Money Management
Sunday, August 15, 2004
Variable Annuities
[Bernstein2] recommends Variable Annuities as a tax-sheltered investment vehicle, useful for someone whose tax-sheltered accounts contain a percentage of their total portfolio considerably below what is necessary to diversify sufficiently into REITs and bonds, which can only be reasonably used in a tax-sheltered account. Vanguard, as always, comes to the rescue with very good (low fees, no load or commission, excellent underlying fund choice) variable annuity. Here are the useful resources:
1) An excellent annuity intro article by Barry Perlman, Chris Lott, and Ed Zollars. At the end, it contains its own set of helpful links, but the article is excellent by itself.
2) Vanguard Variable Annuity program
Wednesday, August 11, 2004
Tax managed investing
Articles on tax-efficient investment, indexing, and survivorship bias at Aperio Group , a firm that specializes in tax-efficient portfolio management and similar hard-to-find services. Another firm to consider, a supposedly bigger one: Parametric Portfolio Associates. The key questions I have about firms like these are:
1) What is the fee structure?
2) What is the advantage of going with them as opposed to doing the same thing yourself?
3) What are the risks involved?
Paper on tax managed investing
Sunday, August 01, 2004
REITs asset class
Frank Armstrong article about REITs on fee-only-advisor.com.
William J. Bernstein advocates REITs in Intelligent Asset Allocator.
Roger C. Gibson advocates REITs in Asset Allocation.
Vanguard has a REITs Index fund, and there are REITs ETFs on the market.
Tax Implications: Most of the growth of REITs comes from dividents which are taxed as regular income (i.e., they are not qualified corporate dividents). Further, despite the brevity of the historical period over which REITs performance data is available, they are very much on par with stocks EV and variance wise, while having quite low correlation with S&P500 (they have higher correlation with small cap stocks).
