Planning for the Long Haul: Addressing Inflation’s Impact on Your Financial Plan

By Jeff Gilbert

Inflation acts like erosion as it quietly eats away at the value of our money—often without us realizing it until many years down the road. You might only notice the effect it’s had on your day-to-day life when there’s a bit less in your bank account than before, or when your grocery shopping doesn’t stretch as far as it used to. But when it comes to financial planning, inflation’s impact can be far more significant, particularly for retirees relying on fixed or slowly increasing incomes like Social Security or pensions without cost-of-living adjustments (COLA).

Rising Costs Negatively Impact Income

Let’s start with income, whether you are still working or retired. Some of the largest money problems in the U.S. are rooted in our incomes failing to keep up with rising costs. Take college costs, for example. One of the chief causes for the massive amount of student loans today ($1.77 trillion as of Q3 2023 according to the Federal Reserve) was the disparity between stagnant wages over the past decade and college tuition inflation, which has averaged 8% annually, according to Bankrate.com. 

This rate of increase not only dwarfs wage/salary COLAs, but most prudent college-saving investment vehicles as well. For parents trying to save and pay for their children’s college expenses, this type of inflation could ruin the best-laid financial plans.

Medical and healthcare inflation ranks right behind college tuition as one of the fastest-rising expenses, especially for retirees who tend to incur these costs more often than most other adults. According to Deloitte, a leading accounting and financial consulting company, from 2001 to 2021, healthcare costs increased a clip of 3.3% annually, nearly a third more than the average of all goods and services, and consumer incomes aren’t enough to keep pace.

Inflation also creeps into other sectors of our financial lives. From travel expenses, to purchasing a car, building supply and labor costs that add up into the price of a new home, each little tick up in inflation figures can compound into driving up the final cost of many of the goods and services we enjoy daily. It is for this very reason that the Federal Open Market Committee (Federal Reserve) has been so adamant about driving down the high inflation we experienced post-pandemic.

Wise Investments Can Curb Inflation’s Devastating Effects

On the asset side, inflation is a critical reason we need to invest our money wisely. As the post-pandemic years showed us, high inflation (and the accompanying high interest rates that arise as a result), can have a devastating effect on whether our investments (and purchasing power) are truly growing, keeping pace, or falling behind. For example, if inflation is cited as 6% but your bank CD or savings account is only yielding 3-4%, or your monthly pension benefit does not have a cost-of-living increase each year, the purchasing power of your money is falling behind. 

Factor Inflation Into Your Financial Plan

Considering these factors, it’s essential to integrate inflation into your financial plan, whether you’re doing it independently or with a financial advisor. Even though there are many financial planning software programs, inflation assumptions still can vary widely. Over a 25-year retirement period, a person’s retirement expenses could potentially double by the later years.

Whether you’re already retired, approaching retirement, or saving for future goals, adjusting inflation assumptions for different expense categories can increase the accuracy of your financial plan.

And like it or not, inflation will always be a factor throughout our lives, which highlights the need to address its impact in every financial conversation. Are you seeking a financial partner to support your long-term financial well-being? Balboa Wealth Partners is here for you. Let’s tackle the important questions together and move toward your financial goals with confidence. Contact us today at 949-445-1465 or email me at [email protected].

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected]. 

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.

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Top 10 Tax-Planning Strategies to Maximize Your Savings

By Jeff Gilbert

Tax planning often falls into the category of tasks we tend to procrastinate—those things we know we should do but would rather avoid. While it’s tempting to delay until tax day approaches, being proactive with your tax-planning efforts can ultimately save you both time and money. 

At Balboa Wealth Partners, our mission is to guide our clients with strategies to retain more of their earnings by reducing tax liabilities and optimizing savings. Here are my top 10 tax-planning strategies for 2024 to consider in your financial plan.

Maximize Your Retirement Contributions

Maximizing your retirement contributions is one of the best ways to minimize your tax liability. This is because retirement plans offer useful tax advantages that are not available if you were to simply put your money in a savings account. There are several accounts to consider, depending on your unique circumstances:

  • 401(k), 403(b), and 457 Plans: These accounts allow you to contribute up to $23,000 annually for 2024 ($30,500 if over age 50). Not only that, but contributions done pre-tax won’t show up as part of your annual income. This is a great way to defer taxes until your retirement years when you could potentially be in a lower tax bracket.
  • Traditional IRA: Contributing to a traditional IRA is another way to reduce your tax liability if your income is within certain limits. You can contribute up to $6,500 for 2023 and $7,000 for 2024, with a $1,000 catch-up contribution limit for those over age 50. Unlike the qualified retirement plans listed above, contributions to a traditional IRA can be made until the April 15th tax filing deadline.
  • Roth IRA: This is an attractive savings vehicle for many reasons, including no required minimum distributions (RMDs), tax-free withdrawals after age 59½, and the ability to pass wealth tax-free to your heirs. The contribution limits are the same as traditional IRAs. However, Roth IRAs have income restrictions and you may not be able to open an account outright if you are above certain limits.

Consider Roth Conversions

If you are outside of the income eligibility threshold for Roth IRAs but still want to take advantage of the Roth tax benefits, a Roth conversion could be the right strategy for you. It works by paying the income tax on your pre-tax traditional IRA and converting the funds to a Roth IRA.

You could also consider the mega backdoor Roth and backdoor Roth IRA strategies:

  • Mega Backdoor Roth: With this strategy, you would convert a portion of your 401(k) plan to a Roth. This involves first maximizing the after-tax, non-Roth contributions in your plan, then rolling it over to either a Roth 401(k) or your Roth IRA. With the mega backdoor Roth, you convert a portion of your 401(k) plan to Roth dollars.
  • Backdoor Roth IRA: In this case, you would make an after-tax (non-deductible) contribution to a traditional IRA. You then immediately convert the funds to a Roth IRA to prevent any earnings from accumulating. This strategy makes sense if you don’t already have an IRA set up yet.

