Client Newsletter
June 2016   Vol. 19  
William Yocius - MVT CEO!
We are happy to announce that Bill Yocius has been promoted to Chief Executive Officer of MVT!  Bill joined the firm in 2007 after several years in finance and public service.  He has played an integral part in our firm's growth and success ever since. David and I couldn't be happier to have a man of his caliber on board and are thrilled that he has accepted this responsibility. Many of our clients have had the pleasure of meeting with Bill or listening to him speak at seminars.  Please reach out and send Bill your congratulations.  He can be reached at 312.922.1717 or byocius@mvtinvest.com.

- John Mitchell, President
2nd Quarter 2016:  Celebrating the Positive
June 13, 2016- The markets have been generally positive this quarter in both stocks and bonds.  Consumer spending jumped up 1% month-to-month (the biggest increase in seven years) and employees saw a 0.5% increase in salary in April.  The manufacturing sector also made some positive strides.  While mortgage rates are still very low (Wells Fargo reports a 30-year fixed rate of 3.75%), housing values are climbing.  

Oil, which was at a mere $38 a barrel in mid-April, has climbed steadily this quarter to around $50, while OPEC countries continue to fail to come to an agreement on production levels.  Iran, in particular, is enjoying the recent lifting of sanctions and wants to increase its crude oil production.

International markets continue to struggle, but some of your international managers are performing ahead of the MSCI EAFE Index.  In the US, some small and midcap stocks are outperforming their larger more growth-oriented counterparts (an example is the Diamond Hill Small-Mid Fund discussed below).  Healthcare continues to be down for the year, but it has recovered about 5% since the start of the second quarter.  Global Infrastructure has been a big performer this year with returns in excess of 8%.  We only hold small positions in sector funds like healthcare and infrastructure, but they often help to bolster stock performance over time.  

Bond interest rates are still very low, and the Fed has not raised them since December. There was some speculation that they may raise them again this month; but the continued concerns in Europe (particularly Great Britain's upcoming referendum about whether or not to leave the European Union.  You can read more about it here:  BBC News Review of Upcoming Referendum ) may keep rates unchanged for the time being. Because rates are still down, performance has been positive.  Our most commonly used bond mutual funds such as Pioneer Strategic Income, Baird Aggregate bond and TCW Total Return Bond are up 3-5% from the start of the year.

Should you have any questions, please contact any of our advisors.  We send you a report each quarter of your portfolio performance, but we are happy to speak to you at any time.  -

Danielle Woods, dwoods@mvtinvest.com

MVT Celebrates 20 Years of Investment Advising !
It has been 20 years since  John Mitchell and David Vaught began the firm.  The primary clientele when the firm first began was Illinois Article 3 and 4 Police and Firefighter Pension Funds.   We are proud to report that we still manage investments and work with trustees from our very first set of clients.  The firm has grown to manage more than $400 million in assets, primarily for our nearly 40 pension funds across the state of Illinois.  We have added a variety of services for our pensions, and we can also handle municipal accounting and other consulting needs.  

Our individual clients have also grown steadily over the years.  We currently manage roughly $30 million for about 100 individual investor families.   We handle a variety of accounts, including IRA rollovers, Roth IRAs, taxable investments and college savings accounts.  We are knowledgeable in tax and estate planning issues, and our staff brings with it a wide variety of experience when helping our clients create a financial plan.

We also offer educational and entertainment opportunities for our clients and welcome all comments and questions.  You can find old copies of our newsletters and client letters on our website as well as videos from previous seminar presentations.

Aside from our clients, our most precious asset is our employees.  We have ten staff members, most of whom have been with us between 6 and 18 years.  We encourage you to call and email our staff with questions.  We like talking to our clients, and we want to make sure we are clearing up any questions or concerns you have.

A huge THANK YOU to all of our clients who have trusted us (some for MANY years) with their hard earned portfolios and for referring other clients to us.  We truly enjoy what we do, and we hope that you will continue to provide the feedback we need so that we can constantly improve our services.  

Thank you!  John, David, Bill, Danielle, Margie, Dwight, Jim, Emily, Tom, & Rhea

Client Focus:  Did You Really Lose Money?

In our experience, clients are most vocal when the markets are behaving badly.  The past nine months has been a prime example.  The market slid twice in the past year, once last summer and again at the start of 2016.  Clients often call or email to simply check in and see how they are doing or they call in a panic.  

Why are we so calm?  It's because we've seen this many, many, many times before. We send you a graph with every performance report.  The longer you've been with us, the more detailed your graph looks.  You can see from the graph that the markets go up, and they go down before they can go up again.  Stocks, in particular, can produce a very bumpy ride, which produces emotional responses.  We understand, but the following are more reasonable ways to look at the situation: 

1.  You only truly "lose" money when you sell a security for less than you paid for it and stay in cash.  Sadly, this happened to investors across the country in 2008 and 2009.  Investors panicked when the market bottomed, sold all of their stock securities, and stayed in cash or low-yielding bonds.  Those investors lost money because they missed the huge market rebound.  

What should you do instead?  Stay the course.  Selling when the market is already down is the worst thing you can do, unless you absolutely need the cash for something unavoidable.  Patience is often rewarded in investing.  

We may sell a security during a downturn, but it is often to replace it with another that we think will rebound better.


