Blogs KNG Banners

Proper allocation in your investments can save you millions…

Blog

Asset allocation is the most important concept in the world of investments. There are numerous studies that confirm this, showing that asset allocation accounts for more than 90% of investment returns. In a nutshell, asset allocation seeks to find the balance between risk / benefit throught portfolio diversification.

This balance is achieved by adjusting the percentage of different assets (stocks, bonds, cash, etc.), adjustments are made depending on your risk tolerance, objectives, and investment time. The classic "60 / 40" model is a real life example, it consists of allocating 60% in stocks and the other 40% in bonds. This model is widely used by many financial advisors and institutions. However, we yse a more diversified portfolio at KNG International Advisors.

Nuestras carteras están conformadas por nueve clases de activos: acciones, renta fija, bienes raíces, mercados privados, Bitcoin, altcoins, metales preciosos, coleccionables y efectivo. Aunque con la extrema volatilidad que hemos presenciado en los últimos años en los mercados tradicionales de bonos y acciones, nuestros asesores financieros e inversionistas están utilizando las inversiones alternativas para mejorar la diversificación de sus carteras. Esta amplia diversificación es una de las razones por la que nuestra cartera de KNG International Advisors ha conquistado el mercado a largo plazo. Como verán, la asignación de activos es nuestro ingrediente secreto…

«…con la extrema volatilidad que hemos presenciado en los últimos años en los mercados tradicionales de bonos y acciones, nuestros asesores financieros e inversionistas están utilizando las inversiones alternativas para mejorar la diversificación de sus carteras.»

Dominion Capital

Por ejemplo, pensemos en 3 carteras tradicionales: (40% renta variable / 60% renta fija; 60% renta variable / 40% renta fija; 80% renta variable / 20% renta fija). Podemos obtener una reducción de volatilidad y una mejora de la rentabilidad anualizada al añadir una asignación del 30% a inversiones alternativas a cada cartera.

Al diversificar tus activos, puedes generar múltiples flujos de ingresos a partir de activos seguros como bonos y acciones que pagan dividendos… para después tomar parte de esos ingresos seguros para apostar en activos «asimétricos» como criptos y mercados privados. Estas jugadas «asimétricas» le permiten lanzarse a tomar riesgos más alto sin poner en riesgo su estilo de vida actual.

Asset allocation is a strategy that every serious investor should use, but, there is also a complementary strategy that you may not know about. This complementary strategy could help you reduce your taxes on any profits made from asset diversification. You can use this information and strategy in your favor when it is time to declare your taxes next year.

«Dónde» inviertes también importa…

The complementary strategy that I referred to earlier is called asset placement, which consists of placing assets in the most tax-efficient account types. This constantly overlooked strategy focuses on tax minimization, since you can take advantage of the tax code and owe less taxes when the money is eventually withdrawn. In simpler words, different types of investments and account receive different tax treatment.

Generally, from a fiscal point of view, to put less efficient assets (like bonds) in retirement accounts. And from a fiscal standpoint it also makes sense to place more efficient assets (such as stocks) in taxable accounts. If you pay close attention to placing assets between your taxable and retirement accounts, it can be financially rewarding.

Here's an example of how financial planning educator Michael Kitces' asset placement strategy works

Digamos que un inversionista tiene $500,000 en una cuenta de corretaje sujeta a impuestos y $500,000 en una cuenta de jubilación individual (IRA), la cual le permite diferir los impuestos hasta que se jubile. El inversionista planea tener acciones en una cuenta y bonos en la otra… un modelo de asignación de activos 50/50. El inversionista también planea mantener estos activos por un periodo de 30 años.

Tomando esto en cuenta podemos ver que así se desarrollaría cada escenario de asignación:

KNG Int. Advisors
  • Los bonos se quedarán en la cuenta de corretaje y las acciones en la IRA.
  • Con base a los números anteriores, el valor futuro después de impuestos de los $500,000 en bonos retenidos durante 30 años en la cuenta de corretaje sería de $1,508,736.

Durante ese mismo periodo de 30 años, las acciones en la cuenta IRA crecerían sin impuestos hasta que el inversionista las retire. Cuando eso suceda, el valor de las acciones después de impuestos será de $6,543,526. Entonces, al final de los 30 años, el inversionista en este escenario vería un rendimiento total después de impuestos de $8,052,262 — una ganancia del 705%.

Ahora veamos como se compara con nuestro segundo ejemplo de asignación… Acciones en la cuenta de corretaje y bonos en la IRA.