All three Roth conversion strategies will allow the contributions to grow completely tax-free and allow you to avoid future RMDs, which is helpful if you expect to be in a higher tax bracket in the future. 

3. Contribute to a Health Savings Account

An efficient but underutilized way to maximize your savings and minimize your taxes is to contribute to a health savings account (HSA). HSAs offer triple tax savings: contributions are tax-deductible, earnings grow tax-free, and you can withdraw the funds tax-free to pay for medical expenses. Unused funds roll over each year and will essentially become an IRA at age 65, at which point you can withdraw funds penalty-free for non-medical expenses. You must be enrolled in a high-deductible health plan in order to qualify for an HSA. 

HSAs can be a great tax-management tool if you are able to pay medical expenses out of pocket and leave the HSA funds to grow. The 2023 contribution limits for HSAs are $3,850 for individuals and $7,750 for families. (The 2024 limits increased to $4,150 and $8,300, respectively.) If you are 55 or older, you may also be able to make catch-up contributions of $1,000 per year. You have until April 15th for your contributions to count for the previous year’s tax return. 

4. Contribute to a Donor-Advised Fund

If you itemize your tax deductions because of charitable contributions, you may want to consider investing in a donor-advised fund (DAF). You can contribute a lump sum all at once and then distribute those funds to various charities over several years. With this strategy, you can itemize deductions when you make the initial contribution and then take the standard deduction in the following years, allowing you to make the most out of your donation tax-wise.

You can also donate appreciated stock, which can further maximize your tax savings. By donating the appreciated position, you avoid paying the capital gain tax that would have been due upon sale of the stock and you are effectively donating more to your charities of choice than if you had sold the stock and donated the proceeds.

5. Make a Qualified Charitable Donation

If you own a qualified retirement account and are at least 70½, you can use a qualified charitable distribution (QCD) to receive a tax benefit for your charitable giving. Since this is an above-the-line deduction, it can be used in conjunction with other charitable tax strategies. A QCD is a distribution made from your retirement account directly to your charity of choice. It can also count toward your RMD when you turn age 73, but unlike RMDs, it won’t count toward your taxable income. Individuals can donate up to $100,000 in QCDs per year, which means a married couple can contribute a combined amount of $200,000!

6. Utilize Tax-Loss Harvesting

Tax-loss harvesting involves selling investments at a loss in order to offset the gains in your portfolio. By realizing a capital loss, you are able to counterbalance the taxes owed on capital gains. The investments that are sold are usually replaced with similar securities in order to maintain the desired asset allocation and expected return. 

With the ups and downs the market experienced in 2023, chances are you have some capital losses that can be utilized. For example, if you are expecting a large capital gain this year, sell an underperforming stock and harvest the losses to offset your gain. 

Tax-loss harvesting can also be used to reduce your ordinary income tax liability if capital losses exceed capital gains. In this case, up to $3,000 can be deducted from your income, and capital losses in excess of this amount can be carried forward to later tax years. 

7. Understand Long-Term vs. Short-Term Capital Gains

Understanding the tax implications of long-term versus short-term capital gains can go a long way in reducing your tax liability. For instance, in 2023 a married taxpayer would have paid 0% capital gains tax on their long-term capital gains if their taxable income falls below $89,250. That rate jumps to 15% and 20% for taxable incomes that exceed $89,250 and $553,850, respectively. Understanding where you fall on the tax table is an important part of minimizing your liability. 

Gains that are short term in nature (held less than one year) will be taxed at your marginal tax bracket, which could be up to 37%! Knowing both the nature of your gain, as well as your tax bracket, is crucial information if you want to minimize your tax liability. 

8. Take a Qualified Business Income Deduction

Business owners involved in partnerships, S corporations, or sole proprietorships can take a qualified business income deduction (QBID) to help reduce taxable income and maximize tax savings. This allows for a maximum deduction of 20% of qualified business income, but limits apply if your taxable income exceeds a certain threshold. To qualify for this deduction, consider reducing or deferring income so that you can remain below the phase out threshold. A great way to do this is to maximize your retirement contributions to tax-advantaged accounts (as discussed in point #1).

9. Consider Estate Tax-Planning Techniques

Estate tax-planning techniques can also be an effective way to reduce current-year tax liability. For 2024, the lifetime exemption for assets that can be given gift-tax-free is estimated at $13.61 million for individuals and $27.22 for married couples (12.92 million for 2023). 

The annual gift tax exclusion increased to $18,000 per recipient in 2024, up from $17,000 in 2023. This is the annual amount taxpayers can give tax-free without using any of the above-mentioned lifetime exemption. Not only that, but the annual exclusion applies on a per-person basis, so each taxpayer can give $18,000 per person to any number of people per year. 

Though gifting and other estate tax-planning strategies are not tax-deductible, they can help to significantly reduce your taxable estate over time.

10. Make Sure Your Advisory Team Is Working Together

Beyond consulting with a tax professional, you’ll want to be sure your entire financial team is working together to provide cohesive oversight and guidance. This should include professionals like CPAs, financial advisors, investment advisors, and estate attorneys. Your finances don’t exist in a bubble and so neither will your tax-minimization strategies. When your advisory team works together, strategies are easier to identify and execute, and proactive tax solutions become much easier to implement, reducing stress and your tax bill.

Take Action Today

Tax planning doesn’t need to feel confusing, especially when you have the guidance of an advisor with years of experience in tax strategy. At Balboa Wealth Partners, we specialize in simplifying the complexity of the tax code and creating a plan to meet your specific needs. If you’re ready to reduce your tax burden and boost your savings, we’re here to assist you. Schedule an initial consultation by contacting us at 949-445-1465 or email me at [email protected].

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected]. 

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.

