Happy Mother’s Day! Nothing better than mothers. Treat them well!
Volatility usually is not a concern for long term investors, but this craziness has my Money Market account at an all-time high. Earning interest at a .70% rate 😅
Instead of fooling around in this market like Portnoy,
I plan to store cash in a money market account for the rest of 2020. The primary reasons are:
This approach means I am ok with whatever stocks do between now and December. Prices go up, prices go down. Doesn’t matter. It’s a short-term game that is not worth playing.
Each paycheck is still contributing to a S&P500 fund in my 401(k).
Bought $AMZN and $VTI.
Disclaimer: I am not an expert. Financial decisions based on my newsletter are your responsibility. I write this letter for educational purposes. Formulate a plan that works for you.
The position size won’t equal 100%. I have small positions that I like to watch/track and build to. Once a company’s position size is greater than $VTI/VOO, I will add it to the table.
$XOM - to track what is going on with gas. Plan to sell by the end of 2020.
Selling activity since last post:
This mass selling is to prep for a Mega Backdoor Roth Conversion. Also, so I can move money into Proven Winners.
$CMG - Restaurants are a tough business. I'm not entirely sold Chipotle can keep the success they’ve built on the food delivery front. Chipotle can be a winner and has handled chaos well in the past, but figure you can invest in better industries/companies with lower expectations - $AMZN.
$BIDU - tax harvesting.
$FCAU, $MU, $BRBR - so I can buy $VTI in ROTH.
Individual positions in 401(k) - transferred these positions to a S&P500 fund since I will do a Mega Backdoor Roth Conversion every ~6 months.
$ROKU, $DLX, $HGV, $NKE, $TSE, $UIS, $UTHR - so I can buy $AMZN in ROTH.
Mega Backdoor Roth Conversion
(this not financial advice)
Below is my experience and what I believe is good advice. I’ve had 2 employers and neither have offered a ROTH 401(k) option. I want to get as much $$$ in ROTH accounts as I can which is why I’m sharing this.
To Get Started.
this tax advantage is incredible
the sooner you can get started, the better
2020 max employer + employee 401(k) contribution is $57k
Best article I read about this trick.
Any fees/taxes to do this? yes, on the earnings
Please confirm the pro rata IRS rule will not trigger fees? talk to a financial advisor
What’s the deal with pro rata if you don't have a traditional ira?
“This could quite possibly be the golden goose of the whole arrangement. Since your contributions in excess of $19,000 are made on an after-tax basis, you can convert the non-deductible portion of your 401(k) to a Roth IRA…and do so without incurring any income tax liability on the conversion!”
“One potential problem with this transaction is the IRA pro-rata rule. Basically, you’re not allowed to earmark only non-deductible contributions for a conversion. So if you have existing pre-tax IRAs, you’ll be forced to convert some of your deductible contributions as well.
Say, for instance, that you have $90,000 in Traditional IRA assets, which came from deductible contributions. Then you put in $10,000 as a non-deductible contribution with the intention to roll it into a Roth IRA.
But when you do a conversion, you can’t convert just the $10,000 non-deductible contribution. You’ll actually have to roll over a total of 10% of your Traditional IRA assets, spread evenly across deductible and non-deductible contributions. So you’ll actually roll over $9,000 of deductible contributions and $1,000 of non-deductible contributions.
To get around this in the future, you’ll need to either roll all your Traditional IRAs over to a Roth account, or roll your Traditional IRAs to an employer-sponsored 401(k). The first option can cost you a lot in taxes (especially since you’re already in a high tax bracket), and the second could cost you earnings if your 401(k) doesn’t have great investment options.”
Linked this article a second time and copied and paste most of it within this letter. Read it.
“But that doesn’t necessarily mean that a backdoor Roth will work best for you. Here’s when you might try it:
If you don’t have other pre-tax IRAs to worry about, then a backdoor Roth won’t cost you much at all in taxes, making it an ideal option.
If you can roll your pre-tax IRA into your employer’s plan without losing valuable investment options, then you benefit from a backdoor Roth (but only after those assets are converted).
If you’re self-employed and newly starting a Solo-401(k) into which you can roll your pre-tax IRA assets, then using a backdoor Roth for additional retirement savings could be helpful.”
“As with any complex retirement move, it’s a good idea to consult with a tax professional before you attempt to actually use the backdoor Roth method. But now you know that investing in a Roth IRA is, indeed, an option, even if you’re over the IRS’s income limits.”
Beat the S&P500 by riding the winners. This is my plan to build wealth using simple trend following tactics like adding to winners, cutting losers, and buying companies that I know and understand.
No idea where/how to start investing, email me!
This newsletter was fueled by dark chocolate! 😋
Recently found out I enjoy 95% and have been eating a lot of it! Hopefully I have enough stocked up since it won’t ship well in the summer. 🌞
Thanks for reading!