Market commentary, explainers & deep dives

Yes, but consider these pros and cons first.

A trust can hold many different assets, including your individual retirement account (IRA). Doing so can have benefits for you and your heirs, but it's important to structure the trust properly.

What Is a Trust?

A trust is a fiduciary arrangement that allows a trustee to hold assets on behalf of a beneficiary. This relationship allows the trustee to decide exactly how and when to distribute assets — useful when an owner worries beneficiaries may mismanage inherited assets, or wants legal protection and privacy, since trusts are not part of the public record.

Who Can Own an IRA?

An IRA cannot be a joint account and cannot be owned by an entity such as a business (though SEP and SIMPLE IRAs can be established by businesses). To contribute, you or your spouse must have earned income.

Can an IRA Be Placed in a Trust?

It is possible to name a trust as the beneficiary of an IRA. The trust then receives any funds remaining when the owner dies, and the IRA owner can specify exactly who should receive funds and under what conditions. One option is a charitable remainder trust — not a taxable event — which pays income to named beneficiaries for a set term before the remainder goes to a designated charity.

Benefits

• Greater control: specify exactly when and how assets are distributed, even naming successive heirs.
• Protection from creditors when properly structured.
• Privacy — trusts aren't part of the public record.
• Avoids probate.

Disadvantages

• Distributions from an inherited IRA generally must be made within five years if the beneficiary isn't an individual.
• Trust income brackets are lower, which can mean a higher tax burden — avoidable via a charitable remainder trust.

Bottom Line: It's possible to place an IRA in a trust for greater control or privacy, but plan around the five-year distribution rule and potential tax burden. Work with a financial advisor, especially if a beneficiary is a minor.

With research and planning, you can create a steady stream of income.

When it comes to investments, patience is a necessary virtue. But that doesn't mean payoff happens only in the long run — these assets can make money for you in one month:

Savings accounts. Safe, reliable, highly liquid, easy to open — though rates usually don't outpace inflation.

Certificates of deposit (CDs). Safe and simple like a savings account, less liquid, terms from 3 months to 5 years — even the best-paying CDs likely won't beat inflation.

Dividend-paying ETFs. Pay shareholders regular income and reward diligence as they appreciate — dividend ETFs can offer more ways to earn monthly income vs. quarterly/annual payers.

Annuities. An insurance contract promising monthly pay, but requiring upfront capital and carrying fees/risk.

Bonds. You act as lender to a corporation or government — can pay significantly higher interest than bank deposits; most pay annually/semiannually, though some compensate monthly.

Many investors seek advisors to navigate markets and maximize returns. But historical data shows advisors rarely outperform the S&P 500 over a 10-year period.

Factors Contributing to Under-performance

• High fees — AUM or commission-based fees compound to erode returns over time.
• Market efficiency — millions of participants make a sustainable edge hard to find.
• Behavioral biases — overconfidence, herd mentality, emotional responses to volatility.
• Risk management focus — capital preservation can limit upside during bull cycles.

The Case for Index Funds: low-cost index funds replicate rather than try to beat an index — offering broad exposure, reduced risk, and participation in long-term market growth, aligning strategy with the realities of the data.

Many investors focus solely on capital appreciation. A comprehensive assessment should include dividends — together they provide a more accurate measure of true return potential.

Dividends and growth have an inverse relationship: high-dividend companies often grow slower, while growth companies reinvest profits rather than distribute them. Dividends provide a steady income stream, especially valuable during downturns; growth offers capital appreciation and long-term wealth accumulation.

Reinvesting dividends in high-growth companies compounds over time, and a diversified portfolio across sectors and asset classes helps manage risk. Dividends + Growth = Total Return on Investment — the combination, not either alone, is the real measure.

Investing is important for beginners because it can generate higher returns than a savings account, allow for compounding growth over time, and protect against inflation.

• Investing allows your money to compound — you earn interest on your initial investment as well as on prior interest earned.
• The S&P 500 has historically yielded an annual return of 8–10%; individual stock picking is time-consuming, volatile, and stressful by comparison.
• Index funds offer diversification and track the market automatically, avoiding the risk — and high fees — of picking individual stocks or paying a manager to do it.
• Risk tolerance and time horizon matter: index funds suit younger investors more than those nearing retirement.
• Retirement accounts (401k, IRA) offer tax advantages but restrict withdrawals; brokerage accounts (Fidelity, Schwab, etc.) are easier than ever to open and trade in.
• Start investing as soon as possible — but only after paying off high-interest debt and building an emergency fund.
• To invest: pick a major brokerage, select an S&P 500 index fund (e.g. VOO), and place a market or limit order for shares (fractional shares are available too).