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The Difference Between Investment Management and Financial Planning

By Jeff Gilbert

A wide array of ideas might come to mind when you think about what a financial professional can help you with. Is it providing investment advice? Investment management? Financial advice? Financial planning? Wealth management? All of the above? 

There is a common belief that all these words are just synonyms for essentially the same thing, but that’s just not the case. Each of these services involve different processes and deliverables. 

In this guide, we discuss the difference between financial planning and investment management and what you can expect from working with Balboa Wealth Partners.

Financial Planning vs. Investment Management

According to the CFP Board, financial planning is a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances. Essentially, it’s a holistic process that looks at all parts of a client’s financial situation to create a customized plan to achieve their financial goals. It includes the following subject areas:

  • Retirement planning
  • Education planning
  • Tax planning
  • Investment planning
  • Estate planning
  • Risk management and insurance planning

Investment management, on the other hand, aims to meet particular investment goals for the benefit of clients whose money a financial professional has the responsibility of overseeing. It is a siloed service that does not necessarily incorporate the other aspects of a client’s unique financial situation. Financial planning usually includes investment management, but investment management does not automatically include financial planning.  

Our Financial Planning Process

What makes our financial planning process unique? With more than 40 asset management firms trading their proprietary strategies directly with the Balboa Wealth Partners team, these subadvisor relationships deliver a unique, tax-efficient portfolio strategy to our clients. This process eliminates costly layers of fees and delivers the portfolio strategies of some of the world’s preeminent asset managers.

We have the ability to solve a wide range of client challenges through our retirement income gap analysis and complex estate and succession planning. From simple cash flow planning and goal-based assessments to detailed tax analysis and estate planning, we have the experience to address your goals and objectives. Empowering you by integrating your planning results in real time, directly into the Balboa Client Portal, we tailor planning to you, modeling what-if scenarios, and stress-testing your current allocations and cash flow requirements.

Our Investment Management Process

The Balboa Wealth Partners investment management model delivers high-touch, responsive service, strategically paired with access to institutional-caliber investment guidance in a way that eliminates conflicts, reduces fees, and opens the doors to truly comprehensive planning.

Our clients receive sensible, effective advice, along with a firm commitment to collaborate with other professional advisors—offering a full array of wealth management and investment advisory services.

We stress-test scenarios incorporating a wide range of asset classes, including stocks, bonds, ETFs, mutual funds, closed-end funds, options, separately managed accounts, hedge funds, and non-traded REITs. We blend internally managed strategies with rigorously selected third-party managers, best-in-class third-party mutual funds, ETFs, hedge funds, and private equity managers to develop a comprehensive platform of customized investment strategies.

Are You Looking for Comprehensive Financial Planning?

We know the first step is always the hardest. If you are looking for comprehensive financial planning that includes strategic investment management, we’re here for you. 

At Balboa Wealth Partners, the needs of our clients come first. Our clients want a partner who values them and understands the importance of what they have built. Our advisors specialize in overseeing your financial affairs and coordinating the day-to-day execution of your long-term financial plans.

To set up an initial call, reach out to us, give me a call at 949-445-1465 or email me at [email protected]. To reach the Scottsdale office, call 480-801-5100 or email [email protected].

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected]. 

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.

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Don’t Let 2024 Catch You Unprepared: Review Your Financial Plan

By Jeff Gilbert

With the new year comes renewed commitments to improving your finances, strengthening your savings, and planning for the future. Now is an opportune time to take a proactive stance toward your financial future. 

I understand the unique financial landscape that high-net-worth and ultra-high-net-worth families navigate, and with 2024 before us, it’s time to align your financial plan with your aspirations. From scrutinizing retirement contributions and investments to fine-tuning tax-saving strategies and charitable giving, I am here to guide you through a comprehensive review that safeguards your financial well-being in the coming year.

Retirement 

Maximize Your Retirement Savings

Be sure to max out your retirement contributions for 2023 prior to April 18th of 2024. Many employers offer retirement plans like 401(k)s, 403(b)s, and 457s, which allow you to contribute up to $23,000 for 2024 ($30,500 if over age 50).

These contributions are automatically deducted from your paycheck and won’t show up as part of your annual income, so the more you can maximize your contributions during the year, the less taxable income you will have. With this strategy, you can defer taxes until your retirement years when you could potentially be in a lower tax bracket.

Keep in mind that the SECURE 2.0 Act will increase catch-up contributions starting in 2025. At that point, individuals between ages 60 and 63 will be able to contribute up to $10,000 or 150% of the regular catch-up contribution to their retirement plan.

Contribute to an IRA

Contributing to a traditional IRA is another strategy to reduce your AGI if your income is within certain limits. By contributing pre-tax funds, you can effectively reduce your current-year tax liability, but you will owe tax on both the contributions and the account growth when you withdraw the funds in retirement. Alternatively, you can contribute to a Roth IRA, where taxes are paid up front but distributions are tax-free at retirement as long as the first contribution was made at least five tax years ago. The 2023 contribution limit for IRAs is $6,500 with additional $1,000 catch-up contributions for individuals over the age of 50. Contributions can be made until April 18th, 2024, for the 2023 tax year so there’s still time to utilize this strategy. If you’ve already maximized your 2023 contributions, start contributing for the 2024 tax year. The 2024 contribution limit is for $7,000 with additional $1,000 catch-up contributions for individuals over the age of 50.

Understand Your RMDs

Starting in 2023, the rules around required minimum distributions (RMDs) have changed again thanks to SECURE 2.0. If you turn 72 after December 31, 2022, your RMD age will be increased to 73. If you turn 74 after December 31, 2032, your RMD age will be 75. If you are subject to RMDs in 2023, the sooner you understand the rules around your distribution, the better. Though we are barely into the new year, you don’t want to be caught off guard come December 31. Depending on what age you are required to start taking distributions (70 ½, 72, 73, or 75), you could face a 25% – 50% penalty on missed distributions. 

