We wanted to share a brief mid-quarter update on portfolio positioning and our current market outlook.

Mid-Quarter Investment Update

In light of the recent events in Iran, we thought this would be a good time to give you a mid-quarter update on your investments.

Since late January, we have been reducing risk in your portfolios. Put simply, the outlook has become more murky, though not clearly bearish.

While we are not outright bearish, more risks than opportunities have emerged since late last year. High valuations, overheated investor sentiment, and cracks in selected credit markets led us to prune risk. Midterm elections in the US also potentially offer a mild headwind to markets this year.

We pruned or sold out positions, especially in areas that had strongly performed. Such areas included equities perceived to benefit from the AI capex surge, certain suppliers, and precious metals.

Conversely, we have built up positions in fixed income (US Treasury), base commodities (energy), and hedged equity. Your portfolios also have a healthy level of cash that will be redeployed into opportunities as they present themselves. However, we believe it is prudent to be patient.

With regard to Iran, it would not surprise us to see near-term volatility continue over the next several weeks. Fears of a spike in oil and potential negative impact on the economy will grow until we get closer to a resolution of the situation. Historically, near-term spikes in fear have presented buying opportunities. We continue to monitor developments.

As always, please reach out if you have any questions about your portfolio or would like to discuss your investment plan in more detail.

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Investment Update: March 2026 appeared first on AWM.

Times of uncertainty often invite important questions—and meaningful opportunity. As we look back on 2025 and ahead to 2026, we’re grateful to walk alongside clients who choose to plan intentionally and stay engaged.

Why True Diversification and Active Management Matter in 2025 and 2026

2025 was a solid year for U.S. stocks, yet with noticeable volatility in the first half of the year.

Client portfolios, however, extend beyond U.S. equities—and that diversification helped many clients achieve returns comparable to, and in many cases stronger than, broad U.S. markets. Clients benefited from exposure to precious metals and mining companies, which significantly outperformed equities. Select allocations—such as rare earths, uranium, and Japanese small-cap strategies—also contributed positively.

Not every area led. Some alternative strategies (including equity long/short, event-driven, and late-stage venture strategies) were more muted, and crypto ETFs declined.

Our job is to continuously evaluate risks and opportunities across asset classes—and to adjust when conditions change. Since late summer, we’ve reduced portfolio risk in several areas due to stretched valuations, open questions around the durability of AI-driven earnings, and signs of consumer headwinds.

True diversification isn’t about owning more funds. It’s about preparing for different outcomes.

Client portfolios are built to navigate multiple potential environments, including:

• Continued acceleration in AI-driven expansion and productivity
• Potential economic recession, including stress on consumers and housing
• Ongoing monetary expansion and current debasement

Why AWM is Not a Standard Investment Firm

We don’t view wealth management as chasing returns in isolation. Our philosophy centers on a simple truth: “It’s not how much you make—it’s how much you keep.”

That means:

• We evaluate investments after taxes, not before.
• We define risk by its real-world impact on your life, not just by volatility.
• We plan proactively, not reactively.
• We build portfolios around real families and real goals, not generic models.

Your family’s financial well-being deserves more than a mechanical “set it and forget it” approach—or a one-size-fits-all portfolio.

How AWM Helps You Understand What You Really Need

Most investors believe they know what they want—until someone takes the time to ask better questions.

Traditional risk questionnaires (including many online DIY tools) try to reduce a complex life to a handful of data points. They capture some quantitative inputs and emotional reactions to recent market movement, but they rarely reflect the full picture: goals, responsibilities, tradeoffs, and what matters most to your family.

Our approach is collaborative—not just at the start of the relationship, but continuously as life evolves. Family changes, career transitions, business events, health considerations, and legacy goals all shape the right investment decisions.

As a fee-only fiduciary, our structure aligns with your best interests:

• We do not use commission-based products.

• We avoid long-term products that reduce flexibility.
• We design portfolios to serve your life—not a sales agenda.

“The best strategies often feel boring in the moment—and brilliant in hindsight.”

What Set Our Clients Apart in 2025

Clients who stayed engaged—through coordinated tax planning, estate planning, and integrated wealth management—put themselves in a stronger position. Not by accident, and not by relying on outdated models.

They did well because they focused on:

• Purposeful positioning, not passive exposure
• Tax-aware decisions that helped preserve returns over time
• Coordination across accounts, entities, and generations
• A willingness to revisit assumptions and adapt early

In 2025, success depended less on predicting markets and more on preparing for multiple outcomes.

Looking Ahead to 2026

As we enter 2026, we see both complexity and promise.

“Wealth is not built by chance, but by choice—repeated consistently over time.”

If 2025 reinforced anything, it’s that clarity, preparation, and disciplined action still matter—perhaps now more than ever. The families who did best weren’t chasing headlines. They were thinking long-term, planning intentionally, and staying engaged.

As we look toward 2026, our commitment remains the same: to help you navigate complexity with clarity, purpose, and confidence—so what you build can endure.

Thank you for allowing us to walk alongside you.

If you’d like a proactive review of your investment strategy, tax planning, or long-term goals for 2026, please reach out—we’re here to help

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Client Newsletter 1Q26 appeared first on AWM.

As we enter the final quarter of 2025, we find ourselves reflecting on a year marked by both growth and change. Markets have rewarded patient investors, yet uncertainty remains—reminding us that discipline continues to be the foundation of long-term success.

This season also invites reflection on the bigger picture: how we steward what we’ve been given and plan wisely for those who come after us. In this quarter’s update, we share insights on the current investment landscape and explore how thoughtful estate planning, particularly through the use of trusts, can help preserve your family’s legacy for generations to come.

2025: Broader Market Upside Beyond AI—But Stay Cautious

After a volatile start, 2025 has been a strong year for client portfolios. Many investments have appreciated nicely, but we do not want to get carried away. To prepare for potential downside risk, we have made incremental adjustments—rotating into commodities, diversified funds, and cash to help reduce exposure to volatility.