Based off the numbers above, the future after-tax value of $500,000 of stocks held for 30 years in a brokerage account would be $7,490,996. Over that same 30-year period, the IRA bonds would grow tax-free and their value after taxes would be $1,620,728.

Al finalizar los 30 años, el rendimiento total después de impuestos de estas inversiones sería de $9,111,724 — una ganancia del 811%. ¡La diferencia es de más de 1 millón!

This additional after-tax income came solely from the strategic location of investments between accounts with different tax consequences.

How can I minimize taxes on my assets?

If you really want to improve your net worth, you must follow an asset allocation strategy.

Smart investors can do even better by adding "asset location" to their asset allocation strategy.

Remember, asset allocation and placement are strategies that might not work for everyone. You should be aware of your specific situation. If you are unsure about where to place specific investments, consult your broker, advisor, or tax professional.

Free financial advice with KNG International Advisors

Si te interesa saber como puedes incorporar la colocación y asignación de activos a tu cartera de inversiones, contáctanos para una asesoría gratuita…

Contact Us
el-oro-ya-no-es-necesariamente-tu-aliado-al-momento-de-invertir

Your best ally against inflation?

Blog

(And it's not necessarily gold)

A little over 50 years ago, Richard Nixon, who was the president of the United States at the time, decided to cut the dollar's link to gold. This turned the US dollar into a fiat currency, meaning that it would no longer be backed by assets but by the government that issues it. And what did this mean? That, from that point on, US dollars could be printed at will. There were no more restrictions on how many dollars could be in circulation in the economy.

Inflation was mild for many years, but it has reached a point where it has begun to increase. To give us a better idea, in February of this year, the Consumer Price Index in the US showed an increase of 7.9% compared to the same month in the previous year. Gas, food, and practically everything we consume is more expensive today compared to the previous year. And all of this is the result of massive money printing.

The Federal Reserve's balance sheet reached $8.9 trillion dollars during the COVID-19 pandemic. It was a massive printing of money, and unfortunately these actions will have drastic consequences. In these cases, inflation acts as a "stealth tax". This means that as the value of our dollars decrease, so do our savings, and our purchasing power slowly sinks.

La inflación actua como un

Whether our money is sitting in a bank or hiding under a mattress, the reality is that with all of this going on we aren't getting any returns on our cash, which pushes us to look for ways to fight inflation. As investors, we look for ways to invests in assets that grow at a higher rate than inflation... How can we shield ourselves in an economy with so much inflation?

Does gold really protects you from inflation?

Traditional wisdom says that if we want to invest, we should buy gold. For the longest time, gold was seen as the best investment, as an asset that would protect us from inflation. Let's be honest, even I used to think that way...

The Obama administracion printed $10 trillion dollars over the course of eight years. If we combine all the amounts of money printed during all the administrations in the history of the United States... they do not exceed the massive amounts printed during that period.

Trillions of printed dollars...

In 2004, the markets were still recovering from the dot-com bubble burst. The Federal Reserve cut down the Federal Funds rate from 6.5% to less than 1%. Similarly, the yield on US Treasury bons fell from 6% in the year 2000 to a little over 3% in 2003. After the Great Financial Crisis in 2008, the Federal Reserve reduced interest rates to almost 0% again, and as a consequence the returns on income-generating assets collapsed. Low rates tend to be bullish for precious metals, asinvestors typically buy gold when returns on income-generating assets fall to the level of inflation.

At the same time, the US government launched a series of money printing programs. In late 2008, President George W. Bush signed the Emergency Economic Stabilization Act (EESA) for $700 billion dollars, in order to "bail out" the banks. Then, in 2009, President Barack Obama signed the American Recovery and Reinvestment Act for $787 billion dollars, which increased the federal deficit by hundreds of billions of dollars. In fact, the federal deficit during the first Obama administration was more than $1 trillion dollars each year, marking the first time in US history that the federal deficit exceeded $1 trillion.

These excessive levels of debt happened four years in a row. As I mentioned before, during the 8 years of the Obama administration, more than $10 trillion dollars were printed, an amount that had never been printed even if all of the administrations in the US history were put together. The low interest rates and unprecedented levels of federal debt were an incredible boost for gold.

After $10 trillion of printing by the end of the Obama administration, the value of gold only went up about 40% ($1,200 usd per ounce), so this sent a very clear message: the value of gold wasn't going to reach $10,000 usd per ounce; if a massive and unprecedented printing of money didn't make it reach this value, nothing was going to do it. Now, it's up to each investor if they want to invest in gold, but based on our research, we don't recommend it.

