In recent years, more and more investors are selecting Exchange Traded Funds (ETFs) over mutual funds. But what exactly is an ETF, and how do they differ from the traditional mutual fund? Modern Portfolio Theory (invented by Nobel laureate Harry Markowitz) states that in order to minimize risk, investors should hold a portfolio of many uncorrelated (unrelated) stocks, similar to the expression “don’t put all of your eggs in one basket.” The problem with MPT is that the average investor would need a lot of money and time to create such a diversified portfolio. Mutual funds and ETFs solve this limitation by allowing investors to gain immediate diversification by combining their funds together.

Markets have been extremely volatile in the last few months, and while it’s true that volatility is normal and even healthy, it doesn’t necessarily mean it is a welcome occurrence for everyone. However, that unpredictability can be used as a tool to help you evaluate your true risk tolerance to prepare yourself and your portfolio going forward.

With the passage of the Tax Cuts and Jobs Act (TCJA) of 2017, many real estate investors are wondering whether rental income qualifies for the generous, yet confusing, section 199A deduction against Qualified Business Income (QBI). The answer is it’s not 100 percent clear, but the general consensus among tax practitioners is that income from rental properties will be deemed QBI and qualify for the deduction. Of course, there are always exceptions. The new section 199A deduction is limited to QBI generated from a qualified trade or business within the United States. Real estate ownership and its associated rental income is generally considered to be a passive activity.  Therefore, the question is, if you own rental real estate, are you operating a trade or business to benefit from the deduction or are you just a passive investor?

This week, a lot of Americans received a gift from the Federal Government, as the IRS announced that it will waive the estimated tax penalties for those who underwithheld taxes in 2018. There are some limitations to this gift, but such a waiver could end up saving Americans a lot of money in additional tax penalties.

Are you a business owner who recently received a letter from the City of Los Angeles claiming you owe tax on your total revenues? If you operate a business within the City of Los Angeles, you must file a Business Tax-Registration Certificate (BTRC) each year regardless of whether or not you generated any revenues. The tax is due on the gross receipts of your business, which is the total revenues you collected before deducting any expenses. City of Los Angeles Business tax postcards were recently mailed and the business tax is due on February 28th of each year (29th if it’s a leap year). This tax is in addition to sales tax, state income tax, and the unsecured property tax imposed by the County of Los Angeles.

Despite the recent gyrating stock market, the economy is still doing quite well based on many indicators. Since October 2018, the stock market is down over 10 percent and in some sectors down almost 20 percent. Does this mean we are entering a recession? A recession is technically defined as a period where Gross Domestic Product (GDP) declines in two consecutive quarters. GDP is the total revenues earned by a country for a given period of time. Based on the factors mentioned below, many of the current economic indicators do not point towards a recession in the near future. That’s not to say a recession will not occur at some point.

The end of the year marks an important deadline for those who have been accumulating assets in a retirement account. That is because the majority of those who are over the age of 70.5 must take a required minimum distribution (RMD for short) from their retirement accounts before December 31st of each year. However, there are a number of caveats to this requirement, because it wouldn't be an IRS rule if there weren’t exceptions and exemptions.

The Tax Cuts and Jobs Act (TCJA), passed on December 22, 2017, lowered taxes on both individuals and businesses by expanding the tax brackets, introducing the Qualified Business Income deduction, and lowering the corporate tax rate. Also included in the TCJA was the introduction of the Opportunity Zones under IRS Codes 1400Z-1 and 1400Z-2. The Opportunity Zones offer generous tax breaks that were introduced to “spur private investment in distressed communities” by either lowering or completely eliminating capital gains depending on how long you hold the qualified investment.

Join us for a webinar where Ara Oghoorian, CFA, CFP®, CPA, will discuss the 2017 Tax Cuts and Jobs Act and all the provisions that affect individual taxpayers.

We get a lot of questions on what is involved in creating a client’s financial plan, and the one clarification we always have to make is that a financial plan is not a budget. While it is true that cash flow is an integral part of any person’s overall financial well-being, that is not an area where we can add value, nor can we really analyze what an appropriate amount is for someone to spend in any particular category.