Client Newsletter - Summer
June 2018 Vol. 26
This Quarter: In the Market...

The stock market has been a mixed bag so far this quarter with domestic companies mostly up since the end of March. Large Growth and Small Cap companies appear to be leading the way in terms of positive performance this quarter. International managers have been slightly negative aside from Oppenheimer's Smid International Fund (OSMYX, OSMAX), which is up more than 4% for the quarter ending 5/31/18.

Despite treasury yields rising, and the 10-year reaching 3%, bond values for short and intermediate treasuries and corporates were only slightly negative. Your municipal bonds did well, i.e. Invesco's High Yield Muni Bond Fund (ACTDX) was up nearly 1.75% through 5/31/18.

The volatility predicted earlier this year is definitely here. For many of you, it will look as if your portfolio hasn't moved much at all. While we know you would prefer to see regular growth, keep in mind that maintaining the growth you've enjoyed for the past several years is still a positive aspect worth celebrating. There have been some segments that have been down for much of the year, while others have been up. The diversity of your portfolio is keeping you steady during this volatile market.

- Danielle Taylor Woods, dwoods@mvtinvest.com

Pay Yourself and Check Your Limits
If you make routine monthly contributions to savings accounts but are not maxed out, we urge you to give yourself a raise. Annual increases are essential to growing your savings and maintaining a disciplined approach to taking care of your future self. If you aren't sure what type of savings account is right for you, call us. There is a variety, and the options depend very much on your personal circumstances.

Keep in mind that Roth IRA contributions are capped at both contribution amounts and income accounts. If your income exceeds the federal limit, you MAY NOT directly contribute to a Roth IRA. There are ways to still get money to your Roth, however. We can help.
MVT On the Road: IPPAC Seminar
Rock Island, IL, May 16-18th

As MVT celebrates its 22nd year in business this summer, it's a good time to reflect on the success of our clients. John Mitchell and David Vaught started the company back in 1996, specifically for the purpose of helping IL Article 3 and 4 Police and Firefighter pension funds manage their assets to provide for their retirees. We now manage investments for 40+ such funds. While there are some trustees who stay on their respective boards for some time, there are new faces all the time. The existing trustees require the opportunity to learn about changes, while new trustees are in need of general education in order to fulfill their obligations as trustees and to learn more about how markets impact their savings.

One such venue for education is the Illinois Public Pension Advisory Committee. MVT has been a member of the group for its entire existence. We look forward to this annual event that brings trustees and industry professionals together to learn about the issues that impact pension funds and to get to know one another better. Increasing education and reducing misunderstandings are key to a positive trustee/advisor relationship.

This year, our firm headlined three different segments of the itinerary. Our President John Mitchell was moderator for a roundtable that included American Funds, Blair, and Oppenheimer Funds, focusing on the importance of international investing. Let us know if you would like copies of the presentations.

While we really enjoy this annual event, we are available for smaller and more intimate group educational options as well. Whether it be meeting a group for lunch or simply a casual conversation with a few people, we are happy to meet with you at no fee to answer your questions and help you the difficult task of representing a pension fund.

- Danielle Taylor Woods, dwoods@mvtinvest.com
Financial Planning: Emergency Fund
The first step in creating a financial plan for you and your family is to create a budget, pay off your high-interest credit cards, and create an emergency fund.  Typically, an emergency fund consists of three to six months' worth of expenses. In case of job loss, medical emergency or other unforeseen circumstances you can use these funds as replacement income instead of relying on high-interest rate credit cards.  A 2015 study found that 46% of Americans could not cover an emergency expense of $400 without borrowing the money or selling something. How do you avoid being one of those in the 46%? Build your emergency fund.

Some strategies for growing your emergency fund:

BUDGET YOUR SAVINGS

The best way to grow your emergency fund is to save money!  Sounds simple, but many people have difficulty putting money aside.  Do you have a written budget? If you do, do you follow it? We often hear, "I think I know what I've spent." We challenge you to go back through your ACTUAL spending for the past three months and do an honest intake of your expenses. What can you cut? One way is to look at your budget and decide if there is something you can live without.  For example, our family recently decided we could live without cable television. We were able to save almost $100/month this way.