Durante los 8 años de la administración de Obama, se imprimieron más de 10 trillones de dólares. Si esta impresión masiva y sin precedente de dinero no logro que el oro disparara su valor, nada lo hará.

"The value of gold wasn't going to reach $10,000 usd per ounce; if a massive and unprecedented printing of money didn't make it reach this value, nothing was going to do it. "

 

2022's best inflation hedge

They key is to invest in sectors and companies that are growing far faster than inflation, so they can outperform the markets and generate substantial income. This raises an obvious question... At this time, KNG International Advisors is looking into a number of unrelated assets that can generate returns above inflation in the coming years, protecting investment portfolios against a possible recession.

Si te gustaría saber más al respecto, no dudes en contactarnos. Nos gustaría darte una asesoría gratuita para explicarte como equilibramos la asignación de activos para las carteras de nuestros clientes.

KNG Intl. Advisors offers free financial advice

No dudes en comunicarte con nosotros para una asesoría gratuita, en la cual se te da un análisis completo y opciones personalizadas para tu portafolio.

Contact Us Speak to a Financial Advisor
planeación-educativa-para-tus-hijos

What is the cost of a college education, and why should I start saving up?

Blog

What does the hard data show about college education costs..?

As parents, it's natural for us to think about our children's future.When we visualize their future, what do we see? Watching them getting a college education and graduating is probably one of the first thoughts that come to mind. At some point have you started to analyze how much does a college education cost? Let us present you the average expenses for college students in Latin America:

In Mexico, pursuing a college degree with an average duration of 4 to 5 years costs around $40,538 USD, and this is without taking into consideration additional living expenses (such as housing, food, transportation) that are around $10,386 USD per year.

In Chile, a college education costs an average of $36,588 USD and to that we still have to add living expenses such as rent, food, utilitis, transportation... which are on average $10,068 USD per year.

Now, if you wish to study abroad (in the US, for example), a college education costs an average of $228,271 USD , and living and school expenses add up to an average of $25,200 USD per year.

We also have to point out that college education costs increase by an average of 7-8% each year, double the rate of economic inflation! You're probably wondering what's the reason for such a rapid growth, these are some of the main reasons:

-Nowadays there's a higher demand for access to a college education than there was in the past.

-There are not enough open spots in the universities for the number of students who enroll each year, nor are enough schools being built to keep up with the demand.

-Most of the top universities are private, and by being businesses, they seek to maintain or increase their profits.

Without a doubt, a post-secondary education is a heavy expense, and for that same reason, what better than planning in advance so that once we have to face this expense, we have enough capital and we can avoid falling into debt, sell our assets, or even deny any opportunity to our children due to the lack of resources.

How can I prepare myself for this expense?

In this case, you definitely have to save, but, what is the smart way to save? If you are one of those who usually keeps their money under a mattress or in a piggy bank, you may want to reconsider your saving methods. If you are saving for the long-term, you have to remember the effect that inflation will have on your future cash savings. Your money will not have the same value or purchasing power if you simply stash it for years and years... so what is the best way to make the most of your money?

An educational savings fund is a tool that allows you to make periodic contributions that will go to a savings fund, during the saving period your funds will grow according to inflation and eventually once your children reach the age of attending college, they will have that savings fund that has been accumulating for several years to pay for their school expenses. Just like in a retirement plan, time is your bestally in this type of plan. The sooner you start saving, the lower your monthly contributions will be and you may even reach your savings goal sooner than expected.

Where do I start?

The first step is to take financial advice, since each person's situation is different. There are several factors to take in consideration to find the plan that best suits your possibilities and goals. Remember that at KNG International Advisors we offer free consultations. Do no hesitate to contact us to schedule yours!

If you would like to know more about this, we invite you to try our educational fund calculator.

 

The best time to start planning your children's future is today.

Now that you have a better idea of what educational savings funds are and how they work, the first step to start a fundamental financial project for your family's future is to take professional advice.

Try our KNG educational savings fund calculator

It is an educational savings fund calculator, which will give you estimates based on the information you provide and will help you estimate the capital you must accumulate to be able to pay for your children's education in the future. (You can access it by clicking the button below)

Educational savings fund calculator

Free financial consultation with KNG International Advisors

Do not hesitate to contact us for a free consultation, in which you will be given a complete analysis and personalized options for retirement or other heavy expenses, such as educational expenses for your children.