We have also maintained several key portfolio sleeves:

• Commodities: Dedollarization themes, including precious metals and crypto.
• New economy growth: Diversified equity exposures positioned to benefit from renewed investment in America.
• International growth: Emerging and developed international companies with strong growth prospects and attractive valuations.

Beyond T-bills—which we have been gradually reducing—we have avoided fixed income, favoring assets with better upside potential and stronger diversification benefits.

One area that has not performed as well is income and diversification managers. However, we believe these could offer the next pocket of upside for investors.

For example, a fund focused on mergers, acquisitions, and other corporate events recently delivered a substantial low double-digit gain from an investment in a data center—demonstrating the return potential above inflation with measured volatility.

We also see opportunity in a couple of managers that have remained flat during the recent market rally, including late-stage venture capital growth and an equity long-short strategy.

In venture capital, up to half of the portfolio companies have filed for IPOs or other strategic transactions that could drive appreciation. Similarly, a market correction—or even a rotation out of high-flying names like AI into other sectors—might lift valuations for the equity long-short manager.

How Trusts Can Help Preserve Your Family Legacy

Wise families plan ahead—and one of our key roles is helping clients think through how today’s decisions shape tomorrow’s outcomes. Planning how your heirs will receive your legacy is one of the most important steps in a comprehensive financial plan.

For families passing on substantial wealth, trusts continue to be one of the most effective tools available.

1. Potential tax savings

Trusts can help reduce or even eliminate estate taxes that would otherwise erode what your heirs receive. In 2025, Washington State raised its estate tax exemption to $3 million. However, the tax rates above that amount have also increased significantly—now ranging from 10% to 35%, among the highest in the nation. Each state periodically makes changes, and we want to keep you informed when they occur. For many families, this means a larger portion of their estate could go to taxes rather than loved ones.

Proactive estate planning—especially through properly structured trusts—can provide flexibility in how assets are distributed and help manage or reduce the tax burden before it becomes permanent.

2. Protection and flexibility

Beyond tax benefits, trusts offer control and protection. They allow you to set conditions on how funds are accessed, support beneficiaries with different financial habits, and ensure your legacy is used responsibly. For example, you can direct distributions for education, home purchases, or matched income rather than large, unrestricted payouts.

Consider this scenario: a widow with three children plans to divide her estate equally. Two of her children handle money responsibly, but the third struggles with managing finances. The widow worries that a large inheritance could do more harm than good. Through a trust, she can create guardrails that help protect her child’s future. For example, she might:

• Require the child to show proof of income before receiving matching trust distributions
• Allow withdrawals only for specific purposes, such as a home purchase or education expenses
• Set up regular, limited distributions instead of a lump sum

Trusts offer the flexibility to design these arrangements around the grantor’s wishes—passing assets on thoughtfully and responsibly.

With these 2025 changes, the cost of inaction has never been higher. Estate planning is no longer optional—it’s essential. Before making major financial or gifting decisions, seek professional advice. We’re here to help you plan ahead—to keep more of what you’ve worked so hard to build.

We Help You Keep More of Your Money

In today’s complex financial world, pulling the trigger before planning can cost far more than most realize. Every decision—when to sell, gift, convert, or invest—carries tax, estate, and legacy consequences. The real power isn’t in reacting to opportunities, but in anticipating them. For years, our philosophy has remained the same: It’s not about how much you make—it’s about how much you keep. That’s why proactive financial, tax, and estate planning isn’t just smart—it’s essential. At Ambassador Wealth Management, that’s exactly why we’re here—we help you see the full picture before you act, so you can make confident decisions that build, preserve, and protect your wealth for generations.

Sincerely,

Petr P. Burunov
President / Certified Financial Planner™

The post Client Newsletter 4Q25 appeared first on AWM.

Is it possible to keep more of your money—without guessing your way through changing tax laws and market swings? In this issue, we unpack timely strategies for 2025 that blend tax smarts with investment discipline, so you can stay focused on what matters most.

Deductions, Deadlines & Déjà vu: 2025 Tax Changes Unpacked

President Trump signed the One Big Beautiful Bill into law on July 4. While we have initial impressions, it will take time to digest the full implications of this new law on your taxes.

Some changes might bring welcome relief. These include new tax deductions for certain workers who earn tips or overtime, and higher standard deductions for seniors and lower-income families.

Still, many core tax rules remain unchanged—even though the bill passed.

• Social Security income will still be taxable.
• Capital gains rates aren’t going anywhere.

In short, taxes aren’t going away. That’s why using smart tax strategy still matters—and why we’re here to help you keep more of your money.

Depending on how you work with us, there are three main ways we can support you:

1. Tax Preparation
   We help you stay compliant and fully understand this year’s tax law changes. Don’t assume your return will look like last year’s—what worked in 2024 might not apply in 2025.
2. Tax Planning
   If your income is high or varies year to year, we’ll help you plan around potential changes in the law. Many of the new deductions in the One Big Beautiful Bill are temporary and expire after 2028. This affects how—and when—you may want to realize income. We’ll work with you to create a strategy that helps you keep more of what you earn.
3. Tax-Efficient Investment Management
   If we manage your investments, we use several tools to limit the tax bite:
   • We focus on generating “good” income—using tax-efficient vehicles—rather than chasing high-yield sources that create steep tax bills. REITs, annuities, and LPs might look attractive on paper but often come with hidden tax consequences. If you’re retired, those consequences could also raise your Medicare premiums (progressive tax).
   • We use tax loss harvesting to offset realized capital gains—allowing you to reduce short-term taxes while staying invested for long-term growth.
   • We help you choose the right investment vehicles (e.g., mutual funds vs. ETFs or notes vs. funds) to reduce unnecessary tax exposure.

At the end of the day, it’s not what you earn—it’s what you keep that matters most to your family’s long-term wealth. We’re here to help you build smart strategies and give less to the IRS.

Balancing Risk, Reward, and Resilience in 2025

We expected 2025 to bring volatility and opportunity. While some of the specific drivers have taken different forms, the early excitement hasn’t impressed us. Despite serious concerns—like Israel’s strike on Iran—markets are roughly flat for the year.

