Implications of Portfolio Withdrawals for Physician Investors

Obtaining Income in a Low Interest-Rate Economic Ecosystem
By Jeffery S. Coons; PhD, CFP®
Managing Principal-Manning & Napier Advisors, Inc
The general trend of declining interest rates experienced over the last decade and a-half, part of a long-term trend Manning & Napier Advisors, Inc. had focused on since the early 1980’s, created new challenges for managing investment [...]

Alphabet Soup: Financial Designations & Certificates

financial-designationsjuly
July 2008:
AUTHORS: Dr. David Edward Marcinko; MBA, CMP™ and Hope Rachel Hetico; RN, MHA, CMP™
POSITION: Publisher-in-Chief, and Managing Editor of the Executive-Post, respectively.
TOPIC: Financial Designations and Certifications [Alphabet Soup of Industry Obfuscation and Self-Promotion, or Real Gravitas – You Decide?]
EXCERPT: “Until recently, most financial advisors were regulated by the NASD, the National Association of Securities [...]

Worthless FOB Stocks

Getting the Tax Deduction
Staff Writers
All physicians and other investors should know when their stock becomes worthless.
Example Scenario:
Some time ago, an FOB physician investor [Family Owned Business] founded two FOBs: One was doing fine while the other floundered. Under the IRS Tax Code, the investor can receive a loss deduction on the second FOB if: 1) [...]

The Herd Mentality of Wall Street [Advice or Avarice?]

Understanding the Channel-of-Distribution Follies
By Dr. David Edward Marcinko; MBA, CMP™

Publisher-in-Chief

Former Investment Advisor and Reformed Certified Financial Planner™

As a former surgeon, insurance agent, physician-executive who took an honest run at Wall Street’s PPMC infamy in the late 90s, board certified financial advisor and stock-broker; and current writer, editor, publisher and speaker-consultant on health economic topics I am [...]

The Uniform Prudent Investor’s Act

A Trust Primer for Physicians
By Charles L. Stanley; CFP™ ChFC
Since inception, the Uniform Prudent Investor Act (UPIA) has changed the financial advisory landscape. Essentially, the act modified the legal criteria of “prudent investing” for trusts.
Now, all assets owned by a trust are considered “investments” for purposes of the Uniform Prudent Investor Act. Consequently, for [...]

How to Interview a Portfolio Manager?

Selection Criteria Critical for Physicians
By Dr. David Edward Marcinko; FACFAS, MBA, CMP™
Publisher-in-Chief and former reformed Certified Financial Planner™
Recently in the Atlanta area, two high-profile financial advisors and portfolio investment managers have been charged with client embezzlement, malfeasance, and more!
The first was Kirk Wright, a Harvard-educated fund manager who was convicted last week in a fraud scheme [...]

Debt-Based Portfolio Decisions

An Establishment Checklist
Staff Writers
Determining the percentage of debt-based assets for any medical investment portfolio - personal, institutional or endowment - is an often difficult decision.
Too much risk may lead to default loss, while too little risk may cause under-performance in the portfolio; neither optimizing the efficient frontier.
And so, the following checklist may help initiate [...]

Professionally Managed Portfolios and Mutual Funds

Advantages and Disadvantages for Physician Investors
Staff Writers
The following briefly summarizes the advantages and disadvantages of professionally managed portfolios and mutual funds according to size and taxation factors.
Portfolio Size
A major factor that impacts the selection process is the size of the physician-investor’s portfolio. For example, is there a size at which it makes more sense [...]

KISS Investment Strategies

Warren Buffett on Index Funds
Staff Reporters
Did you know that over 31,000 investors flocked to this year’s annual meeting for Warren Buffet’s Berkshire Hathaway – also referred to as “Woodstock for Capitalists?”
Assessment
And when a shareholder asked for the single-best specific investment idea that Warren Buffett could recommend to an individual in his 30s, Buffett said:
“I [...]

Interest Rate Options

Treasury Issues Options
By William H. Mears; CPA, JD
Interest rate options are usually options on Treasury instruments, Treasury bills, notes, and bonds. The face values used are $1 million for Treasury bills and $100,000 for T-notes and bonds.
Purpose
With these options, a physician or other investor will bet on the direction of interest rates. When interest [...]

Put and Zero Coupon Bonds

Understanding Debt Puts and Debt Zeroes
Staff Writers
Put Bonds
Put bonds are so-called because they allow doctor-investors and other bondholders to give bonds (put) back to the issuer at par on specified dates prior to maturity. Put bonds have either a fixed or variable interest rate and may have single or multiple tender dates.
Furthermore, they can [...]

Investing in Options

An Appropriateness Summary
By William H. Mears; CPA, JD
Options trading involve a high degree of risk in that the physician or other investor may lose their entire investment when the option expires. As a result, options trading may not be suitable for all doctors or investors.
Suitability
All trading firms must have a procedure in place that requires [...]

General Obligation and Revenue Bonds

Understanding GOs and RBs
Staff Writers
General obligation bonds are secured by the taxing authority and are therefore considered safer than other municipals. The full faith and credit of the municipality ensures prompt payment of principal and interest.
Further more, most municipal bonds, including city, county, and school district issues, are secured by a pledge of unlimited [...]

Using Option Derivatives

Why Options Investing?
By William H. Mears; CPA, JD
Although options can be used to raise cash from a long stock position that is not salable, individual physician-investors should use options primarily as a hedging mechanism. Individuals and doctors may want to hedge their portfolios to gain peace of mind by purchasing portfolio insurance to guard against [...]

Understanding Municipal [Muni] Bonds

State and Local Debt Issues
Staff Writers
Municipal bonds are issued by state and local governments for building schools, bridges, hospitals, and other municipal facilities. These bonds depend upon their tax base to generate the income to pay the interest and retire the debt.
Tax-Exempt Status
The most important feature of municipal bonds is their tax-exempt status. While [...]