If you don’t need your RMD money to live on, consider donating the funds to a worthy cause, which could also lessen your tax burden for the year. To calculate your RMD, use one of the IRS worksheets. 

Cash Flow 

Assess Your Emergency Fund

Now is the time to ensure that you have enough money set aside in your emergency fund or create a plan to build this up over the next year. An adequate emergency fund should cover 3-6 months of necessary living expenses, including mortgage or rent, utilities, groceries, transportation, etc. 

With all stock market uncertainty and recession fears, many experts have suggested maintaining a larger emergency fund, closer to 6-12 months of expenses. If you’re single, or your household only has one source of income, consider saving on the higher end of this scale to make sure you’re covered in the event of a job loss or reduction in income.

However much you save, be sure this money is held in a highly liquid account. It needs to be readily available and easily accessible, but it should also be in an account that offers a competitive interest rate so you don’t lose out on potential growth.

The SECURE 2.0 Act has made saving for emergencies a bit easier. In 2024, participants will be allowed to contribute up to $2,500 annually to an “emergency fund” within the 401(k) plan. These contributions can be accessed before retirement and will not be subject to the 10% early withdrawal fee.

Create and Maintain a Budget

The word “budget” seems to have a negative connotation; many people think that if you budget, you’re broke. Budgeting actually gives you permission to spend and is a simple way to keep track of your expenses and be aware of how much you’re actually saving each month. If one of your goals for the new year is to improve your cash flow and make better financial decisions, creating and maintaining a budget is a great place to start.

Risk Management

Contribute to a Health Savings Account

If you’re enrolled in a high-deductible health plan, consider contributing to a health savings account (HSA) in 2024. HSAs offer triple tax savings. Contributions are tax-deductible, earnings grow tax-free, and withdrawals are tax-free if used to pay for medical expenses. 

The 2023 IRS contribution limits for HSAs are $3,850 for individuals and $7,750 for families ($4,150 for individuals and 8,300 for families in the 2024 year). If you are 55 or older, you may also be able to make catch-up contributions of $1,000 per year. 

Review Your Workplace Benefits

The beginning of the year is a great time to review your workplace benefits and update your coverage levels if need be. If you had a major change to your family structure in 2023, like a birth, marriage, or divorce, now’s the time to update your 2024 health, dental, and vision insurances. Many employers also offer group life insurance which can be a great addition to any private coverages you may have. 

Contribute to Your Flexible Spending Account

Your employer may also offer a health care flexible spending account, which allows you to set aside pre-tax money for qualified out-of-pocket medical expenses. In 2023, you can contribute up to $3,050 (2024 limits have increased to a max of $3,200)

Unlike HSAs, FSAs do not require that you participate in a high-deductible health plan, but they are not as versatile either. For instance, HSAs allow you to carry over any unused funds to the next plan year, whereas FSAs only allow you to carry over up to $610. Generally speaking, if you do not have access to an HSA, then contributing to an FSA is likely a good idea.

Revisit Your Plans and Policies

The new year is also a great time to assess your insurance needs, review your coverages, and update designated beneficiaries to reflect your current financial situation. For example, if you paid off debt, you may not need as much life insurance coverage since your family’s liabilities have decreased. You might also want to evaluate your need for other types of insurance, such as long-term care or disability insurance. 

Taxes

Donate to Charity

Donating to charity doesn’t have to wait until the holiday season. In fact, charitable gifting is a great tax strategy to incorporate throughout the year.

Annual gifts to qualified charitable organizations may be deemed an eligible itemized deduction and can be a great way to give back at the end of the year while also minimizing your tax bill. With the higher standard deduction, you’ll need to make sure your total itemized deductions for the year exceed $13,950 for an individual filer, and $27,700 for married filing jointly ($14,600 and $29,200 for 2024). If your deductions fall below this amount, consider doing several years’ worth of giving in one year.

Donor-advised funds are another option that allow you to contribute a lump sum all at once and then distribute those funds to various charities over several years. With this strategy, you can itemize deductions when you make the initial contribution and then take the standard deduction in the following years, allowing you to make the most out of your donation tax-wise.

Invest in a College Savings Plan

If you have children or grandchildren in your life, contributing to a 529 savings plan is an excellent way to jump-start their college savings in the new year. 

This type of educational savings plan was created so that families can receive tax benefits for saving toward qualified higher-education expenses. After-tax money is invested in a 529 plan where it grows tax-free. When the money is later taken out for qualified expenses, there are no federal taxes due. 

In 2023, you can give up to $17,000 (or $34,000 if gift-splitting with a spouse) per 529 account gift-tax-free. The numbers for 2024 are $18,000 per individual contributor. There’s also a special election that allows you to give 5 years’ worth of contributions as a lump sum, meaning you could give up to $85,000 (or $170,000 if gift-splitting) entirely gift-tax-free! 

What’s more, remaining 529 balances can be rolled into a Roth IRA for the account beneficiary starting in 2024, so you won’t have to worry about losing the funds if your child chooses not to go to college or doesn’t use the full account amount. Keep in mind that the account must be at least 15 years old and the maximum lifetime rollover limit is $35,000. Contributions made in the last 5 years will not be eligible for rollover.

Consider a Roth Conversion

Roth IRAs are an attractive savings vehicle for many reasons, including no required minimum distributions (RMDs), tax-free withdrawals after age 59½, and the ability to pass wealth tax-free to your heirs. Unfortunately, Roth IRAs have income restrictions, and you may not be able to open an account outright if you are above certain limits. 

To get around this threshold, consider a Roth conversion. Using this strategy, you will pay tax on money contributed to a traditional IRA, thereby converting it into a Roth. If you believe you will earn less income in 2024, or your traditional IRA balance has taken a hit due to recent market volatility, a Roth conversion may be a great opportunity for your specific situation. Converting to a Roth also allows your money to grow tax-free for as long as you’d like.