This return to neutral hides a story. The year began with exuberance, only to fade into a moderate decline leading up to April’s Liberation Day, when renewed tariff fears weighed on markets. Since then, stronger economic data and easing trade tensions have brought us back near where we started.

Economic growth has been more resilient than we anticipated, though interest rates remain persistently high. Infrastructure investment has been a tailwind, while government spending and housing continue to pose challenges. Headline inflation is easing nicely, even as job growth slows.

Following the spring correction, we shifted to a more neutral risk posture. Your portfolio remains structured across three buckets: income, diversification, and growth. Each contains a blend of core holdings and targeted sleeves that seek opportunities in specific sectors and themes.

Income: We continue to favor U.S. Treasury bills. We’ve also included a fund that invests in mergers, acquisitions, and other corporate events, offering comparable or slightly higher return potential with measured volatility.

Diversification: This bucket includes a commodity sleeve—better described as a “paper currency alternative”—with exposure to precious metals and crypto ETFs. It also includes a hedged equity long-short manager.

Growth: In addition to core U.S. large-cap stocks, we’ve expanded our international sleeve. Previously, it focused solely on India, which continues to offer strong long-term potential supported by falling inflation and interest rates. We’ve now added diversified small-cap international exposure.

We also introduced a New Economy Growth sleeve focused on themes benefiting from U.S. infrastructure investment. The bulk of this sleeve is in materials—like rare earths, copper, and uranium—and niche technology opportunities.

Why You Need a CPA and a Fiduciary Planner on Your Side

You’ve already done a lot right—that’s exactly why having a real financial plan pays off. Planning isn’t just for when things go wrong. It’s what makes sure your good decisions compound over time.

You might be thinking, “I already have a CPA.” And that’s a great start. But here’s what a fiduciary financial planner brings to the table:

Tangible Benefits You Might Feel

• More money in your pocket. Strategies like Roth conversions, tax-loss harvesting, and charitable planning might save you tens of thousands over time.
• Risk you can sleep with. Stress-testing your plan might help you prepare for events like a recession or disability—with the right coverage or reserves in place.
• Clarity on big decisions. Questions like “Can we buy the beach house?” or “When can I quit corporate?” might get you real answers, not guesswork.
• One quarterback. Your planner can now coordinate with your CPA, attorney, and investment custodian—so you’re not stuck managing the team.
• A locked-in legacy. Updated estate documents and beneficiary strategies potentially help protect more of your wealth from taxes—especially before the 2026 estate tax rollback.

The Bottom Line

A fiduciary planner doesn’t replace your CPA—they maximize the value of your CPA’s work by coordinating your entire financial picture. The earlier you start, the more strategies you can use and the more compounding you capture.

You already know how to manage your money. Now imagine the results when every dollar has a coach working just as hard as you do.

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Client Newsletter 3Q25 appeared first on AWM.

The first quarter of the year has reminded us how quickly markets—and headlines—can shift. While volatility often grabs attention, we remain focused on the fundamentals that drive long-term success: thoughtful planning, strategic portfolio management, and clear communication with each of you.

In this issue, we share some context around recent market activity, including how we position portfolios in light of new developments. We also revisit some key principles of how we manage your investments—what guides our decisions, what we look for in both risk and opportunity, and how you can get the most value from working with us.

As always, our goal is to help you stay informed and grounded through all market seasons. Thank you for your continued trust and engagement.

Navigating Early April Market Swings

President Trump announced a series of higher tariffs on imports on April 2. The following day China announced retaliatory tariffs. Fears ensued about the impact to consumers and company profits as well as risk of recession. Financial markets disliked the news as US stock indices declined nearly -10% in 2 days. Your diversified portfolios thus far have held up better.

As mentioned in our previous newsletter in January, we approached 2025 with caution, though seeing select opportunities. Over the first quarter, we raised cash and precious metals and reduced equities. Just as in January, we still held concerns on high market valuations and pressures on consumers from sustained high interest rates and inflation (peaking but not coming down fast enough for Fed to cut rates further).

The recent market decline poses risk and opportunity. Earnings estimates for major companies were already declining and could fall further. Hence, valuations have corrected moderately, but it might be early to call a bottom just yet. The first signs of AI overinvestment along with overseas competition have also emerged. Retail investors remain heavily invested in stocks relative to history.

The opportunity might come if interest rates were to decline on a weaker economic outlook and/or fiscal retrenchment. Deregulation and AI growth (indigestion, not famine) might lead to a more favorable outlook next year.  Certain investments might have been excessively penalized given reasonable fundamentals remain.

We are monitoring the situation for both risk and opportunities.

As always, the more we collaborate, the better we can serve you.

Keeping an Eye on Taxes—So You Don’t Have To

April 15 has passed, and most of us would prefer to forget about taxes until next year. While our clients might enjoy that option, we at Ambassador cannot lose focus.

Federal tax proposals continue to emerge from Washington, DC, and we’re also seeing increased activity at the state and local levels. Our job is to stay ahead of these changes and work with you to help minimize their impact on your family—whether it’s related to income tax or estate planning.

How We Manage Your Money

A client recently asked how I manage their investments—especially when markets are unpredictable. How do I decide what to buy or sell, and when?

You may occasionally notice more activity in your accounts. Market cycles can shift quickly, and sometimes we need to be agile, thoughtful, and forward-looking to respond to changing conditions. What worked before might stop working—and new opportunities often emerge.

Behind the scenes, I’m constantly evaluating investments through the lens of your individual goals and circumstances. Every decision we make is personal to your situation, based on the information you’ve shared with us. My goal is always to keep you moving in the right direction, even when the market doesn’t cooperate.

When I manage money, I’m often asking myself these four questions:

• Do you need to draw income from your investments?
• What is your personal comfort with risk?
• What’s happening in the markets, and where might we be headed?
• Are there other unique factors that should influence our strategy?

