Most investors think quality, as opposed to price, is the determinant of whether something is risky.  But high-quality assets can be risky, and low-quality assets can be safe.  It’s just a matter of the price paid for them.

– Howard Marks (Sept 2015)

It seems not a day goes by where a media outlet or publication doesn’t run a story on the death of active management. Whether these stories note the current tidal wave of money being dumped into low-cost index mutual funds and exchange traded funds (ETFs) or the idea that some large percentage of active managers fail to beat their benchmark, it’s all the same story.  Even notable investing legend Warren Buffett in his annual letter to shareholders[1] recommended that individuals allocate almost all their investable assets to an S&P 500 index.  Everywhere you turn, the drumbeat of passive investing is audible.  But is it a siren’s song?

Doesn’t it strike you as odd that humans spend countless hours getting the “best deal” on items to include toothpaste, cable bills, gasoline, and groceries, and yet do not put in equal amounts of effort to a far more critical commodity: their financial assets?  Put another way, the word “deal” as described in the prior sentence is meant to imply a recognition of price consciousness.  The passive approach to investing mandates that you ignore your inner drive for price consciousness.  To me, this behavior seems a little strange, but recent flow of funds data[2] would suggest that many investors are, in fact, eschewing price consciousness in favor of simple “market exposure”….just as the equity markets touch new all-time highs.

As with other manias in financial markets history, we think what is really going on here is momentum investing.  In financial markets, the phenomenon of momentum refers to the positive feedback loop that is created by prices that go up over a short/intermediate-term time frame.  This upward bias in prices draws in additional investors near the mid-to-latter stages of the cycle as FOMO (Fear Of Missing Out) creates a buying frenzy.  Investor memories can be myopic, and you don’t have to look hard for examples of this activity.  Some would include: technology stocks in the late 1990s, single family homes in the mid-2000s, master limited partnerships (MLPs) in the 2010s, and the soup du jour is exchange traded funds (ETFs) based on indices.

So why is it a problem that so many investors are now price insensitive, and how are we (Gratus) accounting for this new potential risk?  We touched on this topic in an update last year, but I believe it’s time to revisit the issue as the answer may not seem obvious.

Low Cost ≠ Low Risk

We’ve put this idea first, as we think it is the most important concept to consider when thinking about an ETF or index mutual fund.  Just because the vehicle is low cost (ETF/index mutual fund) does not mean that the assets underlying the vehicle do not carry risk of over-valuation.  Many in the financial media will eschew this point by saying something nebulous like “in the long run” or “over a full market cycle” to indicate why your entry point is irrelevant.  To us, these phrases are meaningless, because every investor’s time horizon is different and considerations around their financial assets are unique to some degree.  So to reinforce the point, just because you can buy an index that has a low management fee does not mean you aren’t paying too much for the underlying assets.

Someone Needs To Do The Hard Work

To us (as we’ve mentioned in prior publications) successful investing all comes down to basic probability analysis and, by extension, risk/reward.  The only way we know how to pass judgment on risk versus reward is to relate an investment to its valuation (i.e. is this investment a good deal relative to how good a deal the investment was at various points in the past or to its future prospects?).  There are many ways to gauge value, but for simplicity’s sake, we will use the price-to-earnings (P/E) ratio.  Simply stated, the P/E ratio relates the share price of a company to the earnings it generates.  The higher the P/E ratio, the worse of a value it becomes and the lower the probability becomes that the subject company shares can perform in line with historical norms.  This is a gross simplification of all the variables that go into the P/E and a rigorous company valuation, but the concept helps underscore a point.  The only investors that undertake company valuation analysis are active investors….not passive index or smart beta investors.  Therefore, if fewer and fewer investors are willing to undertake valuation assessments, then who is judging whether a company is overpriced or not?  Clearly, it’s not the index/ETF contingent.  

Ease of Trading ≠ Better Investment Outcomes

Just because you can trade an ETF (buy or sell) intraday, whenever you feel like it, doesn’t mean that this liquidity is a good attribute.  In fact, Gratus (and others like Credit Suisse Global Strategist Michael Mauboussin) would argue that the more liquid an investment, the more likely it is that an investor will trade that investment.  This is partly due to loss aversion, whereby losses that an investor experiences (whether realized or unrealized) feel three times worse than gains of an equal amount.  Behavioral psychologists Daniel Kahneman and Amos Tversky documented this concept (known as prospect theory) in their academic paper.[3]

Leaving loss aversion aside, buying a low cost index ETF does not guarantee a good investment outcome because the purchase of an ETF implicitly involves investment decisions to include what size companies to purchase (small v. large), where those companies should be domiciled (US v. international), type of company to be purchased (growth v. value), currency exposure, % weighting in the portfolio (overweight v .underweight), among others.

Next, there are instances of equity index /ETFs that actually trade at premiums to the companies within the index they are replicating.  In this way, investing in these select ETFs means you are paying more than you would if you were to buy the underlying constituents.  This is not supposed to happen in an ETF.  Admittedly, this doesn’t happen very often, but when it does (as was the case with the Van Eck Junior Gold Miners) it makes news as the ETF marketing machines have placed considerable emphasis on minimal premiums and low cost.

Contrast the high-frequency trading of ETFs with some of the most successful investment programs, and we believe that the intra-day liquidity of ETFs is more of a marketing tool than an actual benefit to investors.  In the case of Gratus, we prefer to hold our equity/ETF positions multiple years (if not decades). 

Market Structure Degradation

I’ve left this section for last as it may be a little less intuitive than the sections above.  I won’t go into too much detail here but wanted to show a chart that may shed some light on this section.  Put simply, we now have a dynamic where an increasing number of ETFs are being created while the number of underlying stocks are declining.  What new risks does this dynamic present?

Next, obtaining diversification within a portfolio of indices/ETFs is now harder to obtain.  Take the case of ExxonMobil.  It’s a mega-cap energy stock with ample amounts of trading liquidity in its shares and an above-market dividend yield (3.8%).  Due to these qualities and the way these attributes are weighted in both market capitalization as well as factor-based indices, ExxonMobil finds its shares a top 10 holding in a surprising number of ETFs, to include iShares Core Dividend Growth ETF, iShares Russell 1000 Value ETF, PowerShares BuyWrite ETF, SPDR MSCI USA Quality Mix ETF, Goldman Sachs Active Beta US Large Cap Equity ETF, John Hancock Multifactor Large Cap ETF, SPDR S&P 1500 Momentum Tilt ETF.[4]  Does ExxonMobil really fit the requirements of all these types of investment vehicles?  You can see the issue in trying to reduce overlap in an ETF portfolio where a single stock is held in many different indices.  True diversification is harder to attain, which is why at Gratus we are migrating our portfolios to more active approaches.