Contact Us
Speak to a Financial Advisor
Blogs KNG Banners

How much should I save for my retirement and why should I start saving now? 

Blog

Some hard facts about how mexicans prepare for retirement...

Today, in Mexico there are 128.9 million people, of which 57.7 million are economically active, and 60% of them do not have a retirement plan. This means that, around 34.6 million mexicans who are part of the economically active population do not have savings or a defined plan for when they are older.

According to results from a survey carried out by the AMAFORE, 72% of those interviewed have not made plans to retire from work. Another survey carried out by this same institution also indicated that 48% of mexicans do not feel responsible for thei retirement (that is, they plan to rely on their children or they think that the government aid they will receive will be enough to survive), 9% believes that saving will facilitate their retirement, and only 1% recognizes that saving is necessary to have a decent life upon retirement. 

How do I prepare for a good retirement? 

There are many factors that can influence a good retirement, for example: good medical insurance, savings, being debt-free, etc. But without a doubt, a retirement plan is a fundamental tool to help us be prepared and to have financial freedom without being tied to a job.

What is a retirement plan?

A retirement plan consists of regular savings in long-term diversified investments. Its purpose is to create enough assets to cover all retirement expenses. You start this savings plan when you're young for a stipulated period, that is, from the start date of the plan, until reaching the age at which you want to retire.

Contributions are normally made on a monthly basis, they are invested in formal savings instruments that offer annual growth on the investment and the retirement plan is calculated in such a way that at the end of the investment period, whoever owns it can generate income from life from accumulated assets. This is with the purpose that, once you reach old age, you can replace the monthly income you would usually get from working a job and to maintain the same standard of living without any type of concern. 

What is the first thing I should know if I am thinking of starting a retirement plan?

  1. If you want to start a retirement plan, we recommend you set a goal of making a monthly contribution to this plan. The contribution will vary according to your specific saving abilities, that is, according to your income, expenses and specific objectives, there vary depending on each client: for this reason the plan must be tailor-made for you, covering your and your family's needs.
  2. It is very important to establish a goal at the beginning to be able to measure and adjust that contribution during the saving period. You don't want to fall short and not have the time to make up for it! 
  3. At KNG, we always recommend that before investing in any instrument you contact your financial advisor. If you do not have one, KNG's main service is to offer you a free consultation to ensure that the investments you make are in line with your investor profile (avoiding any type of future decapitalization).

It is a reality that the cost of retirement is getting higher and higher and the numbers do not lie. If we put it in perspective, our retirement costs are much more than our house mortgage...

Neil Emberson – CEO of KNG International Advisors

How do I benefit from a retirement plan? 

  • Compound growth: It is a long-term savings in which all profits are reinvested, so the longer you leave your money working, the more exponential your growth will be.   
  • When the savings period ends, we recommend withdrawing the net income from inflation and leaving the capital invested. For example, if inflation is on average 2% per year and our growth is 8%, we will withdraw the difference, 6%. This allows that the 2% that we are leaving in our retirement plan helps our capital and assets to continue to grow in parallel with inflation. If we do this, our annual income will grow proportional to inflation. 
  • You will enjoy your retirement the way that you want, without having to worry, depend on relatives or government aid, among others. 

How do I start my retirement plan? 

You have to take into consideration certain factors that will help you choose the plan that best suits your needs: 

  • Age at which you wish to retire - The sooner the better in order to maximize the effect of compound growth. 
  • Your life expectancy -Along with a realistic estimate of the amount you need monthly to cover all your expenses.  
  • Consider the inflation -And have an idea of where you plan to spend your retirement, since depending on the place you choose to live, your money will last differently. 

Below, we will show you a savings projection of $500 USD per month assuming an average annual growth of 8% in different terms, in a globally diversified portfolio. The strategy and risk profile of the investment is according with your age and your preference. As you can see, profits are more considerable if the savings term is longer. 

This table shows projections, they are not guaranteed amounts. Assuming that the investment portfolio grows 8% annually during the savings term and then during retirement.

Now that you have a better idea of what retirement plans are and how they work, the first step towards starting a fundamental financial project for your future is to take professional advice.

 

Try our KNG Retirement Calculator

Our retirement fund calculator will give you esstimates based on the information you provide and will help you get an estimate of the capital you must accumulate in order to retire comfortably. (You can access it by clicking the button below)

Retirement Calculator

 

Contact Us
Speak to a Financial Advisor