INVEST WISELY

Now that you have a disciplined approach to saving, where do you put the money? You want to keep about two months' worth of expenses in cash on hand (i.e. a savings account that is attached to your checking).  But beyond that, investing your savings in a brokerage account with a diversified group of assets (bonds and stocks) will help it grow. If you or someone you know needs help with investment decisions for your emergency fund, the advisors at MVT can help;  please just ask us how.

- Amanda Vaught, avaught@mvtinvest.com

The Global Economy - Up Close in Mexico

My husband and I recently had the pleasure of visiting Cancun, Mexico, for our anniversary. Seeing Mayan ruins has been on my bucket list for a very long time. We often prefer to do what the locals do when we visit new places, so we defied the State Department warnings and stayed in downtown Cancun versus the tourist-friendly beachfront. We loved the friendly locals, the amazing guacamole and crazy cheap prices (we actually came home with spending money!); but we also appreciated getting a first-hand look at how American companies work abroad and how differently Americans live from Mexicans.

While our firm manages money for our clients and we know we are buying shares in actual companies, it is never more real than when you are standing in front of one in a foreign place. While walking around downtown Cancun and traveling via bus to the ruins, we saw American storefronts and products tucked in and among the local establishments and name brands. American companies, like Walmart and Sam's Club, Keller Williams Realty, various car dealerships, Coca-Cola, Kraft, Heinz, were everywhere. We kept comparing prices, and many of them were just as expensive in Mexico as they are in the US but some were significantly cheaper.

It takes approximately 19 pesos to equal an American dollar, and our dollars went very very far. Services like massages were a fraction of the price that is charged in the United States as was restaurant fare. The elderly work as "volunteer" baggers in grocery stores to get a tip of a couple pesos from each customer. We ended up tipping everyone 30% or higher on meals because it still only equaled about $5 USD. The people worked hard for very little. We saw construction workers getting off buses at 5 a.m., seemingly in the middle of nowhere as they walked along the highway to their respective sites. And it is HOT.

On the way home, we had time to visit downtown Atlanta, Georgia - the home of the Coca-Cola Museum. Coca-Cola is one of the most internationally successful consumer product companies in the world. They have a tasting room at the museum where you can try more than 100 varieties of beverages, many of which are only sold in other countries (My favorite was Sweden's Lingonberry!). It was sobering to see the reach that some American companies have.

If you have never left the United States, I highly recommend it. Spending time anywhere else is an eye-opening experience that will show you up close why our economy is so tied to others' and why we should stay mindful of the economic activities that happen outside of our borders.

- Danielle Taylor Woods, dwoods@mvtinvest.com
The Tasting Room at the World of Coca-Cola in Atlanta, Georgia
Required IRA Distribution?
Give it to Charity and Save on Taxes
IRS rules state that once an individual reaches age 70 ½ they must begin taking a required minimum distribution (RMD) from their traditional Individual Retirement Account (IRA) on an annual basis. This requirement also applies to non-spouse beneficiaries of Inherited IRAs regardless of age. Depending on the size of the IRA, that distribution could add a hefty amount to an individual’s taxable income.

Now, what if when it comes time to take an RMD, you find that you don’t really need the extra cash? After thorough tax planning, budgeting and a look at your overall financial picture you may find that a Qualified Charitable Distribution (QCD) is a good option to explore.

By distributing a portion or all of your annual RMD directly to a qualified 501(c)(3) organization, that amount is no longer taxable to you. And, if you are already in the habit of giving, a QCD is absolutely something to consider. In light of the recent tax reforms that will have all but wiped away the tax benefit of charitable donations for many taxpayers, this is a way to get those tax savings into your planning.

If you decide to make a QCD as part of your RMD, be sure to let your tax preparer know as there are specific ways it must be dealt with on your tax return. Of course, tax breaks are not the only reason to donate to charity, but we’d be doing you a disservice by not letting you know about this mutually beneficial option! You will need to sign a new form to get that distribution accomplished, so please let your advisor know.

- Emily Agosto, CPA, eagosto@mvtinvest.com


Mitchell, Vaught and Taylor, Inc.
Investment Advisors
53 W. Jackson Boulevard
Suite 905
Chicago, Illinois 60604
Phone: 312-922-1717
Fax: 312-922-1772
Behind every stock is a company. Find out what it's doing.

- Peter Lynch, former Fidelity Magellan Fund manager