Finally, within the context of market structure degradation, we will spend a little time on factor-based approaches to ETF/index construction.  In the media, factor-based approaches are commonly referred to as “smart beta”.  While the concept of smart beta is a valid approach to index construction (whereby stocks are selected not just by size but also other factors to include dividend yield, volatility, valuation, momentum) the problem lies with the mass adoption of the concept.  I would note that most major investment firms, to include behemoths like Dimensional Fund Advisors (DFA), now have smart beta index ETFs as a product offering.  Observing this build-up in enthusiasm, our thoughts turn to the risks: if we all agree that equities are trading at elevated valuation levels generally, then what good does weighing by slightly lower P/E or slightly higher dividend yield provide…… if everything is overvalued?  This is where an active manager’s decision on what constitutes absolute value from the smart beta relative value becomes important.  This distinction can be seen very clearly in periods approaching major turning points in the equity markets (e.g. 1929, 1970, 2001).


In summary, as we have outlined above, there are many reasons to be wary of the passive investment revolution.  So how are we addressing this potential issue in our portfolios?  First, by recognizing that index mutual funds and ETFs have advantages and disadvantages.  This is a big first step because the financial media and marketing machines like Vanguard and Blackrock have powerful platforms to spread their message which usually revolves around the ideas that (1) there is nothing to fear with index investments and (2) cost is the only area where an investor should focus.  This, of course, is way too short-sighted.  As even Vanguard founder Jack Bogle would admit, there are limits as to how many market participants could engage in indexing.

The simple fact is, no one knows the exact percentage amount where passive ownership in equity indices becomes problematic.  We would argue that the math of index investing indicates we are closer to this problem area than many realize.  As an investment firm, and not a marketing firm, Gratus has no preference in favor of any investment vehicle.  Our concern is to provide high quality investment counsel and identify the appropriate strategies to achieve specified goals and objectives with the least amount of risk.  For many of the reasons listed above, Gratus has been migrating toward select active investments as we believe better opportunity lies ahead for active strategies with a discernable value proposition.  In an era where price is seemingly becoming increasingly irrelevant, we at Gratus Capital remain committed to the concepts of a value-oriented approach, as we believe that value (or price consciousness) is one of the few time-tested investment strategies leading to long-term success.


[2] Investment Company Institute 2017 Factbook

[3] Prospect Theory:  An Analysis of Decision Under Risk (1979).

[4] Horizon Kinetics, “Indexation: Capitalist Tool”, October 4, 2016

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The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal, or other professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or your business.

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You worry about them and work hard every day to provide for them, hoping they’ll grow up to be happy, healthy and independent adults. Yet as parents, we often scratch our heads trying to figure out how to teach our kids about money. In fact, some of us don’t talk with our children about money at all.

According to a recent T. Rowe Price® survey, 13 percent of parents surveyed said they never have financial conversations with their kids, while 59 percent said they only talk to their kids about money when their kids ask them about it.

Intuitively, we know it’s important to educate our children about the financial side of life, but what’s the best way to go about it? To answer this question, we looked to Gratus Capital’s Director of Financial Planning Kevin Woods, CFP® for some answers. To qualify his answers even further, we focused on children aged 11 to 25.

Before delving into the different age groups and their respective strategies, Woods believes it’s important that parents come to terms with the following two concepts. Once you do, you’ll have greater success helping your children become money-wise adults.

#1 – Understand Your Own Thoughts about Money

To help your children understand money, Woods says that you must first understand your own thoughts about money. “Every day as adults we make decisions that determine what we need and want,” said Woods. “This drives our lifestyle choices, including the cars we drive, the jewelry and clothes we wear, the house we own and all the extras that make us feel good

“However, living within your means and knowing what you can afford often starts with how we grew up and how our own parents helped us learn about discipline, sensibility, sacrifice, reward and goals when it comes to money. To educate your children, you have to come to terms with your own thoughts and expectations regarding money. Only then can you teach your children how to lead financially fulfilling and responsible lives.”

#2 – Understand the Impact of a Digitally-Charged Generation

According to Woods, today’s children are part of a generation that rarely struggles to get what it wants. In fact, most have never had to make a major sacrifice. Instead, many of today’s children primarily understand what makes them happy and how to get immediate gratification.

But why?

Because now more than ever, today’s generation of children are being highly influenced by products and services that promise to make them happy. Search engines are tracking your children’s behaviors and creating advertisements that match their individual search history. This bombardment of highly-targeted and customized advertising enables today’s children to see the very things they want to buy repeatedly. Whether it’s Facebook, Instagram, Snapchat or another digital channel, most kids can’t escape digital advertising.

Digital influence aside, what can you as a parent do to help your children establish good habits about spending, giving and saving for the future?

Since your children’s needs, wants, and goals will change depending on their age, Woods suggests these money-wise parenting strategies for the following ages:

The Formative Years: Children Aged 11 to 18

Most children receive money for allowances, birthdays, holidays and odd jobs such as babysitting and mowing lawns. At this time of your child’s life, you should explain three financial concepts to them:

  1. How much to save.
  2. How much to give back.
  3. How much they’re allowed to spend.

Woods suggests that children save no less than 20 percent for future needs, such as college, buying a car or attending a concert. He’s also a strong charitable giving advocate and recommends teaching children now about setting aside money for the sole purpose of giving back. He recommends five to ten percent be set aside for giving. The rest of the money should go toward what your child wants today – Starbucks, trips to the mall, etc.

Talk More to Bring Goals to Life

It’s very important to talk with your children throughout the year about their saving, spending, overall needs and wants, as well as their long-term goals. Woods suggests that parents have no fewer than four comprehensive financial conversations per year with their kids, and ideally 12. The more conversations you have, the more you help by reminding your children about their goals and checking in to see if they’re on target to accomplish them.

Spend More Time Together by Opening a Joint Account

Starting at age 11 and up is a perfect time to start buying some shares of stock or open a mutual fund. The key is for you and your child to establish what your child’s ongoing contribution goal will be. Over time, as your child sees his or her savings grow, this will instill the encouragement to save even more. This account also becomes one of the key financial conversations you’ll have throughout the year.

The Budgeting Years: Children Aged 19-25

Financial conversations between you and your children will vary greatly at age 19, perhaps even starting a bit younger. The focus now turns to budgeting, says Woods. For children who go off to college, Woods recommends that you and your child establish a budget for both their everyday and monthly needs. They’ll have fixed expenses, such as food and housing; however, they’ll also have variable expenses including entertainment, weekend traveling with friends, etc.

