Investment Update – With Pet Photos!

Puppy Mary Sanderson by Hillary Adams

Every quarter we review our investment portfolios and make adjustments as needed. Ever wonder about the WHY behind the WHAT? Here’s how we think at Deep Creek.

Step 1: Invite Outside Perspectives

You see the value in gaining an independent perspective and have asked us to help you invest wisely. We follow our own advice and work to make informed decisions well.

This quarter we requested investment review meetings with two respected asset managers and met with each during the month of September. We reviewed each individual fund, how each fund fit into the broader portfolio, and looked for opportunities to increase the quality of your investments. We found several.

Step 2: Sleep On It

After taking in an outside perspective it’s important to return to the core principles we base our investment philosophy on. This helps us avoid being swayed by those outside perspectives and is similar to the practice we regularly encourage clients to follow: sleep on it.

We review the costs and benefits of each choice we’re considering making, we look for alternative ways to solve any perceived problems, and we take the time needed to make quality decisions.

A recent decision we made was to ask you for help finding a picture of your pet showing us all what it means to “Sleep On It”. Thank you for your help and for all 269 Comments across our page and two local discussion groups! We weren’t expecting to spend the weekend moderating a plethora of pet photos, but it sure was fun!

Zach Thomas from the Deer Park group came in 3rd.

Walter & Candi Kachnik from the Deer Park group came in 2nd. The cat really startled us!

And Hillary Adams from the Chewelah group came in 1st by introducing us to a very cute puppy, Mary Sanderson.

Step 3: Final Checks

Before making any actual changes to portfolios we look at how each change will impact each client. Our goal us to avoid unnecessary taxes and keep everyone’s retirement paychecks still heading their way on time.

And while you may never meet him this is Ryan Z’s time to shine. Ryan is the trading specialist on the Deep Creek team and works remotely from Western Washington. To make sure that Caleb stays focused on your top priorities Ryan steps in to handle all the portfolio rebalancing. Ryan has been in his role for 3 years and helps run a local children’s community theater in his free time since he enjoyed participating in it so many years ago.

October’s Results

With that in-depth and month-long process in mind, what changes are we making?

  1. We are swapping our International Debt ETF out for a Mutual Fund focused on investing in the same regions and areas of the market. Our goals are to increase the quality and lower the risk we’re taking in this area of the portfolio using the differences between these two investment products.
  2. Given the changes in Fixed Income these last 2 years we’re adding an ETF designed to add diversification and move part of each portfolio from Corporate Bonds to Mortgage-Backed Securities.
  3. We lowered the Cash holding of each portfolio from 2% to 1% as this still allows for plenty of liquidity while ever-so-slightly increasing the opportunity for growth.

These are the updates we’ve made to the investment portfolios most of our clients use, but what about our faith-based investors? We follow a similar process for their Biblically Responsible Investment portfolios. No changes were needed this quarter. We do invite you to join us on October 30th for a webinar where we hear directly from Colby Smidt at Eventide Funds on their process for Values-Based Investing.

The Deep Creek Difference

We believe that implementing strategies to grow your wealth create more opportunities for you and your family to make a meaningful impact on the world. Wealth comes from owning businesses and making informed, long-term investments.

Our approach is simple yet powerful: diversify wisely, minimize costs, and always think ahead.

We guide you through the accumulation and distribution phases with tailored strategies that keep your goals in focus—whether it’s building wealth or living with the confidence of a well-stocked War Chest. By avoiding unnecessary taxes, and aligning your investments with your values, we strive to help you grow your financial future without the confusing jargon (except for the confusing jargon we put in these investment updates ABOVE which we give you full permission to ignore completely and the legally required jargon below).

Investing in mutual funds involves risk, including possible loss of principal. Fund value will fluctuate with market conditions, and it may not achieve its investment objective. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. ETFs trade like stocks, are subject to investment risk, fluctuate in market value, and may trade at prices above or below the ETF’s net asset value (NAV). Upon redemption, the value of fund shares may be worth more or less than their original cost. ETFs carry additional risks such as not being diversified, possible trading halts, and index tracking errors. Mortgage-backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

Winning The Tax Game

What’s certain? Death and taxes. What’s up to you to control (to some degree)? When you die and how much you pay in taxes. Tax planning is crucial for your financial independence and is how you go from losing to winning the tax game.

Tax planning isn’t just about looking through the rear window and writing down what happened (many tax preparers focus solely on the past); it’s about strategically managing your finances to reduce tax liabilities and increase your savings as you look forward through the windshield to where you want to be five, ten, or forty years into the future.

Here are a few times tax planning is essential:

Legacy Planning:

  • Thinking about your family’s tax burden over multiple generations helps clarify which strategies to pursue – and when. Do you have kids or grandkids? How will this legacy impact their taxes?
  • If you have room in your tax bracket (your financial advisor can help you know) then consider Roth conversions* to help your heirs receive a blessing, not a tax burden.
  • Have you moved across state lines since you last created or updated your will or trust? If you’ve moved across state lines, or plan to, make sure your financial advisor reads through your estate documents.

Just last year I spotted a $300,000+ tax time bomb for someone who moved but didn’t update their estate plan. Their estate attorney didn’t catch that – they didn’t have the tax training.  The CPA didn’t catch that – they didn’t even ask to look at the estate documents.

Investment Strategies:

Tax-efficient investment strategies can help you grow your wealth faster by reducing the taxes you pay on investment gains. High interest rates means you’re likely collecting more taxable interest on your savings. Have you asked about options for tax-free interest? Do you need to?

Retirement Planning:

Don’t just diversify your investments, diversify your taxes. Retirees who have choices on which kind of account to pull distributions from appreciate the flexibility to monitor their taxes year by year. But this doesn’t happen by accident – plan now to diversify your taxes in the future.

A few weeks ago I suggested someone tweak their savings strategy. By adjusting which account their savings are going into they’ll save over $20,000 in taxes during the next several years.

This August take a step towards preserving your financial future by considering your tax planning strategies. Here’s to winning the tax game and your financial independence!

*Roth Conversions Disclosure: Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.