2.  Don't stop adding to your investments when the market is down.  Some investors say that they want to wait until the market is doing better.  In essence, you are saying that you want to spend more money later.  When the market is down, it's time to buy cheap.  You may not time it perfectly (in fact, the market may continue to go down for a bit), but you will still have a greater gain down the road when the market is up.

3.  Too many investors focus entirely on market performance (or volatility) and not on their own savings rate.  Market gains are only part of the portfolio.  What you contribute is most often the largest portion of the portfolio.  If you are not increasing your portfolio contribution, the market has nothing to multiply for you.  

In summary, none of us can  control the ups and downs of the market; but we can control how much we add to our portfolios and how we react to market news.  Try to think of down markets as investing opportunities.  If you want to talk about your portfolio or the current market environment, please call.  We are always here to help you.

- Danielle Woods, dwoods@mvtinvest.com
A Note from Charles Schwab About Monthly Statements

For those clients who utilize Charles Schwab as custodian for your accounts, please be aware that should you have a dormant account that has no activity (including dividends, etc), you may only receive a quarterly statement instead of a monthly statement.  While we expect this will only affect a small number of accounts, please contact us if you think this will be a problem.  Of course, we have a complete ledger of all of your account activity, so let us know if you need anything outside of the normal statements. 
College Investing via Coverdell
Some of our clients have asked about college savings accounts recently, so we thought we would address it in this quarter's newsletter.

There are a variety of ways to save for college, but one of my favorites is the Coverdell Education Savings Account.  (In fact, I use this type of account for my two young sons as well.)  While we feel that college savings is secondary to retirement savings and cash cushions for your daily life, we also understand that some parents or grandparents want to help with the potentially high cost of college.

Coverdells are similar to the more widely known 529 plan account.  Both allow an account owner to save money tax-free for a future student; both allow you to withdraw funds for college tax-free; and both allow you to switch designated students within a family.  While 529s allow quite large deposits ($14,000 per year at least), many investors cannot afford to contribute so much.  

A Coverdell, which allows contributions of $2,000 per year per student, gives a saver some more flexibility in investment options and in what the money can be spent on.

529 plans are sponsored by the states (there are dozens of different plans), and a saver is limited to the investment options available to them in whatever plan they choose to use.  A Coverdell can be invested in any investable asset that your custodian will hold for you.

Also, 529 plans can only be used to pay college tuition and fees, while Coverdells can be used to pay for tuition, fees and other expenses attributed to primary OR secondary school.  This comes in handy when you want to buy a computer for your new college freshman, for instance.




The Coverdell does limit contributions for taxpayers whose income exceeds a certain amount.  For single taxpayers, you can contribute the full $2,000 with an AGI of less than $95,000.  It begins to phase down up to $110,000.  If you are married filing jointly, the phase out begins at AGI of $190,000 and ends completely at $220,000.  

If you do earn too much, you can gift the money to another responsible adult that can own the account for you.

Contributions are allowed until the future student turns 18 unless they are considered special needs.  

Other questions:

1.  What if my child doesn't need the money?

You can keep the money in the account for the child until they reach age 30 in case they change their mind or need it for further study.  You can roll the account to another child in the family.  If you absolutely can't do either of those, you can withdraw the money and pay the income taxes and 10% penalty on the earnings.  Your contributions will not be taxed.

2.   Can I have a Coverdell and a 529 plan at the same time for my child?

Yes.  We recommend funding the Coverdell first and contributing anything beyond it in the 529 plan.

3.  How do Coverdells and 529 plans impact financial aid?

These accounts are owned by you or another adult, not the student.  Therefore, the weight of these accounts is far less than it would be if the account was in the student's name.

4.  How often can I switch the beneficiary on my college accounts?

Once per year.

Like all investments, additional information may be very client-specific.  Please contact myself or Emily Agosto, CPA (eagosto@mvtinvest.com) with questions.

-Danielle Woods, J.D. dwoods@mvtinvest.com  
Fund in Focus:  
Diamond Hill Small-Mid Cap 
  Thanks to the research conducted by our own Jim Nowicki, CPA, our investment committee voted to add Diamond Hill's Small-Mid Cap Fund (DHMIX/DHMAX) to our list of mutual funds for clients a little over a year ago to replace a previous small cap manager.  Although the market has taken a bit of a beating in the past year, Diamond Hill's small-mid fund has done quite well.  

We first purchased the fund on March 27, 2015.  Since that day through June 10, 2016, the fund is up about 3.4%.  Alternatively, the Russell 2000, a well-known small cap domestic stock index, is down about 6% for the same time period.  The S&P 500 Index, which includes the largest 500 companies in the US, is up only about 1% for that time period.

For the current year, stocks have recovered nicely overall.  The Russell 2000 Index is up about 2.5%, and the S&P 500 is up about 3.6%.  However, Diamond Hill's fund is up an impressive 6.66% through 6/10/16.   While past performance is no guarantee of future returns, we like to shine a light on the very positive aspects of your portfolio when we get the chance.  We are very pleased with the performance from this manager, and we are hopeful that it will continue.

If you have any questions, please let us know.    A complete list of all available assets can be provided upon request.

- Danielle Woods, dwoods@mvtinvest.com                                                
Mitchell, Vaught and Taylor, Inc.
Investment Advisors
53 W. Jackson Boulevard
Suite 905
Chicago, Illinois 60604
Phone: 312-922-1717

If money is your hope for independence, you will never have it.  The only real security that a man will have in this world is a reserve of knowledge,  experience, and ability. –Henry Ford