A monthly amount of money allotted to your child strengthens their decision-making ability surrounding how to make money last.

Many savings apps can be quite useful in helping your son or daughter to budget more responsibly. PCWorld has provided a nice roundup of budgeting apps for tracking savings and spending.

What’s more, Woods recommends that your child have a summer job and be solely responsible for saving no less than the money needed for the extra spending they may want throughout the school year and summer.

By allotting a monthly college budget and instilling upon your student that he or she is responsible for the extra spending they desire, when your child graduates college, they will have built a foundation for knowing how to live within an established budget.

Watch Out for Credit Card Magnetism

According to a recent Experian College Graduate Survey Report, one in five of the college students surveyed gives their college an F grade on preparing them to understand how credit works. What’s more, of those surveyed, 58 percent have a credit card and had the following personal experiences: 33 percent made a late payment, 31 percent maxed out a card, 23 percent had a card declined, and 15 percent missed a payment.

Given these statistics, it’s imperative that parents and their college-age children maintain open and ongoing communication about their child’s credit card usage. Like most financial vehicles, credit cards have their pros and cons. However, as with any effective financial tool, it needs to be managed, says Woods.

Beware the Taxman

When your adult child starts their first professional job, it’s very important that they understand taxes and how to manage what is left over. Too often, young adults forget to take taxes into consideration within their saving and budgeting planning.

Woods recommends that parents encourage their adult children to pursue four positive financial habits:

  1. Contribute 10 to 15 percent of their newly-found income to their company’s 401(k) or a similar retirement plan. If their company doesn’t have a retirement plan, which can be true for many small businesses, then contribute to an Individual Retirement Account (IRA).
  2. Make a list of monthly expenses to determine how much is available to afford rent, such as mobile phone, gas, car payments, food, etc. Additionally, there are new expenses, such as auto and renter’s insurance, that need to be accounted for.
  3. Establish a second savings or investment account, in addition to a 401(k) or IRA, and contribute to it each month.
  4. Set all savings and investment contributions so that the funds are deposited automatically, alleviating monthly decision-making around surplus income and increasing the likelihood the money is saved.

In Closing

It’s been our experience at Gratus Capital that parents who start educating their children about money during their formative years, such as talking about the costs of operating their home, including the mortgage, property taxes, electricity, heating and so on, help their children go on to be far more money-wise and successful simply due to the open dialogue between parent and child about life’s financial responsibilities and expectations.

At Gratus, we’re financial life counselors who advocate not just for your strong financial future, but that of your child’s. If you have any questions about your financial future, or that of your child’s, please contact us. Finance, budgeting, and investment management are just the beginning of our expertise.

Authored By:

The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal, or other professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or your business.

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In the first quarter of 2017, the bull market seemed unstoppable. The Dow Jones Industrial Average soared past 20,000 and closed at all-time highs on 12 consecutive trading days. The Nasdaq Composite gained almost 10% in three months.1

An eight-year-old bull market is rare. This current bull is the second longest since the end of World War II; only the 1990-2000 bull run surpasses it. Since 1945, the average bull market has lasted 57 months.2

Everyone knows this bull market will someday end – but who wants to acknowledge that fact when equities have performed so well?

Overly exuberant investors might want to pay attention to the words of Sam Stovall, a longtime, bullish investment strategist, and market analyst. Stovall, who used to work for Standard & Poor’s and now works for CFRA, has seen bull and bear markets come and go. As he recently noted to Fortune, epic bull markets usually end “with a bang and not a whimper. Like an incandescent light bulb, they tend to glow brightest just before they go out.”2

History is riddled with examples. Think of the dot-com bust of 2000, the credit crisis of 2008, and the skyrocketing inflation of 1974. These developments wiped out bull markets; this bull market could potentially end as dramatically as those three did.3

A 20% correction would take the Dow down into the 16,000s. Emotionally, that would feel like a much more significant market drop – after all, the last time the blue chips fell 4,000 points was during the 2007-09 bear market.4

Investors must prepare for the worst, even as they celebrate the best. A stock portfolio is not a retirement plan. A diversified investment mix of equity and fixed-income vehicles, augmented by a strong cash position, is wise in any market climate. Those entering retirement should have realistic assessments of the annual income they can withdraw from their savings and the potential returns from their invested assets.

Now is not the time to be greedy. With the markets near historic peaks, diversification still matters, and it can potentially provide a degree of financial insulation when stocks fall. Many investors are tempted to chase the return right now, but their real mission should be chasing their retirement objectives in line with the strategy defined in their retirement plans. In a sense, this record-setting bull market amounts to a distraction – a distraction worth celebrating, but a distraction, nonetheless.

At Gratus, we provide sound asset allocation advice, from determining each client’s initial allocation (“getting it right”) to ongoing strategic asset allocation (“keeping it right”).  We offer our clients balanced and comprehensive investment advice, complete objectivity and a personalized investment strategy. We apply a value-orientation (absolute not relative) to all facets of the investment decision-making process. This approach informs both the asset class and underlying strategy decisions in asset allocation construction.

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Gratus Capital is an SEC registered investment advisor. Registration with the SEC does not imply any level of skill or training. Our ADV documents are available upon request.  The opinions expressed are as of April 2017 and may change as economic conditions vary. The information provided is not intended to be relied upon as specific investment advice and is not a recommendation, offer or solicitation to buy or sell any securities.  As with any investments, past performance is not a guarantee of future results. There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses.  All indices are unmanaged and are not illustrative of any particular investment.  This article was prepared by MarketingPro, Inc. This information has been derived from sources believed to be accurate. This article is intended to provide generalized financial information; it does not give personalized tax, investment, legal, or other professional advice.  Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or your business.


1 – [3/31/17]

2 – [3/9/17]

3 – [4/3/14]

4 – [4/3/17]

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March 2017 Update: Dallas We've Had a Problem

“Houston, we’ve had a problem here.”  – Jack Swigert (Apollo 13 astronaut)

It was April 13, 1970, and the Apollo 13 mission to the moon was approaching the point at which the lunar lander was preparing for descent.  All of a sudden, an oxygen tank exploded which crippled the service module and effectively aborted the mission.  It was only after great effort and sacrifice that the crew of Apollo 13 was able to return the spacecraft safely back to earth.  In many ways, we believe that the Apollo 13 mission is a useful metaphor for the state of the US pension system.