The more we understand about your full financial picture, the more proactive we can be. Many of our clients have a financial plan in place, which helps guide expectations—both during strong market years and

more challenging periods. If you haven’t gone through the planning process yet, I encourage you to consider it. It’s a collaborative effort that allows us to align more clearly on your needs, and it gives you confidence knowing we’re prepared to respond on your behalf.

Who Gets the Most Out of Our Relationship? (Hint: It’s Not About Account Size)

The clients who tend to get the most value from our relationship do three key things:

1. You engage with us regularly and treat this as a partnership.
2. You share relevant information—goals, changes, or concerns—so we can act with clarity and care.
3. You connect us with your other professionals (CPA, attorney, etc.), enabling us to coordinate strategies on your behalf.

This deeper level of engagement allows us to explore and implement impactful strategies, such as tax-loss harvesting, Roth conversions, or optimizing your Required Minimum Distributions (RMDs). If you’re not already taking advantage of these opportunities, we’d love to talk.

When Communication Slows, So Can Progress

From experience, clients who step back from the planning process often end up feeling uncertain or hesitant. Without a clear plan, it’s easy to let fear and emotion influence investment decisions—often leading to missed opportunities or overly conservative choices.

When we don’t have enough information, we err on the side of caution—even if you might be in a position to take on more risk or act more decisively. We serve you best when we can be proactive and forward-thinking, not just reactive.

What We’re Watching—and Why It Matters

There are always moving pieces—markets fluctuate, tax laws evolve, and economic priorities shift. We’re staying focused on investment fundamentals, diversification, and strategies that can help take advantage of a dynamic environment. We’re also watching closely for areas that may be vulnerable to inflation or interest rate changes, so we can make informed decisions for your portfolio.

As always, the more we collaborate, the better we can serve you.

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Client Newsletter 2Q25 appeared first on AWM.

Happy New Year! As we welcome 2025, we are excited to share some incredible news. Our firm has officially acquired Rodman & Associates, LLC, a highly respected CPA firm in Spokane, WA. This partnership allows us to expand the range of services we offer, bringing even greater value to you through integrated financial planning and tax expertise. We are thrilled about this opportunity to serve you even better in the year(s) ahead!

In addition, we are in the process of rebranding to better reflect our combined vision and expanded services. In the coming months, you will notice updates to our logo, colors, and overall brand identity across printed materials like this newsletter, as well as online through our website and client portal. We’re excited for you to experience this fresh new chapter with us!

2025 Market Outlook: A Year of Volatile Opportunity?

As we look ahead to 2025, we can’t help but reflect on the unique market dynamics of 2024. While many streams typically contribute to overall market returns, this past year, one (or perhaps two) streams dominated. The so-called Magnificent 7 tech companies delivered incredible gains of over 48%, while the remaining 493 companies in the S&P 500 posted a more modest 15%. Smaller stocks, unfortunately, saw even less exciting returns.

Today, these seven companies make up less than 2% of the S&P 500 index by name but hold a staggering $1 of every $3 invested in it—a testament to their outsized influence. Gold also had a strong year, climbing more than 20%, though it plateaued following the November elections as the Fed hinted at pausing rate cuts. In contrast, many global markets struggled, with Europe, China, and emerging markets facing headwinds. Even fixed income saw only modest gains, and energy trended lower.

Looking ahead, could 2025 bring a shift in these trends? As always, there are reasons to be optimistic (the Bulls) and areas to remain cautious (the Bears). Here’s a snapshot of both sides:

Reasons for Optimism (Bulls)

1. AI Investments Continue: Big tech’s spending on AI shows no signs of slowing. The question remains to what extent a broader range of companies actually adopt AI for profitable growth.
2. New Leadership in DC: A fresh administration promises deregulation, lower inflation, and reduced interest rates. Will these changes create meaningful growth despite political challenges?
3. Potential for Peace: Cooling geopolitical tensions in regions like Ukraine and the Middle East might foster global growth, though pressures in areas such as China and Taiwan remain.

Points of Caution (Bears)

1. Valuation Concerns: At over 21 times earnings, the S&P 500 is priced at the higher end of its historical range. Future returns might depend more on earnings growth rather than simply higher prices for the same amount of earnings.
2. Consumer Pressures: High inflation and interest rates put a strain on many consumers. Cracks are appearing in housing, credit, and auto loans. Risk of a weaker labor market might amplify these challenges.
3. Lingering High Rates: Despite the Fed’s pause on cuts, mortgage rates remain elevated. Government borrowing continues to fuel inflationary pressures.

While we approach 2025 with caution, we also see opportunities within this complex environment. Your portfolios remain prudently diversified. They balance traditional investments such as short-duration US Treasury fixed income and US large cap equities with themes such as robotics and India. Additionally, alternative strategies, including equity long-short, commodities, and merger arbitrage, potentially account for a range of possible market scenarios.

Stay Safe: How to Spot Smishing Scams

We want to pass onto you another heads up for protecting your personal data. While we have heard nothing from our clients, Schwab has informed us that hackers are using another scam to target people.

The newest scam attempting to steal client data is called “smishing.” Hackers send clients text messages from international numbers claiming that a large disbursement has been made from their Schwab account. The message asks you to click on a link to verify or cancel the transaction.

Just to be clear: neither we nor Schwab will ever contact you by text related to your money. We would only give you a personal phone call to confirm your identity and permission on any disbursement.

Here’s how you can spot these phishing attempts:

Red Flags:

• International numbers: The texts come from foreign phone numbers.
• Large transactions: They claim an ACH was debited, often in the thousands of dollars.
• Suspicious links: The link leads to a fake Schwab website with a misspelled URL.
• Urgency: The message asks you to reply “Y” and click the link to cancel.

What to Do:

• Don’t click any links: Always go directly to the Schwab website to check your account.
• Report it: Forward the text to phishing@schwab.com and delete the message.
• Add extra security: Enable two-factor authentication and a verbal password on your Schwab account.