The "Pay Yourself 10% First" rule suggests setting aside 10% of income for savings or investments before allocating the rest to expenses. The idea is to prioritize saving as a non-negotiable, regular habit.

1. Calculate your income.
2. Deduct 10% and move it to savings/investments immediately.
3. Budget the remaining 90% for living expenses and obligations.
4. Adjust spending if the 90% doesn't cover expenses.
5. Treat the 10% as non-negotiable — consistency matters more than the exact percentage.

401(k), HSA, and similar contributions count toward the 10% — and the more you save, the faster you reach your goals.

• Prioritize growth stocks when young — more risk capacity, more time to recover from losses and benefit from compounding.
• Dividend stocks provide stable income, even through bear markets; growth stocks offer higher upside but more volatility (e.g. Tesla, NIO vs. established dividend payers).
• As retirement nears, shift toward dividend payers and passive index funds, reducing growth-stock concentration and increasing cash.
• Dividends + Growth = Total Return. Generally, the higher the dividend, the less room for growth, and vice versa.

Whether renting or buying is better depends on monthly cost, opportunity cost, and individual preference. Over the past 30 years, U.S. real estate appreciated ~1.97%/year after inflation, while the S&P 500 returned ~7.19%/year — stocks have outperformed real estate by roughly 5% annually.

The "8.71% rule": if the monthly cost of renting a comparable home is cheaper than the monthly cost of owning (property tax + maintenance + cost of capital), renting is more advantageous. Owning becomes more favorable after ~30 years as equity accrues and interest cost diminishes — though mortgage-interest deductions, predictable payments, and inflation-eroded debt value add non-mathematical benefits too.

Bottom line: run your own numbers given today's mortgage rates — renting may win short-term, but buying often wins if you'll stay 5–8+ years.

Advantages

• Diversification across sectors and companies, reducing single-stock risk.
• Lower costs than actively managed funds — meaningful over time when compounded.
• Transparency and simplicity — holdings mirror the published index.

Disadvantages

• Limited upside — won't beat the market by design.
• No downside protection in bear markets.
• Limited flexibility to deviate from the index composition.

10-year annualized returns (as of June 2023, dividends not reinvested): Vanguard 500 (VFIAX) ~12.63%, iShares Core Total US Stock Market (ITOT) ~12.14%, SPDR S&P 500 (SPY) ~11.90%. Add ~1.6% for dividends not reinvested in these figures.

Benefits

• Tax-free growth and tax-free qualified withdrawals; many states add deductions or credits.
• Flexible beneficiary changes among eligible family members.
• High contribution limits — some plans allow well over $300,000 per beneficiary.
• Age-based portfolios that auto-adjust as the beneficiary nears college age.

Pitfalls

• Limited investment choices vs. a brokerage account.
• Non-qualified withdrawals trigger income tax plus a 10% penalty on earnings.
• Plan assets factor into the Expected Family Contribution (EFC) for financial aid.
• Limited control — a designated manager runs the investment strategy.

Consult a financial advisor and compare state plans before committing.

• Limited investment choices — most plans cap you to a pre-set list of mutual funds.
• Early withdrawal penalties before age 59½ reduce flexibility for emergencies.
• Employer dependency — job changes can disrupt continuity; plan quality varies by employer.
• Tax considerations — those expecting a higher future tax bracket may prefer Roth diversification.
• Unique goals — capital needed sooner (business, education) may be better served outside a 401(k).

Diversifying across vehicles aligned with personal circumstances and goals maximizes long-term outcomes — consult an advisor for guidance specific to your situation.

Alpha: performance relative to a benchmark — positive means outperformance, negative means underperformance. Often used to gauge manager skill.

Beta: volatility relative to the market. Beta of 1 moves with the market; >1 is more volatile; <1 is less volatile.

Sharpe Ratio: risk-adjusted return — excess return over the risk-free rate, divided by volatility. Higher Sharpe means better compensation per unit of risk taken.

Divide 72 by your interest rate to estimate years to double your money. At 6%: 72 ÷ 6 = 12 years ($100 → ~$200). At 12%: 72 ÷ 12 = 6 years. It's a rough estimate, not a precise calculation, but a useful rule of thumb.

• Purchasing power erodes, squeezing company margins and potentially stock prices.
• Interest rates often rise in response, making borrowing costlier and bonds relatively more attractive than stocks.
• Future cash flows get discounted more heavily, pressuring valuations.
• Sector performance diverges — commodities/energy/real estate can benefit, while consumer discretionary/tech can struggle.
• Investor sentiment turns more cautious, adding volatility.

The relationship is complex and shaped by interest rate policy, investor expectations, and global conditions.