The Options Clearing Corporation

Option Positions and Exercise Limits
By William H. Mears; CPA, JD
The Options Clearing Corporation [OCC] places certain limits on the number of contracts that can be outstanding on each side of the market for individual securities. These position limits vary from underlying security to underlying security. However, they range from 4,500 to 10,500 contracts. The number [...]

Options and Market Price

In, At, and Out-of-the-Money
By William H. Mears; CPA, JD
A call option is in-the-money if the market price of the stock is higher than the exercise price of the option.
If the market price of the stock was the same as the exercise price of the call option, the option would be at-the-money.
If the market [...]

High-Yield Bonds

Understanding Junk Bonds
Staff Writers
High Yield Bonds [HYBs] are debt issued by U.S. corporations that carry less than investment-grade ratings. They are also referred to as “junk bonds.” For the purpose of high-yield bonds; below investment grade means Ba or lower; as ranked by Moody’s, and BB or lower by Standard & Poor’s.
The Market
The market [...]

Understanding Options

A Misunderstood Derivative
By William H. Mears; CPA, JD
An option is either the right to buy or sell an asset, or the obligation to buy or sell an asset. Options are derivative instruments; i.e., they derive their value from the performance of the asset upon which they are based—the underlying asset or security. This can be [...]

Calculating Historic Asset Returns

Single versus Multi-Period Returns
By Mary A. Lauritano; CFA, MBA
The total return on a financial asset over a single time period is broken down into the income return (dividend or interest) plus the capital change or the change in the market price of the asset (negative or positive). This rate of return is called the holding [...]

Value-at-Risk

Another Portfolio Risk Meter
By Dr. David Edward Marcinko; MBA, CMP™
Publisher-in-Chief 
 
Value at Risk [VAR] is a technique used to estimate the probability of portfolio losses based on the statistical analysis of historic price trends and volatilities.
And, as a measure of investment portfolio peril, VAR has been gaining in popularity for several reasons.  
Gaining Popularity 

First, physician investors, [...]

Monte Carlo Simulation

Combining Portfolio Asset Classes
By Dr. David Edward Marcinko; MBA, CMP™
Publisher-in-Chief 
 
Combining the disparate information of a physician’s investment portfolio, into a workable asset allocation strategy, is as much art as it is science; perhaps even more so.  
Most doctors, investors or endowment fund managers will use a combination of quantitative and qualitative analyses to develop their allocations.  
The [...]

Mean Portfolio Variance Optimization

MPT and the Efficient Frontier
By Dr. David Edward Marcinko; MBA, CMP™
Publisher-in-Chief 
 
Mean Portfolio Variance Optimization [MPVO] has at its core Modern Portfolio Theory (MPT), which seeks to find the “efficient frontier” that defines the minimum risk for any given level of investment portfolio rate-of-return.  
Efficient Frontier 
In order to find the efficient frontier, MPVO will consider the expected [...]

Portfolio Risk Measurement

Understanding Standard Deviation
By Julia O’Neal; MA, CPA  

The risk of a single asset is measured by its standard deviation of return and by its co-movement with the expected return of the assets in the market in which it is traded.  
Defining Standard Deviation 
The standard deviation is a measure of the variation around the average or mean. It [...]

Unsystematic Investing Risks

Understanding Company, Sector or Industry Risk
By Julia O’Neal; MA, CPA  
 
Unsystematic risks are those associated with factors particular to the underlying company, sector or industry. 
Unsystematic risks are all risks that can be eliminated by diversification and are thus unrewarded.  
The Alpha Factor 
The residual nonmarket influences unique to each stock are measured by its alpha factor.
When one [...]

Systematic Securities Risks

Understanding Stock Market Risk
By Julia O’Neal; MA, CPA  

Systematic risk, also known as market risk, is that part of a security’s risk that is common to all securities of the same general class (e.g., stock or bonds) and is caused by economic, sociological, and political factors.
Systematic risk cannot be eliminated by the physician-investor through diversification [...]

Investing Terms and Portfolio Design Definitions

A “Need-to-Know “ Glossary for all Medical Professionals
Staff Writers

Absolute volatility: The true volatility of an investment. 
Accumulation phase: A phase in an investor’s life when he or she is trying to accumulate an estate; usually characterized by growth-oriented investments.
Alpha factor: Measures the residual non-market influences that contribute to a securities risk unique to each security. 
Arithmetic mean: [...]

Investment Policy Statement Construction

Developing a Sample IPS Document Template
By Clifton McIntire; CIMA, CFP®
By Lisa McIntire; CIMA, CFP® 
 
Here is an abbreviated sample Investment Policy Statement [IPS] template for a healthcare entity, clinic, private physician or hospital endowment account; posted by “Ask-a-Consultant” subscriber request. 
Introduction
An IPS typically contains the following sections, at a minimum. It may be a 5-15 page document [...]

Constructing Your Personalized Portfolio

Self Portfolio Management
By Clifton McIntire; CIMA, CFP®
By Lisa McIntire; CIMA, CFP® 
 
Most individual investment portfolios are simply a list of stocks.  Doctors with such lists usually know the cost of each position and when they acquired it. It is not unusual to find inherited low cost stocks in the account that have been held for many [...]

When to Change Money Managers

The Money Managers
By Clifton N. McIntire, Jr.; CIMA, CFP®
By Lisa Ellen McIntire; CIMA, CFP®

Sometimes even the best made plans just don’t work out. Despite extensive time and energy spent on due diligence before hiring an investment manager, it becomes evident that the doctor must change managers. 
Here are a few thoughts when considering a change:
 § You [...]