Stay alert and don’t fall for smishing scams—Schwab will never send account updates via text from international numbers!

Don’t Overlook Beneficiaries

Life brings change—marriage, divorce, the birth of children, or the passing of a loved one. Keeping your beneficiary forms current ensures your assets go where you intend.

It’s important to remember that beneficiary designations often override the instructions in your will. If these forms are outdated, it can create conflicts and complications. By maintaining accurate beneficiary designations, you can help reduce legal disputes and delays, ensuring assets transfer smoothly without the expense and complexity of probate.

Additionally, specific accounts like IRAs, 401(k)s, and other retirement plans may have tax implications when passed to beneficiaries. Without proper planning, they can create unintended tax burdens. Reviewing and updating these forms regularly can help protect your legacy and provide peace of mind.

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Client Newsletter 1Q25 appeared first on AWM.

With the upcoming election and the year’s reflections ahead, it’s a great time to focus on staying prepared for what’s next. Together, we can navigate any uncertainties with confidence and a steady hand. I invite you to keep reading for some friendly insights into maintaining your financial strategy as we close out the year.

Riding Market Highs and Staying Grounded

As we approach the end of 2024, let’s take a moment to reflect on the role of long-term discipline in financial success. In a strong bull market, especially during speculative bubbles, it’s natural to focus on high performers while overlooking those that may not have kept pace. But these cycles are common, and it’s precisely here that financial discipline becomes crucial for staying on track toward your goals.

If you’re investing with major milestones in mind—like retirement, education, or safeguarding a nest egg—this strategy remains essential. True diversification means maintaining a variety of investments over time. This approach allows for flexibility: portfolios may sometimes emphasize stocks, bonds, or commodities based on broader trends, while at other times, the mix might include alternative investments to adapt to changing opportunities.

Our goal is to help build a balanced, disciplined portfolio, one that provides resilience over time rather than chasing short-term excitement. Diversified portfolios help spread risk, giving your assets a greater chance to withstand market declines and recover sustainably. Though they may not always be as thrilling as the latest “hot stock,” these strategies are designed to support steady growth over time.

Your Financial Plan: Setting a Course for Success

Each word in your financial journey holds weight and purpose. Here’s what we mean by “discipline,” “making your financial plan,” and “sticking with your financial plan”—all essential to achieving your goals:

• Discipline: Our discussions with you are designed to understand your goals and risk tolerance. Your portfolio is a thoughtful reflection of these needs, crafted to support your objectives with sound decision-making as its backbone.
• Creating Your Financial Plan: This plan is your map, customized to support you at every stage of life, whether you’re prioritizing income now or aiming for growth. Our most successful clients maintain close contact, updating us on changes in their lives, so we can adjust as necessary and keep their plan relevant and effective
• Sticking to Your Financial Plan: Staying committed to your plan is key, even when market emotions or outside voices suggest otherwise. The plan should only evolve with significant changes in personal goals, not based on market speculation or social media trends.

Managing Emotions for Long-Term Success

Emotions play a crucial role in our lives, but when it comes to managing wealth, they can sometimes lead us astray. Here’s how we can guard against biases that might impact financial decisions.

• Recency Bias: This is when we place too much emphasis on recent events and overlook both the past and future. It’s common during market highs and lows to think “Why not go all-in on stocks?” or “Let’s pull out of stocks altogether!” But relying solely on recent events can lead to impulsive choices that don’t account for the broader context of financial history.
• Selection Bias: We often hear, “One of my stocks is doing so well; why isn’t my whole portfolio like this?” Selection bias causes us to fixate on top-performing investments while ignoring underperformers, which can skew expectations and lead to poor decisions. In reality, even stellar stocks can’t always be predicted to perform well long-term.
• Emotional Bias: Sentimental attachment, such as the idea of holding on to certain stocks because “my family always held these,” can lead to holding investments based on nostalgia rather than strategy. This can expose you to unnecessary risks, potential losses, or tax issues.

Our Advice for Staying Disciplined

Allow discipline—not emotion, envy, or sensational media coverage—to guide your financial decisions. Here’s a simple checklist to keep your financial goals on track:

1. Stay in Touch: Keep us updated on changes in your needs andgoals so we can adjust your plan accordingly.
2. Focus on Long-Term Goals: Resist the urge to chase markettrends or react to short-term shifts.
3. Diversify Thoughtfully: Make sure your portfolio is aligned withyour risk tolerance and major milestones.
4. Check In with Yourself: Recognize emotional biases and reflect onhow they may impact decisions.

Remember, everyone’s journey is unique. Staying disciplined helps manage these common biases and creates a steady path toward lasting financial stability.

Are Your Roth IRA Clocks Set?

As you set back your clocks for daylight saving time this weekend, consider another time-sensitive matter: your Roth IRA distribution clocks. Understanding these can help you maximize your retirement savings and avoid penalties.

Roth IRA Clock #1: Penalty-Free Distributions of Converted Dollars

When you convert a traditional IRA to a Roth IRA, you don’t face an immediate 10% penalty, even if you’re under 59 ½. However, withdrawing converted funds before five years have passed (and while under 59 ½) could result in a penalty. This countdown starts on January 1 of the conversion year, and each year’s conversion has its own clock. If you’re over 59 ½, this rule doesn’t apply.

Roth IRA Clock #2: Tax-Free Earnings Distributions

This clock affects earnings on contributions or converted funds. To be tax-free, the five-year rule must be met, and you must be at least 59 ½ (or meet certain exceptions). The clock begins on January 1 of your first-ever Roth contribution or conversion and covers all future ones. Contributions and conversions are distributed tax-free first, so earnings are only taxed if you withdraw early.

With an extra hour this weekend, take a moment to review your Roth IRA strategy and ensure your clocks are ticking in your favor.

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Client Newsletter 4Q24 appeared first on AWM.

I hope you are staying cool in our July heat. The second half of 2024 promises to be eventful with the upcoming presidential election. Let’s dive into our updates and thoughts.

