Wealth Management Blog | WrapManager | Doug's Quiz Corner (4)

Tax Aversion – Doug’s Quiz Corner

Posted by Doug Hutchinson | CFA®, Director of Research and Trading

March 9, 2016

Quizmaster, Doug Hutchinson, has come up with another great quiz for us regarding how tax aversion can sometimes lead investors to make sub-optimal investment decisions.

Good luck!

Consider this scenario:

Your friend Jeff owns a mutual fund worth $100,000 in his taxable account. Jeff has been considering selling the mutual fund and replacing it with a similar investment with lower fees (and, therefore better projected net of fees returns). However, Jeff is leaning toward not selling his mutual fund because his cost basis on the mutual fund is $75,000, so selling it would create a taxable gain of $25,000.

ETF Tracking Error – Doug’s Quiz Corner

February 10, 2016

Quizmaster, Doug Hutchinson, has come up with another great quiz for us regarding the factors that may cause the performance of an ETF to differ from the performance of an index. [+] Read More

Human Capital and Your Investment Portfolio - Doug's Quiz Corner

January 13, 2016

Quizmaster, Doug Hutchinson, has come up with another great quiz for us regarding the potential effect of human capital on your investment strategy. Good luck! [+] Read More

Conjunction Probabilities and Behavioral Finance – Doug’s Quiz Corner

December 16, 2015

Quizmaster, Doug Hutchinson has come up with another great quiz. This month, he demonstrates how cognitive bias can influence our perspectives and decisions. Good luck! Consider the following scenario: Laura is a recent graduate of UC Berkeley where she majored in English and Environmental Studies. As a student, Laura was very concerned with social justice issues and environmental issues. She is an avid reader and a vegetarian. Indicate which of the following cases is most probable? Which case is the least probable? A) Laura works in the banking industry B) Laura works as a librarian C) Laura works as a librarian, takes yoga classes, and is a member of the Sierra Club D) Laura works in the banking industry and is a member of the Sierra Club [+] Read More

Leveraged ETFs - Doug's Quiz Corner

November 18, 2015

Quizmaster Doug Hutchinson has come up with another great quiz that explores the compounding effect of leveraged ETFs. Let’s see what the math has to say. [+] Read More

Harvesting Losses - Doug's Quiz Corner

October 13, 2015

Quizmaster Doug Hutchinson has come up with another great quiz that explores the effect of harvesting losses. Let’s see what the math has to say. Good luck! First, a definition of tax loss harvesting. Tax Loss Harvesting is the practice of selling a security that has experienced a loss. By realizing, or "harvesting" a loss, investors are able to offset taxes on gains. The sold security may be held in cash or replaced by a similar one (keeping in mind wash sale rules), to help maintain the optimal asset allocation. [+] Read More

Advisor Fees and Mutual Fund Expenses - Doug's Quiz Corner

September 16, 2015

Quizmaster Doug Hutchinson has come up with another great quiz that explores advisor fees and mutual fund expenses to consider when choosing an advisor. Let’s see what the math has to say. Good luck! Consider the following scenario: Sam, Frank, and Kathy use different financial advisors. Each financial advisor has a different fee structure. Sam pays a flat fee of 1% to his advisor. There are no other fees associated with his account. Frank pays his advisor a fee of 0.9%. The advisor invests Frank's assets in a mutual fund with an expense ratio of 1.6%. Kathy pays her advisor a flat fee of 0.75%. Her advisor invests Kathy's assets in a mutual fund with an expense ratio of 1.25%. [+] Read More

Pre-tax or After-tax Retirement Investment? - Doug's Quiz Corner

June 17, 2015

Quizmaster Doug Hutchinson has come up with another great quiz that explores pre-tax and after-tax options for retirement investing. Let’s see what the math has to say. Good luck! [+] Read More

Adding an Asset to Your Portfolio - Doug's Quiz Corner

May 13, 2015

Quizmaster, Doug Hutchinson, has come up with a great quiz that illustrates how adding an asset with higher volatility can actually lower overall volatility of a portfolio. Let’s see what the math has to say. Good luck! Consider this scenario: Your friend Mary has a portfolio consisting of one asset, Asset A. She is considering adding a second asset to the portfolio and her new portfolio would be weighted as 50% Asset A and 50% of the new asset. She would like the new two asset portfolio to have the lowest risk (as measured by standard deviation) possible, given the other options that she is considering adding to her portfolio: Asset B and Asset C. [+] Read More

Volatility and Wealth Accumulation - Doug's Quiz Corner

April 15, 2015

Quizmaster, Doug Hutchinson, has come up with another great quiz for us regarding how volatility can affect wealth accumulation. Let’s see what the math has to say. [+] Read More

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