What does Apollo 13 have to do with the pension system, and why should you care?  Just substitute “Dallas” for Houston and the metaphor will translate well.  For those that haven’t been watching what is happening in the city of Dallas, there’s reason to be interested…..especially for municipal bond investors.  Here’s a brief summary of what has happened.

The $2 billion Dallas Fire and Police Pension (DFPP) Fund finds itself at ground zero of the brewing pension issues on the horizon.  Essentially, DFPP made some bad real estate investments on behalf of its pensioners in the mid-2000s to include Hawaiian villas, Uruguayan timber and undeveloped land in Arizona.  These poor investments caused the pension fund to incur average annual losses of -1.5%/yr for the last five years, as opposed to the assumed return of 8.5%, to cover promised benefits.  These losses created a ~$7 billion shortfall that caused Moody’s and S&P to downgrade the credit rating of Dallas in early January.

Sensing that the pension was in crisis, many beneficiaries opted to take out lump sum distributions in lieu of the monthly payment.  This snowballing of fear caused ~$500 million in lump sum distributions in just the first few weeks of 2017, exacerbating the shortfall and causing the mayor of Dallas to halt all lump sum payments.  Now the city of Dallas/DFPP are in grueling negotiations to try and figure out where to go from here.

This brings us back to our original questions posed above:  What does Apollo 13 have to do with the pension system, and why should you care?  In short, we believe many investors are (1) overlooking large, unfunded liabilities, and (2) still relying on credit ratings and simplistic rules of thumb when making investment decisions on municipal bond offerings.  I’ll hear phrases like “I don’t have to worry about XYZ city because it’s a general obligation bond” or “this bond is AAA, so why would I be concerned”.  These are dangerous phrases to throw around.  In the case of Dallas, Texas, Moody’s has downgraded its general obligation (GO) bonds from Aa1 to A1 (three levels) in under 12 months due to pension concerns.  At Gratus, we approach a municipal bond portfolio with risk as a primary consideration.  To that end, below are a few considerations we keep in mind when constructing a municipal bond program.

1. Financial deterioration can happen quickly. Rarely is it the case that a municipality or state will jump from a high quality to low-quality bond overnight.  Yet, details are important to monitor.  One detail that we find useful is the rate of return (a.k.a discount rate) assumption being used by a municipal pension.  According to Piper Jaffray & Company, the median rate of return assumption being made by most municipalities is 7.75%.  In other words, the municipality is expecting the pension asset pool to earn 7.75% in perpetuity.  Obviously, this is far too high given where interest rates currently sit.  The problem, however, is more insidious.  If the municipality lowers its return assumptions, this increases the unfunded liabilities amount given that more assets are needed to generate the same return.  The table below illustrates this dynamic well. 

Discount Rate 7.6% 7% 6% 5% 4%
Total Liabilities ($tn) 4.5 5.1 5.8 6.6 7.5
Assets ($tn) 3.4 3.4 3.4 3.4 3.4
Unfunded Liability ($tn) 1.2 1.8 2.5 3.3 4.1

All this is to say, when interest rates were higher, there was more margin for error on investment returns.  Now with interest rates hovering around historically low levels, there is far less margin for error.

2. You can’t outsource your due diligence to a credit rating agency. While one would think companies providing insurance to municipal bonds have learned a valuable lesson in the credit crisis, we never rely on this insurance when making a municipal bond investment.  Certainly, the quality of municipal insurers has improved since 2008 with the entrance of behemoths such as Berkshire Hathaway, White Mountains Insurance and others.  Yet municipal bond insurance is often a reason I hear for not doing credit analysis under the idea that if Berkshire Hathaway is insuring the bond then it’s as good as an obligation of Berkshire.  Certainly, this will be the case longer term, but if an investor is relying on timely principal and interest payments as part of their income, any disruption (whether for a month or six months) to a payment can be difficult to endure.

3. Most municipalities display warning signals in advance of distress. As Wayne Gretzky once said, “A good hockey player plays where the puck is.  A great hockey player plays where the puck is going to be.”  Our thought on the current pension situation is simply to avoid investing in municipalities/states where the unfunded liabilities are large relative to the size of the pension and tax base.  Furthermore, to reduce the risk of a pension disaster, we can look at essential service bonds which have zero pension/benefit obligations.  An example of this would be a municipal bond whose principal and interest is derived from a utility bill or special purpose tax.  Good examples of municipalities that were displaying warning signals well in advance of bankruptcy were:  City of Detroit (2013), City of Stockton (2012), City of Vallejo (2008), Puerto Rico (2016).

Current municipalities flashing warning signals include the following:  State of Illinois, City of Chicago, Cook County, Marshall Islands, American Samoa, State of Connecticut, City of Hartford, State of Rhode Island, City of Providence, State of New Jersey, among others.

In summary, our point in publishing this article is not to scare clients into thinking that there is some action that needs to be taken; it’s merely to describe the new world order in the municipal marketplace.  In our opinion, rules of thumb can be dangerous.  As with the Apollo 13 mission, the problem is not terminal, but it’s pretty close to dire for certain municipalities.  Unless dramatic and swift action is taken at the municipal level to right-size pension obligations, there will be identifiable losers over the medium term:  bond holders and pensioners of the problem issuers.  We are (and have been) proceeding with caution in the municipal marketplace as we see certain geographies that could have problems in the future.

Post Script:  After I wrote the piece above I looked into the situation for union pension plans.  As it turns out, the first union pension plan declared bankruptcy (NY Teamster Local 707) earlier this year.  According to industry estimates, a further 200 union plans are on the brink of insolvency. 

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The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal, or other professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or your business.

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Save More Money for Retirement in 3 Easy Steps

According to a recent survey, one in three people has no retirement savings.1 Clearly, if you’re not feeling confident about your retirement savings, you’re not alone. As financial advisors, we believe that it’s never too late to begin saving for retirement. The key is to get started. Once you get past this initial hurdle, you’ll see your savings accumulate. To begin, first create a realistic household budget and savings plan.

To help you save more money for retirement, follow these three steps:

Step #1 – Determine what amount of money you can live within per month.

Notice that we said, live within. In order to effectively save more for retirement, you first need to define a budget. One that includes forgoing miscellaneous purchases and freeing up additional funds for your retirement savings.

Keep in mind that most people spend and then save what’s left over. The problem with this approach is that there’s typically very little left over, if anything at all. Therefore, a key budgeting step is to first determine how much you need to save each month.

By using a retirement calculator, you can get a better understanding of how much money you need to save in order to afford retirement based upon your projected time frame goals.2

Step #2 – Ask yourself: Where is my money going?