Market Outlook: Don’t Get Carried Away with Last 9 Months, Clouds Are Gathering

The market’s rally over the last 9 months has far exceeded expectations.  Yet, most stocks have not participated in this rally.  (For instance, until this week, small cap was flat for the year and well below its peak.)

Some other assets like precious metals have done well due to hopes of interest rate cuts and concern over economic and geopolitical stability.  Traditional fixed income, small cap stocks, and base commodities have not performed as well.

The relevant question is not simply looking at the past, but rather considering what to do now and in the near future?

Particularly for those of you in or about to enter retirement, you cannot afford to simply chase the herd.  Potential red signs are flashing.  As much as we seek returns, we also must guard against risks that could hurt your nest egg.

Concerns we see include:

• Potential turning point on the US economy (US consumer health deteriorating, jobs sputtering, commercial real estate declining)
• The Fed still has not cut interest rates (unclear if inflation is actually improving that much)
• Bubbly market behavior (bloated concentration of market performance in less than a dozen names, speculation in limited areas at the neglect of others, “everyone is in the pool” technicals, valuations extreme for the winners relative to history, though the losers appear much less overvalued)
• Geopolitical tension (US November elections, EU elections portend change)

AI is the one thing powering the market – but there exist some similarities to the Internet rage leading up to the year 2000.  (Does anyone remember AOL or Yahoo?  They were some of the darlings in 1999, but we hardly hear of them today.  That is because new winners emerged.)

As a reminder, after NASDAQ peaked in 2000, it sold off and did not recover for nearly 14 years.  Most of you in retirement (and many approaching retirement) simply do not have that much time for your savings to recover from such a potential drawdown if it were to happen again.

Questions exist as to the ultimate economic returns that most companies would actually get on current AI development.  Cost synergies appear feasible, but revenue growth less so.  Undoubtedly, there are many menial, mental processes that could be automated.  Yet, replacing a human worker with a humanoid robot powered by the state of the art chips is nearly double current employee cost.  Robo taxis are the rage, but the reality is that other players in the auto industry rely on the same data and, thus, over time, competitive advantage gets whittled away.

We maintain a defensive stance while looking for opportunities to grow your portfolio even with risks out there.  Your accounts continue to be invested in a variety of sleeves, including growth, income, and diversification.

What Do I Own in the Income Bucket?

“Why do I need anything but NASDAQ stocks?”  Today they rise, but that is no guarantee in the future they will keep rising.  In fact, especially if stocks become overvalued and/or earnings disappoint expectations, the stocks possibly might even fall.  Just remember the year 2000 followed 1999.  After the decline, it took over a decade for investors to recoup losses.

Except for those with the longest time horizons and most aggressive risk appetite, most of you own investments in the “income” bucket.  (Recall in the last newsletter that we discussed the “diversification” bucket.)

The Income bucket is designed to allow you to clip coupons by being paid interest, yet with potentially limited (up or down) appreciation on your principal.  The Income bucket functions to fund short-term needs for cash and potentially stabilizes the total portfolio when volatility rises and risk markets decline.

US Government T-Bills are the primary exposure in those of you with the Income bucket.  Low duration (less than 2-year maturity) and minimal credit risk (US government) along with a mid-single-digit coupon offer potentially attractive risk-adjusted returns.  The greatest risk to returns on T-Bills is the possibility and extent to which the Fed decides to reduce interest rates in response to a weaker economy.  Lower interest rates mean lower (but not negative) returns on T-Bills.  In fact, a cut in interest rates near-term benefits the value of your principal.  However, the bad news is that future yield on new T-bills is lower.

Our hunch is that the Fed might make a moderate cut in rates over the next 18-24 months if and as the economy continues to weaken.  However, we doubt it brings us back to the near zero rates of pre COVID; fiscal spending and debt are at much higher levels.  Lower interest rates might also add gasoline to the fuel of a possible resumption in inflation.

For the most part, we have avoided buying bonds with high duration or credit risk.  (A few accounts with high cash needs might own some highly rated corporate bonds in limited amounts.)  Risk of inflation and economic weakness coupled with low rates relative to the risk one takes in owning the bonds keeps us cautious.

While not officially part of the Income bucket, one mutual fund strategy might provide slightly higher returns with a risk profile similar to fixed income.  This fund utilizes an event driven strategy (officially classified in the Diversified bucket).  We described it briefly in our last newsletter, but here is a brief description.  Roughly 2/3 of the strategy is merger arb, where the fund buys the securities (equities or bonds) of a company that has announced it will be acquired.  The fund hedges its exposure by selling short the equity of the buying company.  These trades tend to be low return but low risk and mostly short term (3-6 months).  The other 1/3 of the strategy is classic event driven, where the fund conducts a variety of short-term strategies around corporate events (one example might be announcements on investor days, where the fund might purchase both calls and puts to anticipate a strong stock reaction positive or negative).  The fund does not generate income in the literal sense.  Yet the fund’s strategies potentially result in low volatility similar to traditional fixed income with the potential for higher returns (and lower correlation to the direction of interest rates).

Keep Your IRA Beneficiaries Up to Date

Why Beneficiary Forms Matter

You’ve spent years building up your IRA, watching it grow, and perhaps even rolling over funds from a company plan. But have you thought about what happens to your IRA after you die? Many people mistakenly believe their will controls who inherits their IRA. In reality, the beneficiary designation form you filled out with your IRA custodian determines who receives your IRA funds.

Completing and Updating Your Beneficiary Form

When you set up your IRA, you named primary and contingent beneficiaries on a beneficiary designation form. This form decides who gets your IRA if something happens to you. It’s crucial to update this form after major life changes, like marriage, divorce, or the birth of a child, to ensure it reflects your current wishes.

Regular Reviews Are Essential

Regularly check your beneficiary form to make sure it’s accurate. Clear identification of all beneficiaries and their shares is vital. If the form is missing or outdated, update it immediately. Problems can arise if the form is lost due to bank mergers or other issues. Completing a new form now can prevent complications later.