Consider Tax-Loss Harvesting

Tax-loss harvesting involves selling investments at a loss in order to offset the gains in your portfolio. By realizing a capital loss, you are able to counterbalance the taxes owed on capital gains. The investments that are sold are usually replaced with similar securities in order to maintain the desired asset allocation and expected return. 

Given the continued market volatility of 2023, this can be a great way to make the most out of a losing situation by using an investment loss to offset your tax liability. Even though the deadline for this to count toward the 2023 tax year has passed, there will likely be ample opportunity to revisit this strategy in 2024. Talk with your advisor about potentially harvesting your losses and if it makes sense for you.

Investments

Review Your Asset Allocation & Invest With Impact

The beginning of the year is also a great time to review your asset allocation strategy and incorporate ESG and impact investing if desired. Given the dramatic market volatility and historic levels of inflation over the last year, it’s crucial to evaluate your investments and make sure your portfolio is properly diversified in 2024. It should also be tailored to your specific risk tolerance level, ensuring you earn enough returns to keep up with inflation but you’re not overexposing yourself to risk. 

If you are interested in using your funds to support environmental, social, or governmental issues (ESG), you can also consider impact investing as a way to earn returns while also promoting change on causes you care about.

Estate Planning

Review Beneficiary Designations

If you had any major life events happen in 2023, like the birth of a child, marriage, divorce, or a death in the family, make sure you review your beneficiary designations for 2024. There are several assets, including retirement accounts, bank accounts, and life insurance policies, that are distributed based on beneficiary designation and not the terms of your will. If you have an updated will but an outdated beneficiary listed on one of these accounts, there is a chance your assets will not pass according to your wishes. 

Review Your Estate Documents

Similarly, it’s important to review your estate planning documents, including your last will and testament, any powers of attorney, living wills, and/or trust documents. The new year is always a good time to take another look at these documents or start drafting them if you don’t already have them in place. 

Make the Most of the Annual Gift Tax Exclusion

If you’re looking to reduce your taxable estate in 2024, consider making gifts up to the annual exclusion amount. Individuals can give to each recipient (and to an unlimited number of recipients) up to $17,000 and married couples can give up to $34,000 without triggering gift tax (this increases to $18,000 per person in 2024) Not only that, but the beneficiary of your gift will not have to report it as income. This is a great way to spread your wealth amongst family and friends.

We’re Here to Help

Whether it’s optimizing your retirement contributions, strategically managing investments, or fine-tuning your charitable endeavors, a proactive approach now can pave the way for a prosperous and fulfilling future. 

Partnering with a professional can help prevent the opportunities of a new year from slipping through your fingers. We at Balboa Wealth Partners are here to help. Let’s collaborate to build a dynamic strategy that propels you toward financial success. Reach out, and together let’s make 2024 a year of financial achievement—give me a call at 949-445-1465 or email me at [email protected].

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected]. 

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.

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Season’s Greetings: Warm Wishes From Our Team!

By Jeff Gilbert

Wishing you a joyful holiday season from our team at Balboa Wealth Partners! As we reflect on the past year, filled with both highs and lows, we remain deeply grateful for clients like you. Your trust in us is truly appreciated, and we value the opportunity to deliver exceptional service to you and your loved ones. Our mission is to instill confidence in your future so you feel prepared to face whatever lies ahead. May this holiday season bring you peace and joy, with the assurance that we’re here to guide your steps to greater financial success.

Looking Back on 2023

Before we bid farewell to 2023, we want to take a moment to reflect on the challenges, triumphs, and growth we’ve experienced over the past 12 months. In the face of continued economic uncertainties, including inflation, stock market volatility, recession concerns, and international turmoil, we’ve continued to persevere unwavering—and we truly feel better equipped for the journey ahead. While not every day was easy, the challenges we encountered have contributed to our collective growth. Turning the page to a new year often comes with mixed emotions, but we are closing out 2023 with optimism and high hopes for the future.

Looking Ahead to 2024

We hope you feel the same excitement we do about the potential 2024 holds. Let’s embrace this transition by dreaming big about the possibilities that lie ahead in the coming year. The holiday season is a perfect time to recharge, set fresh goals, and reignite our motivation; let’s prepare to hit the ground running come January! The canvas of the new year is blank—what masterpiece will you create?

Gratitude for a Wonderful Year

At Balboa Wealth Partners, we extend our deepest gratitude to you, our valued clients, for being the cornerstone of our success. As always, your loyalty has opened new doors, and your trust has paved the way for enduring relationships. Everything we achieve as a firm is a reflection of your support. We understand that life’s twists and turns are inevitable, and we want you to rest assured that, whenever you need advice, guidance, or a listening ear, we are here for you.

From all of us at Balboa Wealth Partners, here’s to a joyful holiday season and a prosperous and fulfilling new year! Thank you for allowing us to be part of your financial journey.

Schedule a Year-End Review

As the year draws to a close, now is the perfect time to review your financial plan so your finances are primed for a successful 2024. To schedule a review and analysis, feel free to give me a call at 949-445-1465 or email me at [email protected]. Don’t hesitate to get in touch—we look forward to hearing from you!

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected]. 

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.

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The Best Time to Invest Was Yesterday: Timing the Market

By Jeff Gilbert

It’s an all-too common theme: When economic news is bad, the stock market takes a hit as investors sell.

And there are many investors out there trying to buy low, hoping the market will rebound so they can sell for a profit.

But are either of these strategies sound? Should you even attempt to move your investments around based on economic factors or timing the market?

Let’s learn more about marketing timing and alternative investment planning strategies.

