Our latest edition of the 5,5,5 looks at value stocks' pattern over the past nine years, FAANG stocks and their crucial role in your portfolio performance, and our recent partnership with Community Partners of Dallas in their Back to School Supply Drive. Enjoy!
Value Stocks Continue to Lag Growth Stocks
Value has lagged meaningfully over the past nine years, one of the longest such periods of underperformance. Over history though, value has reliably beaten growth, and given the past few years of underperformance, a reversion favoring value may be coming. Our confidence in value remains high.
Source: Virtus Investment Partners, 2018 Q2 Vital Signs: The Value Investing Slump
High Level of Household Equity Ownership Portends Poor future Equity Performance
Households have their highest allocation to stocks and stock funds since 2001 and subsequently their lowest allocation to cash in their investment portfolios. According to the AAII Asset Allocation Survey, as of June 2018, 68% of portfolios are allocated to equities. This current equity allocation is in the highest 20% of all allocations since 1951, according to Ned Davis Research. Typically, from such high periods of equity ownership, markets tend to perform poorly.
Excluding FAANG Stocks, Markets Are Down For The Year
Have you heard about FAANG – Facebook, Amazon, Apple, Netflix, and Google? Year-to-date, these five stocks have been the sole contributors to the positive performance of the S&P 500. As the chart below shows, if one were to remove FAANG from the S&P 500, the index would be down almost 1%. As a result, any portfolio that does not have a meaningful allocation to FAANG, will most likely be down for the year.
True North Collects School Supplies for Community Partners of Dallas
True North Advisors has partnered with Community Partners of Dallas http://www.cpdtx.org/ in a Back to School Supply Drive. Their mission is to ensure safety, restore dignity and inspire hope for the abused and neglected children served by Dallas County CPS. This year they plan on providing supplies to more than 3,500 children.
True North’s core purpose is fulfilling lives and we hope to do this by collecting more than our company goal of 1,000 supplies. We would welcome you to join us by reaching out to any of our employees to make a donation.
Yes, You Really Can Pay for Private School With 529 Plans
Under the new law, starting with the 2018 tax year, you can withdraw $10,000 per student per year from a 529 plan to pay for primary or secondary education. Unlike funding for college; however, this money can be spent only on school tuition, not textbooks, computers, or other fees or activities. With 529 plans, you put money in, let it grow for years in mutual funds and then pull it out to use for higher education expenses. When you do, you don’t pay capital gains taxes on what you’ve earned over time.
In the past, you would save money for 18 years and then pull the money out over four to six years while your child completed college and even graduate school. With the changes in the new tax law, you can ‘superfund’ 529 plans with a large amount of money upfront. You can then pull out the $10,000 maximum each year to use for elementary and secondary school until your child starts college.
This also works if you have a 529 account that is currently overfunded. If your child is in private high school and you have more than they are projected to need for college, you can begin to use the 529 funds now.
There are many different ways to optimize funding and usage of 529 plans for your children. If you would like more information, please reach out to your wealth manager.