS and in other jurisdictions where exempted. The information contained herein is not intended to be used as a guide to investing or tax advice. This material presented is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Past performance is no guarantee of future results.

 

 

#eaglestrong #eaglestrongfinancial

 

 

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