If your savings aren’t adding up fast enough to meet your projected retirement timeline, then the next step is to ask yourself: Where is my money going?

To answer this question, try using an automated tool that helps track spending. For example, Mint is a program that pulls all your financial information into one place so you can see your entire financial picture. Once you have a better understanding of where and what you’re spending money on, you can make proactive savings adjustments.3

Step #3 – Make spending cuts and redirect the funds back into savings.

Before you start cutting, be sure that you’ve outlined your savings goals and projected retirement timeline. By having goals underscored by reasons, it’ll be easier for you to cut expenses.

Good savers are typically individuals motivated by personal goals.

Contemplating where to cut spending? Try looking here:

  • Travel & Vacations – Do you really need to take your family to Disney World this year? Instead, how about a weekend in the city. Taking advantage of local tourist destinations is a nice alternative to expensive vacations – and Atlanta certainly has a lot to offer!
  • Home Repairs – Spend when it’s really Small DIY jobs can often spiral into costly home renovations. Plan ahead for major home repairs by saving in advance. In the meantime, focus only on the projects necessary to the function of your home. Décor preferences change with the season, and it’s worth waiting it out until you’ve properly budgeted for major updates.
  • Dining Out – It’s true, packing a lunch slows you down getting out the door in the morning. What’s more, it’s tiring coming home after a long day at work and then needing to cook dinner. Yet, there are tremendous savings to be had if you were to simply cut back on your dining out. CNN Money found that you could save as much as $207,598 by skipping two restaurant meals a week over a period of 40 years.4 How about limiting a night out to once or twice a week?
  • Coffees-To-Go – Those lattes sure are delicious, and at $5+ each, they ought to be. In fact, if you enjoy one each day on your way to work 49 weeks out of the year, that’s approximately $1,225 a year in lattes. How about limiting yourself to one or two lattes per week?

Many people believe they need a large income in order to save effectively for retirement. This isn’t true. The key to saving is to monitor your spending habits and automate your savings.

If you’re serious about wanting to save more money for retirement, then download our latest complimentary guide: Practical Steps to Fix 3 Fatal Flaws in Your Financial Plan. Learn long-term savings strategies to help you achieve your retirement goals.


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The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal, or other professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or your business.

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February 2017 Update - New President, New Outlook_Gratus

“It’s tough to make predictions, especially about the future”.  – Yogi Berra

“Economists are often asked to predict what the economy is going to do. But economic predictions require predicting what politicians are going to do – and nothing is more unpredictable.”  – Thomas Sowell

At this juncture, we continue to believe that making financial market predictions is a dangerous business.  Not only is there economic uncertainty relating to the fact that we are now in our eighth year of expansion during this cycle, but we also have obvious political risks percolating around the world.  To that end, political uncertainty now inhabits the White House with aspirations of undoing most of what has been done over the last eight years.  This US-specific political risk is one of many global political risks that stems from burgeoning nationalist movements in Western Europe and elsewhere.  These nationalist movements have the potential to be disruptive to economies over the short term.

Why does political risk matter now?  In our view, it’s simply because outcomes in many western economies are now even more difficult to forecast.  In other words, recent historical norms around free trade (TPP/NAFTA), immigration policy, and military unity (NATO) are coming into question.  In the spirit of a New Year and new president, we thought we’d collect and opine on President Trump’s priorities for 2017.

  • Roll back “regulation” because there is too much regulation in all areas of business

Trump’s Transition Team (TTT) has indicated that upwards of 75% of all regulation is unnecessary.  Financial markets are betting that a large portion of Dodd Frank gets rolled back.  This can be seen in the performance of most financial sector companies, which have responded very positively post-election.

INVESTMENT IMPACT:  Likely beneficiaries of reduced regulation would be heavily regulated sectors like energy and mining, as well as the financial sector.  Recent share price movements in metals/mining/energy shares certainly indicate it may be easier to mine/drill in more ecologically sensitive areas than previously thought.  Interestingly, nuclear companies are performing well, with the idea that no one energy source is favored over another.  Until recently, nuclear has been discouraged due to the nuclear waste disposal issue.

  • Overseas cash repatriation.

The idea is that US companies would be able to bring their overseas cash back to the United States at a low tax rate.  This proposal is fairly straightforward and has a high likelihood of passing through Congress without much obstruction.  Repatriation would give corporations access to much-needed liquidity in the event they decided they wanted to pursue M&A activity, increase share repurchases or increase dividend payments.

INVESTMENT IMPACT:  The investment impact of this policy would be relatively limited if we use the template of the first overseas cash repatriation that occurred in 2004.  Under that template, cash that came back was mostly paid out in dividends….not reinvested in the company.  Furthermore, overseas earnings that are being converted back into US dollars could cause the US dollar to move higher, which would crimp future earnings from those same overseas subsidiaries and, potentially, kick start the next recession. 

  • Reduction in tax rates at both the individual and corporate levels. 

There’s still a lot of distance to close within the Republican ranks as President Trump and Speaker Ryan have publicly proposed plans that are different.  Both men have proposed unique plans for corporate taxes as well as individual taxes.  The key is that they both believe something needs to be done.  This area of tax reform has, in my opinion, the highest possibility of getting Congressional approval.

INVESTMENT IMPACT:  As tax reform legislation works its way through the approval process, equity markets in the US will likely respond positively.  Goldman Sachs estimates that tax reform alone could add up to 4.8% in earnings per share or roughly $6 to 2017 S&P 500 earnings.  The downside, I believe, is that most of this benefit has been priced into equities already as exemplified by the move in small company stocks since election day.

  • Repeal and replace the Affordable Care Act (ACA).

President Trump has already issued an executive order to minimize the ACA’s impact at both the state and federal levels.  The US House of Representatives and the Senate have initiated legislative proceedings to defund the ACA at the same time.  It looks like this repeal and replace is the highest priority for most Republicans in D.C. right now.  The problem, of course, is that even with 3+ years of time to come up with a transition plan for the ACA, there is still no cohesive legislative solution to fill the ACA’s void.

INVESTMENT IMPACT:  It’s still too early to tell, but clearly there will be segments of the healthcare complex that stand to lose if the ACA is repealed without any solution (hospitals, pharmaceutical companies, etc).  Outside of healthcare, I don’t see much by way of immediate market impact until more details are known.

  • Massive infrastructure spending bill to rebuild America.