Take Action Now

To protect your hard-earned IRA funds and ensure they go to your intended heirs, keep your beneficiary designation form updated and accurate. Regular reviews and updates can prevent legal battles and ensure a smooth transfer of assets to your loved ones.

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Client Newsletter 3Q24 appeared first on AWM.

As the vibrant spirit of spring blooms around us, we’re thrilled to reconnect with you in this quarter’s newsletter!

Investment Update: Enhancing Your Diversification

Just because the S&P 500 is close to all-time highs does not mean everything else is.

We remain concerned about inflation, interest rates, and market valuations.

To be cautious does not mean we are passive.  We have made some additions to your investments in liquid alternatives as well as commodities (what we call “diversified sleeve”).  These investments potentially offer opportunity for principal growth and diversification outside of traditional stocks (“growth sleeve”) and bonds (“income sleeve”).

Depending on your account’s risk/return profile, you might have exposure to some or all of these liquid alternative investments (daily pricing, and in all but one case, daily liquidity):

1. Equity long/short fund that takes limited exposure to direction of stock markets. This fund seeks to make returns on buying cheap companies with strong market positions and cash flows and hedging by selling shares in overvalued companies with deteriorating balance sheets.  Returns can be volatile, particularly in markets that lack trend or narrowly-focused rallies.  Longer term, the fund has had a positive long-term track record due to strong stock selection despite various headwinds (growth stocks outperforming value, momentum stocks continuing to be bid up beyond fundamentals).
2. Corporate event driven fund that consists of 2 strategies: (1) merger arbitrage, the majority of the fund, seeks to profit from the completion of announced corporate mergers and acquisitions, typically by going long the acquisition target selling at a discount to the announced price and shorting the stock of the acquiror, which nets to limited exposure on absolute direction of stock markets, and (2) special situations, the minority of the fund, seeks to profit on idiosyncratic opportunities. Examples might include buying/selling options around investor days, special dividends, and other situations.  Taxable clients have the potential to benefit from limited capital gains distributions as this fund was inherited from a previous manager’s strategy that generated meaningful tax loss carryforwards.  While this is a lower volatility strategy than other of your investments, principal can go down if certain deals break up or trades in the event driven strategy do not work out.
3. Late state venture capital fund that invests in private companies with sales of over $100mn and potentially further rapid growth. This space has lagged public markets since the peak of the venture capital bubble in 2021, yet the companies in the portfolio have continued to grow, in some cases turning profits, and secondary market liquidity has also increased, providing more transparency for valuations.  Future catalysts for appreciation might come from a rise in mergers and acquisitions (larger public companies or other funds buying the fund’s underlying companies), further financing rounds for future growth, and IPO’s into the public market.  Investors with longer time horizons (years) potentially benefit from the only public vehicle with a daily NAV.  Risks include economy and specific risks to any of the fund’s nearly 100 company investments.  The fund also has limited windows for redemption.  (Accordingly, it is a modest allocation to portfolios with more aggressive risk appetites.)
4. We have also begun a position in a managed futures fund that invests across multiple asset classes based on technical price factors. Times of macroeconomic and political uncertainty, including trending inflation and interest rates, potentially might offer bouts of volatility to traditional asset classes, but they might also provide opportunity for managed futures managers to shine.  Managed futures managers take positions long or short on equities, bonds, commodities, and interest rates depending upon their views of price and other technical trends in the markets.  Low volatility driven by low inflation and interest rates was a significant drag on performance for many funds in the last decade, but we believe the times might be shifting in favor of managed futures.  Our specific manager invests in an index meant to replicate the returns of some of the world’s leading managed futures managers.
5. Additionally, we have maintained meaningful exposure to commodities (precious metals, broad based commodities including energy, agriculture, metals). Recently, we have added small positions to cryptocurrency and gold miners.  These all potentially benefit from rising government debt, uncertainty in inflation and interest rates, and geopolitical risk as well as loss of confidence in the US Dollar globally.  Supply shortages in certain commodities offer a further potential catalyst.  The main risk would come if the US Dollar regained credibility at the expense of alternative currencies.

Beyond Price: Nourishing Your Wealth and Future

Let’s talk about family wealth management. It’s not just about numbers and transactions; it’s about values and relationships.

In the media, there’s a lot of talk about whether financial planning and family wealth management is all about the price. Some suggest that the cheapest option is the best because all you need is a basic portfolio and no personalized service. But that’s like saying all you need for dinner is fast food.

We see things differently. We understand that each family is unique, with its own goals, dreams, and challenges. That’s why we offer personalized advice and services tailored to your specific needs.

Our approach is about more than just investments. It’s about building a long-term relationship that extends beyond the numbers to include your family and your future. We’re here to help you stay on track and avoid costly emotional decisions that can derail your financial goals.

So, while others may offer quick-service solutions, we believe in serving up a gourmet meal—a comprehensive plan that nourishes your financial health and empowers you to live your best life. Because when it comes to your wealth and your family’s future, value matters more than price.

Maximize Your Financial Management with Our Online Portal

Are you taking full advantage of your online portal? It’s a powerful tool at your fingertips. Here’s what it offers:

• Consolidated Financial Overview: Link external assets and liabilities to easily track all your finances in one centralized platform.
• Personalized Planning Tools: Tailored features to assist in your financial planning journey.
• Comprehensive Reporting: Access various reports related to your AWM accounts effortlessly.
• Data Collection Tools: Streamline your financial planning process with tools designed to gather relevant information.
• Secure Vault: Safely store and access AWM reports, upload documents for sharing, and maintain a private documents folder.

If you need help setting up your credentials, logging in, or navigating your online portal, please contact Debbie.

Looking Ahead: Proactive Planning for Your Financial Future

As we bid farewell to another tax season, it’s a fitting moment to shift our focus forward. My most successful clients recognize the value of planning and have peace of mind in knowing that they are taking care of their financial health.

While tax season may be behind us, the opportunity for strategic planning lies ahead. Don’t wait until the year’s end to assess and make crucial decisions. Now is the time to be proactive and set the groundwork for a prosperous retirement.