Market Timing Is Consistently Inconsistent

Timing the market usually involves attempting to “buy low and sell high” by analyzing current market trends for inefficiencies or volatility indicators. This strategy may work sometimes, but it is far from perfect. Not only do you have to guess when to buy in, but you then have to guess when to sell. That means for every gain, you have to be right twice to make timing the market worth it. Unfortunately, market bottoms can only be truly spotted in hindsight, and timing the market is often closer to playing the lottery than it is to an educated guess.

Timing the Market Is Expensive

Timing the market can also be expensive. Depending on your account type, asset class, and where you are executing your trades, you will likely be charged for every purchase and sale you make, and that’s on top of any taxes owed on gains. The more frequently you trade, the higher your transaction costs will be.

If you held the assets for less than a year, your gain will be taxed as ordinary income at your marginal tax rate, which can be as high as 37% for high-income earners. Long-term gains are taxed at a preferential rate. Regardless of your tax rate, your market timing must still be right more often than not just to cover the cost of your guess. 

You Will Miss Out on Compound Growth & Market Rebounds

A recent study by Schwab Center for Financial Research found that bad market timing is worse than investing immediately, regardless of the market conditions at the time of investing. This indicates that even in market downturns, or just before a downturn, investors who invest immediately and remain invested will be better off than those who stay on the sidelines or attempt to time the market. 

Take a look at Schwab’s graph below, which shows just how much more a fully invested portfolio earns over the course of 19 years. It would earn approximately $14,000 more in growth than a portfolio with bad market timing, and $91,000 more than a portfolio that stays in cash. The only investor who performs better is the one with perfect timing—but since we already know that perfect timing is impossible, investing immediately is the next best strategy.

What’s more, over time that extra $14,000 or $91,000 will have the opportunity to grow even more thanks to compounded interest. Even if the market fluctuates in the short term, the odds are high that a solid investment strategy will grow over time.

Another graph by Hartford Funds and Morningstar shows what happens if you miss the best days in the market, which often closely follow a major downturn and can be just as difficult to predict. An investor who missed the 10 best days in the market between 1992 and 2021 would have earned 54% less than someone who was fully invested during the same time period. 

Someone who missed the 30 best market days would have earned a whopping $172,000 (83%) less than their fully invested counterpart. The research is based on a $10,000 initial investment, but these numbers would be much more dramatic if you were dealing with a $100,000 or even a $1,000,000 portfolio. 

The time value of money tells us that a dollar today is worth more than a dollar tomorrow, and this is certainly the case when it comes to investing. The longer you are invested, the more likely you are to ride out the day-to-day market fluctuations and experience growth instead.

Are You Missing Out on Opportunities for Growth?

Remember, successful investing isn’t about market timing, it’s about time in the market. Consistent investing can help you realize the benefit of long-term growth, and working with a financial advisor empowers you to make informed, steady investments. That’s where Balboa Wealth Partners comes in!

If you want to speak about your investment planning strategy, give me a call at 949-445-1465 or email me at [email protected].

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected]. 

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.

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Balboa Wealth Named Runner-up in AZ As One of the 50 Fastest Growing RIAs

By Jeff Gilbert

Balboa Wealth Partners is proud to announce that we’ve been selected as a runner-up in Arizona for Citywire’s 50 Growers Across America report! We’d like to thank our dedicated clients for allowing us to be your advisor of choice, as well as our team for providing you with the tools needed to grow and shield your wealth. Here’s more about the report and how we made it on the list. 

How the List Was Determined

The 50 Growers Across America special report is the brainchild of former Citywire RIA editor Alex Rosenberg, which he implemented in 2020. Each year, the Citywire team receives and thoroughly reviews information from Discovery Data to determine the top 50 fastest-growing RIAs across the country. They run this list through several layers of analysis to get an accurate picture of which independent advisors are eligible for consideration. 

They then use this data to assign each RIA what they term a “growth factor.” This number determines each advisor’s place on the list and is based on their performance over the previous year in areas such as percentage growth in AUM, monetary growth in AUM, and percentage growth in employees. Each firm on the list is then contacted by the team at Citywire for participation in the report and is invited to an awards ceremony. 

Pictured below is Alex Aretakis, one of our advisors in the Scottsdale, Arizona office, accepting this award at the conference in Austin.

Balboa at Citywire conference

What We Have Done to Grow

We strive for excellence in all we do at Balboa Wealth Partners, and our success is proof of that mindset. While there is a lot involved in how we pursue and achieve excellence, there are a few main factors we can attribute to our growth. 

Clients Come First

Our mission here at Balboa Wealth Partners is to serve as a guide and advocate to our clients so they can turn their financial goals into reality. We are passionate about listening and understanding what is important to you. Beyond investment and financial planning advice, we care deeply about helping you reach your short-term and long-term goals. 

Attract New Advisors

One of the main goals of our firm, along with serving as a trusted advisor for our clients, is to provide a supportive environment where Investment Advisors can have the collaboration and resources of a larger firm but still run their businesses independently. We have even added multiple team members to our AZ office in 2022 alone.  

Industry Expertise

Not only do our advisors represent a wealth of industry expertise in various areas, but as a firm, we make it a goal to stay on top of market trends and share that knowledge with our clients. We do this by publishing a brief weekly market commentary on our website, along with other content on the topics of wealth management, retirement, and investing. 

We Are Grateful for You

While we are certainly proud to be included on this esteemed list, we wouldn’t be here if it wasn’t for our clients. We value the trust you place in us to guide you toward financial independence as we help you pursue your financial goals with confidence. 

At Balboa Wealth Partners, our goal is to deliver uncompromising advice, exceptional investment strategies, and outstanding service to our clients. Thank you for helping us become one of the fastest-growing RIAs in Arizona in 2022. We look forward to years of success in providing you with value and services that help your wealth grow. If you have any questions or would like more information on partnering with us, reach out to us at 949-445-1465 (CA), 480-801-5100 (AZ), or email [email protected]. 

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected]. 

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.