Again, nothing is really new here as both candidates Trump and Clinton had infrastructure spending proposals.  Clinton proposed an Infrastructure Bank while Trump proposed opening up US infrastructure to public private partnerships (PPP).  PPPs are a unique way to raise private capital for public projects but, effectively, these new PPPs act as new taxes on people that use those facilities.  Further, most infrastructure spending would get pushed down to the state/local levels.  From the time a funding measure for infrastructure would be passed to seeing shovels in the ground could take as long as 2 years given the permitting, environmental, and governmental approval process.

INVESMENT IMPACT:  Likely very little impact in the first four years of the Trump presidency.  To fund the level of infrastructure being tossed around (~$1 trillion), a lot of new debt would need to be issued and absorbed by the markets.  The Federal Reserve could buy that debt directly, but this may interject new risks to the financial system if the bond mark loses faith in the Federal Reserve.  On the positive side, the sheer scale of the program would likely lead to higher levels of employment which could have a positive effect on consumer sentiment thereby providing support for risk assets.

In summary it would appear, based on our initial analysis that much of what is being proposed above as stimulus to the economy has been accounted for in current market prices.  This makes intuitive sense as equity markets typically function with a 6-12 month forward-looking discount mechanism.  (For example, while the S&P 500 bottomed out in March of 2009, S&P 500 earnings didn’t start their upward movement until August/September of 2009).  Further, most of the above has to actually occur for the equity market to maintain its current valuations!  Said another way, don’t get pulled into the hyperbole of the 24-hour news cycle, and keep your focus on the long term.

Authored By:

The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal, or other professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or your business.

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5 Reasons You Need a Charitable Giving Plan

The new year is the perfect time to make a positive difference in another’s life. Be sure you’re making the most of your donations with the tips below.

Who is donating?
According to a recent Gallup poll, among U.S. adults who said they donated money in the last 12 months, 77% say they’ll give the same amount to charities in the next 12 months, while 18% plan to give more and 5% intend to give less.1

But how many are giving with purpose and clarity?
We tend to think of gifting strategies in terms of tax planning, but there are many other reasons to develop a charitable giving plan, including identifying your priority causes, responding to requests for support, and making your contributions go further.

I have put together a list of five reasons why you should have a simple, yet flexible, documented charitable giving plan. Use these tips to help ensure that your giving goals remain on track year after year.

Reason #1 – To Make an Ongoing Positive Impact in the World
Beyond tax deduction benefits, a charitable giving plan encompasses your philanthropic goals and the positive impact you seek to make in this world. It identifies whom you want to help and why. By defining the latter, you’ll be better able to select from a myriad of charities. Make the most impact with your funds by following the steps below:

  • Determine Whom to Help
    When deciding whom to help, consider what you’re most passionate about and what organizations have played a key role in your life. Perhaps you’re passionate about animals or the environment, or maybe your church or college has made a profound impact on your life. Drawing from your personal interests and experiences will help you in prioritizing your giving goals.
  • Automate Your Giving
    These days, regular giving is extremely easy to do through automatic checking withdrawals on many nonprofit websites. By automating your donations, whether monthly or quarterly, you’ll be less likely to feel the financial impact because you’re donating over a period of time, rather than in a lump sum at the end of the year.

Answer A Key Question
To prioritize your donations, ask yourself: How can I best make a long term positive impact in this world? By answering this one question, you’ll be more likely to achieve your giving goals. Also, consider the scale of impact you’re seeking to make. Are you looking to support your local community, or a worldwide cause?

Case-in-point: According to the Atlanta Community Food Bank, for each $1 donated, they’re able to provide more than $9 in groceries for someone in need.2  Clearly, every dollar donated makes an immediate impact on the community the food bank serves.

Reason #2 – To Feel Satisfied & See an Impact
Simply by defining your goals and financial contributions, you’ll be better able to see the impact that you’re having on an organization. You’ll also be more able to say “no” to other charities, knowing that your concentrated efforts are still helping others in the long term. By determining which organizations you’ll help year after year, you’ll come to know them better and enjoy your involvement that much more.

Reason #3 – To Take Advantage of Employer Matches
Many employers match their employees’ charitable donations. However, employer policies and other charitable giving restrictions can change. Therefore, make sure to review your employer’s charitable matching program annually in order to maximize the positive impact of your donation.

Many employers enable employees to donate their time, and while your time doesn’t qualify for a tax deduction, it does enhance the positive changes you’re seeking to make.

Reason #4 – To Monitor Charity Standards
While you may have narrowed down your charitable giving to two or three organizations (which we recommend), it’s important to revisit a charity’s operational standards each year as part of your plan.

Two key considerations:

  • Board Structure – Is your charity’s board of directors still well diversified? It’s important that your charity has several independent board members to ensure that its original mission is upheld.
  • Donation Distribution – Take the time to review how a charity distributes its donations. Look to review annually what percentage is spent on salaries and operations versus the amount spent directly on its programs and those meant to benefit.

To help you make ongoing informed giving decisions, refer to Charity Navigator, a nonprofit watchdog that rates charitable organizations in regards to their financial, accountability and transparency practices.

Reason #5 – To Ensure Tax Deduction Legitimacy
Keep in mind that not all charitable donations qualify for a tax deduction. In some cases, organizations may lose their nonprofit 501(c)(3) standing. To confirm that your charity is, in fact, still in good standing and qualifies for a tax deduction, begin by utilizing the Internal Revenue Service’s Select Check tool.

Finally, be sure to consult with your financial advisor when preparing to make a charitable donation. Your advisor can help you understand the tax impact on your overall financial plan and help you navigate the various tax deduction thresholds and other restrictions. At Gratus Capital, we welcome your charitable giving questions. As philanthropic advocates ourselves, we support helping others to fund their philanthropic endeavors through effective and ethical investment management.

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The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal, or other professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or your business.

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5 Essentials for Estate Planning

Estate planning isn’t just for the wealthy. Money aside, in order to protect yourself and your family, you need a will and a few other legal documents. Without them, you may leave your assets, your medical well-being, and the fate of your children in the hands of a judge who knows very little about you or those you care about.

In this post, we’ll discuss a misconception most Americans have in regards to estate planning that may, mistakenly, deter you from creating a will. We’ll also address how some parents automatically lose the rights to their children’s medical care, as well as key reasons to put estate planning documents in place.

The Facts

According to a Harris Poll survey, 64% of Americans don’t have a will. Of those without a plan, about 27% said there isn’t an urgent need for them to make one, and 15% said they don’t need one at all.1

Estate Planning is Critical

At Gratus Capital, we believe an estate plan is a critical component for helping you achieve your financial and lifetime goals. Ultimately, an estate plan is your voice for a time when you’re no longer living or able to speak for yourself.

