Thankful Money Mindsets

November 21, 2017 - Max Osbon (3 mins to read)

Gratitude is such an empowering and satisfying emotion, it deserves more than one day on the calendar. And we have so much to be thankful for, both personally and professionally. This is especially true in the investment world. From the perspective of modern investors, here are three things that we can all be thankful for in the spirit of Thanksgiving.

 We’re thankful…

…for investment abundance

We live in an amazing time of investment abundance. Innovation in capital markets and communication have created near limitless investment opportunities for would-be investors of all sizes.

Brokerages like Fidelity provide instant access to 10,000+ global securities. Aggregators like iCapital and CAIS provide small ticket access – $50,000 minimums – to private equity investments once reserved for the ultra-wealthy. Nearly all of your investment property research can be completed on publicly available services like Zillow. Angel investors can easily form groups and share deal flow or investment ideas. Even companies like Coinbase make it seamless to buy cryptocurrencies via your iphone. The result is that today very few investments are truly exclusive.

…for compound interest

Interest that earns interest. From Warren Buffett to Einstein, wise men hail compound interest as one of the most powerful forces in investing and even call it “the eighth wonder of the world.” They’re right. Allow your interest or investment income to be reinvested rather than paid out and you too will experience this magical multiplying effect. As dividends get reinvested, 100 shares of AAPL turn into 101 shares of AAPL, which produce more dividends in turn. Rinse, repeat and rejoice. When you spend less than you make and avoid tapping into your investment portfolio unless absolutely necessary, time and compounding give your investments space to multiply.

…for the psychology of giving

We are wired to enjoy the gift-giving process. Consider the needs of underprivileged youth, the crown jewel of your city’s artistic identity or a medical group that helped save the life of someone you know. Giving a gift is often more pleasurable than receiving one due to a bond-forming social psychology effect that lets us rediscover that “we’re all in this together.” Giving awakens our instinct for empathy, allowing us to momentarily see the world from someone else’s perspective. Giving creates empathy and empathy creates happiness.

Since we’re rapidly approaching the end of the tax year, it’s a good time to address end of year giving. If you plan to give any larger gifts, anything over $5,000, consider donating taxable assets with large capital gains. When we donate a stock with a capital gain three things happen:

     1. The charity is allowed to keep the full asset value pre-tax.

     2. We can write off that full value against our annual income.

     3. We both avoid the capital gain tax.

AAPL stock has been a favorite for donations over the past few years due to large embedded capital. There are certain limits and the details matter. We’ll go into more detail next week when we write specifically about Charitable Gift Funds. Until then…

Happy Thanksgiving from Osbon Capital Management!



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