Whether it’s mapping out investment strategies, optimizing tax efficiency, or safeguarding your legacy, our team is here to guide you every step of the way. Remember, true wealth isn’t measured by how much you earn, but rather by how effectively you preserve and grow what you have.

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Client Newsletter 2Q24 appeared first on AWM.

Happy New Year! I hope you had a wonderful Christmas season.

Our Strategy Remains Defensive

We have been fairly conservative since late 2021. It served portfolios well in 2022 and entering into last November, it also helped.

Market valuation was high, and earnings estimates outside of a few names (AI) were flat to declining. Inflation was declining but nowhere close to dead. The economy was being heated by fiscal spending, but other signs (declining financial stocks, consumer, small cap) pointed to a weaker economy. The Fed had been tightening consistently through the fall.

And then, the Fed cried, “Uncle!”

Fed Chairman Jerome Powell trumpeted the end of Fed hikes (at least for a while), which markets interpreted as the beginning of rate cuts.

Other stocks started to wake up. Bond yields turned lower. Commodities got a bid.

Does this now mean “the Fed is our friend” and the bulls keep running into 2024? Will the AI gold rush continue? Will it automatically spread to the other 493 (or 1993) stocks? What about international stocks?

Part of our job is not simply to make a forecast, but also to weigh risks (up and down). Some of the factors we analyze across different assets include:

• Fundamentals (Are earnings estimates believable? How much can earnings actually grow? How much are we paying for those earnings/growth? What is supply/demand for the asset class?)
• Technicals (What value do past prices and volumes tell about the future? What is their current message? Where are major players such as large institutions, retail, quantitative strategies positioned?)
• Macro (economics mainly, politics secondary).

Not to play the Grinch or Scrooge, but we remain skeptical.

How much will the Fed cut rates?

We don’t know. What we do know is this: if the Fed cuts rates too much, the inflation genie potentially might get new life. Supply constraints in a number of commodities along with robust government spending provide a potentially potent cocktail to revive inflation. (For this reason, it would surprise us to see rates go back to the lows of a decade ago, unless we are in a far worse crisis than what markets discount now.)

If the Fed cuts more slowly (or does not cut), risk assets might not be pleased especially coming off the strong “Santa Claus” rally we have just seen.

Additional potential risks include catch-up effects of higher interest rates on a weakening economy. The Fed continues to provide extraordinary amounts of short-term liquidity to regional banks (which is scheduled to run out in March 2024 – will it be renewed?). Jobs and industrial activity have clearly lost momentum. The housing market is mixed with new homes edging along, but existing home sales are stagnant.

Potential political volatility might come from geopolitical tensions (Mideast, Taiwan) or the election cycle (though many presidential elections have brought good returns to markets, tensions around 2024 might unveil unexpected surprises and volatility).

Overseas, Europe continues its stagnant path. While many emerging markets were early to hike rates and might seek to cut them, much depends on what the Fed does in the US. China still faces severe challenges in its overbuilt and leveraged real estate market.

Regarding the AI theme, no doubt it has validity. The question is how sustainable the cycle is (and who are the beneficiaries). Remember the Y2K cycle, which helped stoke a boom in technology capex and a roaring market in 1999, only to come crashing down the next couple of years. Additionally, will today’s winners be tomorrow’s winners? It might take more than just a year to sort the issues out.

Your portfolios generally remain defensively positioned. (Accounts with longer time horizons and less need for liquidity are invested more aggressively in the event this rally is more sustainable than what we expect.) They include cash-equivalents with meaningful yield and minimal credit and interest rate risk (T-Bills), alternative strategies less reliant on market direction, and a light allocation to traditional equities (mainly large cap US and modest exposure to emerging markets) and commodities.

It’s Up to You to Protect Your Family

Each of you is in a unique situation. Depending on where you fall on the retirement timeline, we can offer some recommendations to potentially help you preserve your assets, grow your investments, and keep up with inflation.

1. Retirement: You Are Retired. Set aside time to review your Trust documents. In seasons of high inflation and rising prices, you potentially might position your assets to mitigate estate taxes that your heirs might otherwise pay more of. The key in this stage is income, tax & estate planning.
2. Preparation: You Are Getting Ready to Retire. As you prepare for your upcoming retirement, ask yourself if your investment accounts are working for you and if your business or real estate holdings are positioned to prepare you for retirement. The key in this stage is income & tax planning.
3. Accumulation: You Are Establishing a Career. Establish a good, working budget to understand where your money is going. Think about ways to increase your savings, maximize retirement account contributions, invest in real estate, and/or work on paying down debts. The key in this stage is budgeting & saving.

We have and will continue to keep you informed about what we are doing with your portfolios to prepare for these challenging times ahead.

TD Ameritrade to Schwab Transition: Dual From 1099s

Those who transitioned from TD Ameritrade to Charles Schwab in 2023 will be receiving two Form 1099s:

• One from TD Ameritrade—for pre-conversion reportable activity
• One from Schwab—for post-conversion reportable activity

Delivery will be based on your paperless preferences for Form 1099s. If you are enrolled for paperless delivery, you will receive a notification when your tax forms are available on SchwabAlliance.com, or you will receive tax forms via mail if you have selected to receive paper statements.

If you have any questions about your tax forms, please let us know!

Maximizing & Reporting Roth IRA Benefits

If you missed your 2023 Roth IRA contribution, you still have time. The deadline to contribute for 2023 is April 15, 2024.

Surprisingly, there’s no need to report Roth IRA contributions on Form 1040; the custodian handles it on Form 5498. Though not required, tracking contributions is wise for future distributions.

Contributions are tax- and penalty-free, but using converted funds may incur penalties. Use your tax preparer or software to monitor contributions, aligning distributions with tax-year contributions to maintain their status. Ideally, wait until retirement age for qualified distributions, maximizing the tax- and penalty-free benefits of a Roth IRA.

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Client Newsletter 1Q24 appeared first on AWM.