To help you plan how to use your voice, we sat down with prominent Atlanta Estate Planning Attorney Tony Turner. What follows are some of his estate planning insights and recommendations. 

Key Estate Planning Considerations

To begin, let’s discuss the basic components that make up a typical estate plan.

#1 – Legal Documents

An estate plan is comprised of several legal documents. The most common include a will, living will, and power of attorney.

A will indicates how you want your property distributed upon your death and names a guardian for your children and a trustee to manage your estate’s finances. A living will names individuals responsible for carrying out your health care wishes in the event that you become severely ill or injured. A power of attorney names the individual you want to oversee your financial affairs in case you become incapacitated.

Turner recommends that these documents be updated every three to five years, since relationships and tax laws change over the years.

If you fail to make time to put these documents in place, then your “voice” may be left up to a court-appointed person who knows little about you, including your goals and values.

#2 – Most Important Decision

The single most important decision you can make for yourself and your family is to decide who shall make decisions on your behalf when you’re no longer living or able. What’s more, this role isn’t limited to just one person.

An estate plan typically includes the following assigned roles:

  • Executor – The person responsible for settling your estate. This role can be short term. Once an estate is settled, the job is done.
  • Financial Power of Attorney – The person who makes financial decisions on your behalf if you become incapacitated.
  • Heath Care Power of Attorney/Health Care Proxy – The person who understands your health care wishes and upholds them on your behalf should you suddenly become ill or seriously injured.
  • Trustee – A key role, this individual manages the distribution of your money, whether through continued investment management or inheritance distributions.
  • Guardian(s) – The person(s) responsible for raising your minor children.According to Turner, the roles of trustee and guardian are often filled by two different people. Why? Because everyone has their strengths. For example,  one of your relatives may be a wonderful parent, but not so reliable when it comes to managing finances.

Simplifying Roles Is Highly Recommended

When choosing whom to appoint to each role, consider what will happen upon your death. A classic example is when a parent makes both their adult children co-executors, or an adult child and a second spouse co-executors. According to Turner, people act differently when you’re no longer around. Assigning a “co” role can often cause complications for those you leave behind.

To simplify decision-making, try assigning primary and secondary executors or agents. Allow one person to make key decisions instead of requiring a consensus. Therefore, a key question is: Who will best carry out your wishes?

#3 – A Key Estate Planning Misunderstanding

Many individuals believe that estate planning is primarily used to avoid paying estate taxes. This couldn’t be further from the truth, according to Turner. In fact, 99% of Americans will not pay federal estate taxes when receiving an inheritance. Why? Because the federal government exempts from taxation the first approximately 5.5 million of inheritance for individuals and 11 million of inheritance for married couples.

#4 – Must-Know for When Children Become Legal Adults

Many families are unprepared for the time when their children become adults. Because of new health care privacy laws2, when your child turns 18 years old, medical professionals can no longer speak with you regarding your child’s well-being.

Imagine that your child is away at college and is involved in a serious car accident. The medical staff cannot legally answer your questions without your child having completed a health care power of attorney. To do so would be a violation of your child’s privacy. Therefore, be sure to have your young adult children complete HIPAA health forms with their primary care physician and with college student health services, ideally naming you as a health care agent.

#5 – Consequences of Not Having a Will

Most people don’t realize that in many states your estate proceeds don’t all go to your surviving spouse by default. In fact, for married couples with two children living in Georgia, if your spouse dies, without a will, then two-thirds of the deceased’s estate proceeds are automatically distributed to the children, and only one-third to the surviving spouse.

Many complications can arise from this, including the surviving spouse not having reliable access to the children’s estate proceeds in order to help pay for their living expenses. What’s more, a child’s inheritance is paid out at age 18, a time when many young people are still learning financial responsibility.

Having a will helps to avoid these unforeseen challenges, as well as many others.

Will you be one of the following?

The American Bar Association claims that 55% of Americans die without a will or estate plan.3

Will you be one of these people? Are you intending to let a court dictate the future of your hard- earned assets or who shall raise your children? In order to reduce havoc in the lives of your loved ones, all of us at Gratus Capital encourage you to coordinate an estate plan. In fact, our expertise includes blending estate planning desires with comprehensive financial plans, to help you ensure that your lifetime goals are fulfilled.

To start the conversation, please contact us with any and all of your estate planning questions.




Guest Blog Authored By:

Tony Turner

Atlanta Estate Planning Attorney Tony Turner is a partner with the law firm Cohen Pollock Merlin & Small. He practices family wealth planning, estate and charitable planning, probate and estate administration and business succession. He is a Fellow of the American College of Trust and Estate Counsel, and was named a Top 100 Attorney in the United States by Worth Magazine. He can be reached at (770)-857-4828 or

The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal, or other professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or your business.

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Scary Facts Surrounding DIY Retirement Plans

When Hurricane Matthew first appeared on radar screens, it wasn’t clear where it would make landfall or the degree of damage it might cause. But meteorologists could see, in broad terms, which areas would need to prepare.

Retirement planning follows a similar arc. When people are younger—in their 20’s or 30’s, and just beginning to establish their careers—“retirement” is a massive, ill-defined eventuality. As it comes closer into view, it’s much easier to attach concrete numbers to one’s plan.

For a lot of families, unfortunately, this has become a de facto retirement plan: set some money aside; don’t worry about specific goals until retirement is clearly within view. In fact, a frightening 44 percent of today’s pre-retirees do not engage a financial planning professional when preparing a retirement plan. Of those, 50 percent say they can do it “just as well” on their own [i]. What are they overlooking?


Most of us tend to think in very linear terms. From right now until age 70, we see a straight line. And we fail to account for an endless list of what if’s. For example, a lot of DIY retirement plans are based on a mortality age that isn’t realistic. People are shortchanging themselves on how long they’ll live, and how inflation will eat into their buying power over time.

Tax liability is another good example. If you don’t understand distribution requirements after age 70 ½ and related tax obligations, your DIY plan could be in for a shock. Also your spouse’s pension: do you have a contingency plan for if you lose all or a portion of that income? Working with a wealth management professional is the easiest way to recognize these pitfalls early on, and run different projections on your plan—illustrating the effect of X, Y, or Z event.

For high-net-worth families, especially, there are myriad moving parts to consider beyond the present day. Estate planning, charitable planning, tax planning: one way or another, these facets may be covered by a family CPA or an attorney, but often no one is working to coordinate all the pieces. In the absence of a “personal CFO” or financial advisory services, this is akin to a DIY approach—one that overlooks changing tax laws, estate tax laws, market shifts, and other opportunities that change over time.