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My Experience at the Cooperstown Adult League Baseball Tournament

By Jeff Gilbert

For many years, I’ve maintained a passion for America’s favorite pastime, playing in adult baseball leagues throughout the seasons. These leagues have not only been a source of camaraderie but also a way to keep the thrill of the game alive in my adult years. A few times each year, I’ve had the privilege of teaming up with old friends and teammates to participate in baseball tournaments. 

Today I wanted to share a bit about my unforgettable experience playing on the iconic Doubleday Field in Cooperstown, New York, and my first visit to the Baseball Hall of Fame.

Doubleday Field

It was a dream invitation—I was invited to play for the first time in the adult league baseball tournament in Cooperstown, a veritable mecca of baseball. Arriving in Cooperstown, I was immediately struck by the idyllic beauty of the town, but it was the sight of Doubleday Field that truly took my breath away. As I stepped into the historic ballpark, the same turf once graced by baseball legends, I couldn’t help but feel a profound connection to the history of the sport.

The Hall of Fame 

Beyond the tournament, my time in Cooperstown held another highlight: my first visit to the Baseball Hall of Fame. Walking through the halls of this shrine to the sport, I was surrounded by baseball’s rich history, from Babe Ruth’s iconic bat to Jackie Robinson’s game-worn jersey. It was an awesome reminder of the profound impact baseball has had on American culture as well as the hearts of its fans.

A Championship Moment

As the tournament progressed, my team advanced, and finally we stood victorious on Doubleday Field, champions of the Cooperstown adult league baseball tournament. It was an incredible moment, a culmination of years of dedication to the game.

My journey to Cooperstown was more than just a baseball tournament; it was a pilgrimage to the heart and soul of the sport I love. It was a reminder that no matter how many years I’ve played, the game still has the power to surprise, inspire, and bring people together.

Team Up to Leave a Legacy

At Balboa Wealth Partners, we believe in creating a life that includes your passions and purpose. We take the values you love and integrate them into a financial plan that builds into a lasting legacy. If you’re ready to team up, give me a call at 949-445-1465 or email me at [email protected].

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected]. 

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.

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Don’t Leave the IRS a Tip: The Importance of Tax Planning and Reviewing Your Return

By Jeff Gilbert

Instead of working on our taxes, most of us would rather…well, do just about anything else. Sure, it’s not exactly fun, but one of the best ways to retain more of your wealth (and we all want that) is to reduce the burden of taxation. An ongoing tax strategy can reduce your tax bill and keep as much of your money as possible out of the IRS’s hands.

Think of it like a game: If you understand all the rules of tax law, you will have a greater chance of “winning”—or, in this instance, reducing your tax bill and paying less. Rather than just crossing your fingers and hoping for the best, let’s look at some tips on how to make that a reality. 

Build a Tax-Efficient Retirement Plan

When working with your financial advisor, retirement planning will often be a key point of conversation. By stress-testing your plan, you can quickly see if your current retirement accounts, savings rates, and other assets will be adequate for the retirement lifestyle you desire.

A direct way to reduce your tax bill is to contribute money into tax-deferred savings accounts, such as a 401(k) or IRA. But, in order to maximize your savings, you will need to determine both your current cash flow needs and your ideal retirement income. A proper financial plan will look at both factors and determine the best way to use your tax-deferred savings accounts to save you money both now and in the future. 

For example, a $50,000 withdrawal from a Roth IRA will have a wildly different tax impact than that same distribution from a traditional IRA. Creating a tax plan can help you strategically withdraw from your various retirement accounts and reduce your tax liability. 

Contribute to Your Health Savings Account

Health savings accounts (HSAs) offer triple the tax savings. This may sound too good to be true, but HSAs have no federal income tax, no state or local taxes, and no Federal Insurance Contribution Act (FICA) taxes. If you are eligible for an HSA, your money will be tax-deferred and can be withdrawn tax-free to pay for medical expenses. 

Because HSA account balances roll over from year to year, by contributing to the limit each year, you can build up quite a nest egg to cover either current medical expenses or future medical expenses in retirement. Think of it as a Roth IRA for medical expenses. 

As of 2023, HSA owners now have higher contribution limits to help them do just that. If you have individual coverage, you can contribute $3,850; for family coverage, the limit is $7,750. There is also an extra catch-up contribution of $1,000 available for those age 55 and older. If you can’t max out the yearly limit, attempt to contribute enough to cover your deductible and take advantage of your employer match, if available. 

Use a Roth IRA to Transfer Wealth

Roth IRAs are an attractive savings vehicle for many reasons, including no required minimum distributions (RMDs), tax-free withdrawals after age 59½, and the ability to pass wealth tax-free to your heirs. Although Roth IRAs don’t have RMDs, other accounts like a traditional IRA might. This will force you to increase your income and could bump you up to a higher Medicare range, which can add $100 to $150 each month in premiums.

You probably know the effects taxation can have on your assets and the inheritance you hope to pass on to future generations. For example, if you passed down a traditional IRA, non-spouse beneficiaries used to be able to stretch the distributions from that account over the beneficiary’s life, but now they have to liquidate the account within 10 years of inheriting it (with some exceptions), thanks to the new SECURE Act. This significantly decreases the value of the account due to the amount of taxes paid in a short time. But, if you pass down a Roth IRA instead, there is no income tax due on the distributions, as long as the account is held for more than five years and the account holder is 59½ or older. 

If you have traditional IRAs already or earn too much to qualify for a Roth IRA, consider a Roth conversion to remedy the tax loss. The basic process to convert your IRA is to withdraw the amount you’d like to invest in a Roth, pay the tax owed on the distribution, then reinvest it into a Roth account. Be sure to work with a professional to determine the best time to do this so you don’t push yourself into a higher tax bracket or are forced to use funds from the account to pay the extra taxes on the distribution.

