Summary
If you are an investment fiduciary or a financial professional seeking superior investment results, seek a fiduciary that beats the S&P 500 with significant excess returns, and lower volatility. At least one exists.
Business Owners Charter, Inc. (BOC) does not offer securities. BOC provides an investment research methodology. BOC is not a Registered Investment Advisor, a Broker Dealer, or any entity licensed to sell securities (“Clients”).
BOC personnel invest their own money in securities that rely on BOC investment research as exclusively sold through our Clients. Boc is a fiduciary to its Clients. The BOC fiduciary duty is a legal obligation to do the same for the Clients as a prudent person knowledgeable in the affairs at hand would do for one’s self. Our fiduciary role is lived out through our actual investments that we cannot invest on our own yet do invest through our Clients.
There are many financial advisors who are forming a business culture that favors ease of work over best in class returns. By this I mean some advisors do not wish to undertake, nor should they attempt to undertake, the work required to achieve superior investment results. A fiduciary cannot know what any client will choose until the fiduciary offers both best of class returns after advisor fees and anything easy to offer. And in their role as a fiduciary, they still need to seek best in class investment returns. Excess investment returns may have outsized significance over other factors including income tax (see Appendix A).
It takes one to know one.
A fiduciary is obligated to put their client’s interest ahead of their own interest. A fiduciary must be paid, but if the fiduciary is unable to provide superior investment results on their own, Business Owners Charter, Inc. may be a solution.
According to S&P Dow Jones Indices, fewer than 7% of funds beat the S&P 500, or symbol SPY. Since inception in 2017 BOC Portfolio Total Returns after advisor fees speak for themselves with higher alpha (excess returns), lower beta (less volatility), and moderate monthly correlation to SPY.
In conclusion, if you are a fiduciary licensed to sell securities seeking superior investment results, consider Business Owners Charter, Inc. Contact Dan@BusinessOwnersCharter.com.
BOC is not licensed to sell securities. That is the job of our Clients. BOC is a fiduciary to its Clients. BOC Portfolio is only available upon request by the wholesale investment trade, not the retail public. Risk of loss may occur. Historic returns and research are not necessarily indicative of future returns.
Appendix A – Tax
Appendix A Summary
Given after advisor fee returns of 14%, compared to 7%:
- On after tax accounts, like an outright account, 58% marginal tax bracket would have to be attached to the 14% return before tax efficiency became a factor. In 2023, maximum marginal tax bracket is 37%, a favorable difference on the 14% returns of 21%.
- On pretax accounts, like 401k or Ira, during a hypothetical 10 year retirement increment, money would run out in 5 years at 7%, compared to lasting the full ten years at 14%.
In conclusion, if you are a fiduciary licensed to sell securities seeking superior investment results, consider Business Owners Charter, Inc. Contact Dan@BusinessOwnersCharter.com. Excess investment returns may have outsized significance over other factors including income tax.
Appendix A Detail
Assumed
- after tax account
- 500,000 start value
- 11.32% Spy compound annual return 6 years.
Option A
Assumed
- Moderate aggressive or aggressive risk tolerance compared to .76 x SPY benchmark.
- Option A Benchmark = expected return = .76x 11.32% = 8.60%
- Less advisor fees = 1.2%
= 7.4%
- Assume 20% actual long term capital gains tax bracket on 7.4% = after tax return = 7.4% x (100%-20%) = 5.92%
Option B
Assumed
- Boc portfolio actual 14.00% after advisor fees compound annual return 6 years.
Problem: How to Solve for X = Marginal ordinary income tax bracket required for taxes to offset excess returns.
Solution: Tax bracket on 14.00% would have to rise to X%, where X=(5.92 %/14%)-1= 58% marginal tax bracket calculated as follows.
14% x (1-X) = 5.92% or 1-X=5.92%/14% or x=(5.92%/14%)-1= 58% marginal tax bracket. According to College Investor actual 2023 tax brackets are “10%, 12%, 22%, 24%, 32%, 35% and 37%,” much lower than 58%.
And that is the worst tax case.
Take best tax case pretax account such as Roth or any Ira or any 401k which has no current tax.
500,000 start value
Option B 14.00% after advisor fees compound annual return 6 years.
Compared to
Option A 7.4% after advisor fees compound annual return 6 years.
Lost opportunity cost compounded annually = 6.8% (14%-7.4%= 6.8%).
Over 6 yrs that amounts to 6.8% raised to the 6th power = (1.48%-1%)=48%
Losing 48% of your money is a lot of money.
For a retired couple who needed 500,000 to live in ten year increments under Option B, using the above assumptions Option A would result in running out of money in 5 years, {[1/(1+.93) = 51%] x 10 years = 5 years}. Running out of money for the retired couple in half the time is a huge problem compared to having enough money to last for each ten year increment.
Excess investment returns may have outsized significance over other factors including income tax.
BOC is not licensed to sell securities. That is the job of our Clients. BOC is a fiduciary to its Clients. BOC Portfolio is only available upon request by the wholesale investment trade, not the retail public. Risk of loss may occur. Historic returns and research are not necessarily indicative of future returns.