Here’s another scary fact: Americans spend more time planning for vacation than for retirement [i], and not just because retirement seems so far away… I suspect that younger generations (Generation X, and even some Baby Boomers) misread the security they see in their parents’ situations. They look at seniors living comfortably, not dependent on personal savings, and they ignore the value of their parents’ pension plans—perhaps not realizing what retirement will look like now that those benefit plans are quickly disappearing.

Which brings me to one final, scary fact: 26 percent of currently retired Baby Boomers report feeling “surprised” by retirement expenses—healthcare and travel, in particular [i]. This speaks to the need for frequent plan review and revision. A retirement plan should be a living document. But DIY retirement planners are less likely to reflect on what’s happening in their lives (new grandchildren, new hobbies, new health conditions), and update their plans annually. Without reality checks, even a well-drafted upfront plan can fall apart in the long run.

I’ve always liked the quote that reads, “A goal without a plan is a wish.” Whether you’re just getting started in your career, or your life has changed somewhat since you first mapped out a retirement plan (divorce, career change, kids’ college plans), it makes sense to sit down with a professional and rerun your numbers.

Authored By:


The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal, or other professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or your business.




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Your Family’s Investment Strategy: Why It’s Time to Take Stock

Feeling less than confident about your family’s investment strategy?  Trying to help adult children make the most of their portfolios?

You’re not alone—especially if your kids were born during the 1980’s or 1990’s. Recent data shows many Americans are still a little market leery, almost a decade removed from the 2008 downturn. Specifically, according to surveys from and Capital One/ShareBuilder, we know:

  • 93% of Millennials express both a distrust of the markets and a lack of investing knowledge.
  • 39% of Americans ages 18-29 list “cash” as their preferred method of investing, when it comes to money they won’t touch for 10 years. 

If you recognize these attitudes in your children or your grandchildren, the following Q&A offers a helpful primer. Investment strategist and portfolio manager Marc Heilweil (MH) explains why the stock market remains a very sound place for the preservation and growth of capital—and indeed why it may become the only reliable way for the next generation to build wealth over time. Share his insights with your family members.

In simple terms, why should people invest?

MH: Major U.S. traded companies grow their profits by an average of  7% per year. If you’re an investor, you’re going to participate in that growth.

Do you think a sound investment strategy is as important today as it was for past generations?

MH: If anything, it’s more important. French economist Thomas Piketty published a book in 2014 titled, Capital in the Twenty-First Century. His thesis is basically that returns on invested capital grow faster than wage growth. So if you want to get ahead and stay ahead that’s why you invest.

How do you advise clients who want to employ an active trading strategy for some portion of their portfolio?

MH: I ask them to do that on their own. It’s hard enough to be a good investor. To be a good trader is an entirely different ball game. Except for maybe a few savvy individuals, who are very close to the market and have access to sophisticated tools, people will typically run into large downdrafts that effectively eliminate most successes over time.

What are the fundamentals of a good investment strategy?

MH: Being a good investor means starting off with the three R’s:

  1. Return on Invested Capital
  2. Retention Rate
  3. Return on Equity

Return on invested capital (or assets) is the net income of a corporation divided by total assets. Retention rate is an interesting part of today’s market because this is how much profit a company returns after stock buy-backs and after dividends. Overall, companies aren’t retaining an awful lot of their profits, and therefore investors should be concerned about how prospective opportunities will grow their business in the long term. Return on equity is the shareholder’s return on the stock value of the company. This is the least important of the three because it can be affected by many variables and sometimes ignores key features of the company in question.

Beyond the three R’s, investors should dig into the business itself to see if the metrics are sustainable over time. Is senior management capable? Is the company culture healthy and thriving? Do leaders have shareholders’ long-term best interests at heart? Some companies/industries are inherently unyielding and do not deliver good opportunities. Others are exceptional organizations that can reliably produce good returns.

Who has time to do all this research?

MH: Clients can contribute to the process if they have a good head for business. But mostly this is the value that investment managers bring to the table—their experience, judgment, and familiarity with what’s out there.

When taking a long-term approach, how often should individuals revisit their investments and earnings reports?

MH: You’re not looking at immediate results of investments. So if your advisor tends to recommend companies that are undervalued or out of favor, you may not see returns right away. Returns get better down the road. Investing requires patience. At the same time, you’re constantly evaluating what you own and seeing if it meets your expectations.

Should a person’s investment strategy change as they age, or as different milestones come into view?

MH: The notion that your investment goals change as you get older is somewhat overstated. A good investment is always a good investment—one that has a reasonable margin of safety. Any money you’re investing should have a long-term horizon. If you need money in the short term, don’t invest.

When choosing an investment manager, what kind of homework should investors be doing?

MH: When evaluating an investment advisor, be aware of how he or she has done over a bull market cycle and a bear market cycle.  Some may preserve capital a lot better in bear markets.  In our case for example, we also manage mutual funds, so that aspect of our performance (Marathon Value Portfolio) is a matter of public record.  You can also conduct research on a firm and the individuals in the firm by visiting these sites: and

Any final words of advice?

MH: It’s been said that a “price” is what you pay, and “value” is what you get. This is an important perspective that every investor needs to adopt. Don’t confuse a rising price with a good investment. You need to understand the value of what you own.

Do you have questions about your portfolio or investment strategy? Don’t hesitate to contact the Gratus Capital team!

Blog may include forward-looking statements.  All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”).  Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct.  Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.

Any information provided by Gratus regarding historical market performance is for illustrative and education purposes only.  Clients or prospective clients should not assume that their performance will equal or exceed historical market results and/or averages.

Past performance is not indicative of any specific investment or future results.  Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.

The material listed is current as of the date noted, and is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Any information is for illustrative purposes only, and is not intended to serve as investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Results will vary, and no suggestion is made about how any specific solution or strategy performed in reality.

Gratus Capital LLC, the investment advisor to the Marathon Value Portfolio Fund, is registered with the Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940.

Ticker symbol: MVPFX.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Marathon Value Portfolio Fund.  This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 1-800-788-6086.  The prospectus should be read carefully before investing.  The Marathon Value Portfolio Fund is distributed by Northern Lights Distributors, LLC member FINRA/SIPC.  Gratus Capital, LLC is not affiliated with Northern Lights Distributors, LLC.

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Gratus Capital, LLC
3350 Riverwood Pkwy, Suite 1550
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Phone: (404) 961-6000
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