Deduct Eligible Charitable Contributions

Annual gifts to qualified charitable organizations may be deemed an eligible itemized deduction. Under the Tax Cuts and Jobs Act, fewer taxpayers itemize deductions due to the doubling of the standard deduction. Regardless, charitable giving is still a useful tax-minimization strategy.

In order to benefit from charitable giving, you’ll have to plan ahead. With the new higher standard deduction, you’ll need to make sure your total deductions for the year, giving included, exceed $13,850 for an individual filer and $27,700 for those married filing jointly. If your deductions fall below this amount, consider bunching your giving or doing several years’ worth of giving in one year.

You may also want to look into using a donor-advised fund to combine all charitable contributions in a year and then distribute the funds to various charities over several years. With this strategy, you may be able to itemize deductions in one year and take the standard deduction in the following years so you can achieve a tax benefit that you may not have received otherwise.

Review Your Previous Tax Returns

You can learn a lot from the past. Look at your previous tax returns with a professional to search for deductions or credits you may have missed, opportunities to lower taxable income, and plan for the next tax season. Take these factors into consideration when making a tax plan for the future:

  • Review notable tax law changes for 2023 that may affect you
  • Review your capital gains and losses
  • Review your retirement savings options
  • Consider Roth IRA conversions
  • Consider additional year-end tax strategies
  • Understand potential tax law proposals

Get Ahead With Tax Planning

Time spent on your tax strategy is worth the effort—as it can potentially save you money both now and in the future. But the key is partnering with an experienced professional who can help you understand how each possible opportunity works and how it fits into your big-picture strategy and long-term goals. 

With years of experience in financial and tax planning, our team at Balboa Wealth Partners knows how to implement appropriate tax-minimization strategies to help you save more of your hard-earned money. And our mission is to be your guide to financial independence. 

If you have questions about any of these tax strategies and whether they’d be right for you, give me a call at 949-445-1465 or email me at [email protected] to schedule a  no-obligation conversation. To reach our Scottsdale office, call 480-801-5100 or email [email protected].

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected]. 

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.

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Investing for the Long Term: How to Beat the Market Without Trying

By Jeff Gilbert

The market is a complex beast, and there are millions of people who are trying daily to tame it. It can be frustrating to see someone analyze trends carefully and make incredibly successful investment choices, while you feel like your results are only earning minimal results. We can feel that unless we become a genius in market trends, we won’t be successful.

However, with many years of experience under my belt, I can confidently say this is not the truth. You don’t have to outsmart the market in order to be successful. You don’t have to stress and worry about making the perfect trade. Successful investments are attainable and here’s why.

You Can’t Outsmart the Market

Outsmarting the market usually involves attempting to “buy low and sell high” by analyzing current market trends for inefficiencies or volatility indicators. This is a common strategy used by both portfolio managers and everyday investors alike. It may work sometimes, but it is far from perfect. 

In fact, a new SPIVA report shows that 68% of active fund managers underperformed their benchmarks in 2022. The long-term results of this report are even more significant: 84% of active fund managers underperform after 5 years and 95% underperform after 20 years.

Not only does outsmarting the market involve guessing when to buy in, but you then have to guess when to sell. That means for every gain, you have to be right twice to make timing the market worth it. Unfortunately, market moves can only truly be spotted in hindsight, and outsmarting the market is often closer to playing the lottery than it is to an educated guess.

You can be a successful investor simply by relying on time in the market instead of timing the market. The longer you stay invested in a particular asset, the more likely you are to experience growth over the long term. Considering the S&P 500 Index has averaged around 9.4% for the last 50 years, this strategy doesn’t seem all that bad. Buying and holding often results in much lower stress and a more secure investment experience for the average investor over the long term.

Riding the Wave Is Less Expensive

Trying to outsmart the market has been around just as long as the market itself, and though it rarely works, many people keep trying. Not only are you less likely to outperform the market through market timing, you could further reduce your returns depending on how often you trade. That’s because outsmarting the market can be expensive. 

Depending on your account type, asset class, and where you are executing your trades, you will likely be charged for every purchase and sale you make, and that’s on top of any taxes owed on gains. The more frequently you trade, the higher your transaction costs will be.

If you held the assets for less than a year, your gain will be taxed as ordinary income at your marginal tax rate, which can be as high as 37%. 

Even if you find an actively managed fund that is able to beat the market, they have to do so by a wide enough margin to cover its higher costs and more. As such, even some funds that beat the market end up with lower returns once fees are taken into account.

Staying Invested Produces Better Returns

Many investors will sell their positions during times of volatility in order to avoid or reduce a loss. But how do they know when to buy back in? This is one of the most difficult aspects of outsmarting the market, and it often leads to much less growth than staying invested the whole time would have produced. 

For instance, a recent study by Schwab Center for Financial Research found that bad market timing is worse than investing immediately, regardless of the market conditions at the time of investing. This indicates that even in market downturns, or just before a downturn, investors who invest immediately and remain invested will be better off than those who stay on the sidelines or attempt to time the market. 

The time value of money tells us that a dollar today is worth more than a dollar tomorrow, and this is certainly the case when it comes to investing. The longer you are invested, the more likely you are to ride out the fluctuations of the day-to-day market and experience growth. 

Do You Have a Successful Investment Strategy?

The market is unpredictable and often takes everyone by surprise. Like picking the winning lottery numbers, the odds of picking a winning stock market strategy that never takes a tumble are pretty low—if not impossible. A successful investment strategy is one that can tune out the noise and focus on the long term instead. 

It’s this focus that we at Balboa Wealth Partners take pride in. It is our joy and honor to work with clients to create a plan that can help them reach their goals and beyond. When you partner with us, you’ll find years of knowledge and skills being used for your unique financial situation. Investing is for the long term, so start planning now. Give me a call at 949-445-1465 or email me at [email protected].

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected]. 

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.

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