Taxes: We are receiving calls about the income taxes you owe. Earning capital gains and dividend income is why you invest and paying income taxes may be the unpleasant part. I recommend withdrawing the money to pay the tax out of your accounts if you need to. If you have other money, and you won’t feel strained by using it, do so. Frequently, the hole caused by the withdrawal fills in quickly and the incident is forgotten, and the investment continues to grow.
The advantage: the capital gains and stock dividends that you reinvest are taxed at a lower rate than your ordinary income from salary, pension, or bank interest. Reinvested capital gains and dividends increase the cost basis of your shares, and you will not pay income taxes upon that money again.
************************************************************************************************************************
2022 is a year where the market has not continued in an upward push…so far. Markets have decreased in places. For all the cries and conjectures on the part of the media, the market has been quite resilient. What will be upcoming? We don’t believe anyone knows short term and we refuse to believe those who would like you to believe they do know. History has shown us the market always wins long term. We see any decrease in the market as an opportunity for you to buy additional shares at lower prices.
Knowledgeable people know that market declines are normal. Time and again people benefit from the market and a little knowledge. Here is an example of someone I saw recently. We met her several years ago and I do not think it an exaggeration to say she was angry. She had retired a few years previously and rolled a retirement account into 3 annuities recommended by the salesman. One of the annuities had gone into a contract and been annuitized for ten years. When she came in to see us, she belatedly understood that the money would be all gone at the end of the ten years, and she would have received only a bit more back than she had put in. (It had probably been called a “safe” investment.)
She wanted to transfer the remaining two annuities into an IRA we could set up for her. I wanted her to understand the costs of closing out the annuities and accepting the risk of not knowing exactly what would happen. She was willing and is happy with the current results. The first annuitized annuity will stop paying soon but the rollover IRA will be able to replace the income. Sticking to a withdrawal rate ranging between 6 to 8% yearly, we expect the money to continue to grow. No guarantees, only history to learn from. Currently the account has increased by a significant amount and withdrawals have also been made. This is what taking reasonable risk can do for you.
************************************************************************************************************************
My friend and I traveled to Arkansas a few weeks back, thanks to the recommendations of a few of our clients. We were visiting the Bentonville home of Sam and Helen Walton and the beautiful Crystal Bridges Museum. Next time I would visit the quaint Walmart Museum before visiting the Crystal Bridges. I purchased the book, Sam Walton, Made in America, My Story, by Sam Walton with John Huey. Sam Walton speaks directly to the reader and so do many of the people who helped him develop the great company. Over the years I remember many detractors criticizing Walmart. Sam Walton had one goal: to provide savings to his customers or the people of America. His words; “…our business strategy was to bring the customers into the tent by selling the highest quality goods we could at the lowest possible prices.” He said he never spent much time being reflective and he was known as a terrible driver with impossible handwriting. He then took up flying, terrorizing his family I assume. He was known as someone who always improved operations and techniques and was never afraid of being wrong. He checked on his competition endlessly and copied whatever he thought unique and good. Financially, he learned from his father-in-law, setting up a partnership where family members and business associates became partners. “We ranked number one in our industry for the lowest ratio of expenses to sales.” Near the end of the book, he discusses the problems he saw then which we still battle today but he expressed great optimism in the ability of the average man in a free society based on a market economy to achieve great results. A great story, inspirational.
************************************************************************************************************************
Evelyn Roosevelt is quoted as saying, “When you get to the end of your rope, tie a knot and hang on.” We’ve been through many Bear Markets and, so far, this is one of the easy ones – although it is not officially classified as one yet, I believe.
Sincerely yours,
Louise Googins, President, Investment Advisor
Michael Googins, Administrator
Kim Rankin, Accountant
Rick Martin, Investment Advisor
Lynne Goldsmith, Investment Advisor
Brady Peat, UW-Madison Intern
Kyra Meach, UW-Madison Intern