Responsible Investing Redefined · Tax-Smart 🌎ESG Direct Indexing

Published Articles & Quotes:

Sustainable, Social-Impact Investing: Does it Pay Off?

July 26, 2018

“Most investors believe there is a trade-off between one’s values and one’s investment returns. This is left over from the days of overpriced investment products”
“Historically, on average, socially selective funds underperformed the market for the same reason other name-brand, actively managed funds did: high fund expenses,” said Jason R. Escamilla, CEO of Impact Labs in San Francisco
Socially selective funds were a niche market that required a marketing & sales budget to attract investors, he explained.

Using investments to make a difference
Mass Mutual, July 2018

“I don’t know WHEN to buy stocks, but I know WHETHER to buy stocks.”
‑Warren Buffett

August 30, 2018
Warren Buffett on CNBC interview:

“We’re buying stocks this morning.”
“…considerably more attractive than fixed income securities”
“…stocks generally — they’re businesses; they’re American businesses: $30 trillion worth of ’em — and they look cheaper than…generally, real estate”

Still Sitting on Cash? Here's the #1 Chart…

November 22, 2016

Cash levels in the U.S. are extraordinarily high -- still!
Just focus on the 'cash' buildup and where it is likely to go next.
Interest on cash deposits: CDs, money market, etc. does not even keep up with inflation -- still!
You, quite possibly, could miss the next big run for U.S. stocks as that cash gets invested.
This unprecedented level of dry powder can help absorb the inevitable shocks to stocks, potentially providing downside protection.

2019 Update: Real-time 'cash' as % of GDP: St. Louis Fed's M2/GDP.

⚠️ Spoiler Alert:
it's back above 70% of GDP!

The dry powder/sideline cash is still there, unlike previous market-peaks.

The Highest Tax in the English-Speaking World is in this U.S. State

February 23, 2017

When you graduate to investing money held outside of your IRA/401(k), it’s a whole new ball game — taxes matter.
Californians give up, in taxes, as much as 1/3 to 1/2 of each year’s interest, realized stock and bond gains, etc.: 'short-term investment income'.
Only France and Denmark have a higher long-term capital gains tax than California’s 33%+ (of the 35 OECD nations).
Most investment strategies are optimized on something other than after-tax profit…the same about most investment products on the market.
You can build wealth faster and with less risk by being tax-smart.

Know your tax rates. Make better financial decisions: TaxImpacts.com

Warren Buffett's Advice on Market-Timing for Investors

December 15, 2016

Sitting in cash is essentially market-timing when done outside of a proper long-term financial strategy.
Market-timing, as an investment strategy, is a very difficult one to defend -- for both amateur and professional investors alike.
“Trying to time the market” is the #1 mistake to avoid.

“People that think they can predict the short-term movement of the stock market — or listen to other people who talk about (timing the market) — they are making a big mistake”

- Warren Buffett -

“I have never known anyone who could consistently time the market. And in fact I've never known anyone who knows anyone, who was able to consistently time the market”.

- Burton Malkiel -

Pitfalls of Robotically Investing in Bonds

August 29, 2017 (2.098% yield)

10-year Treasuries are a bad investment right now.
You can expect to lose value over time, after taxes and inflation.
Taxes matter; inflation matters.
A well-constructed investment portfolio needs to take into account current expected real returns and not robotically follow outdated, and thus unrealistic, portfolio allocation assumptions from a different era.

Treasury Bond ETFs are still in the red since this article: iShares 7-10 year Treasury ETF chart

As yield goes up; price goes down. The yield on Treasuries hit a post-election low (2.02%) within a few days of this article and since has crossed 3%

“When you’re looking to park taxable cash, there are smarter places than a money market fund”

Jason Escamilla, CEO of Impact Labs, said “municipal bond funds in a high-tax state like California are relatively more desirable after tax reform. This is because marginal tax rates can be higher and fewer people get hit with AMT after tax reform.”
He cited this example: “Married, two kids; $430,000 of income, no deductions and (after taxes)

you keep less than 48 cents on the dollar in money market interest/dividends.”

“And don’t forget about the Fed’s 2% inflation target over time: expect a 2% inflation hit,” he said.
“A higher-yielding 2.5% money market fund rate does not even beat inflation once you get into a meaningful tax rate, e.g., making enough to cover the cost of a family today. Even in an IRA, you will eventually have to pay the tax man in nearly all scenarios.”
“When you’re looking to park taxable cash, there are smarter places than a money market fund,” he said, noting how meaningful it was to avoid standard interest tax rates in California and other high-tax states.

Municipal bonds: The antidote for those retail investors on a low-SALT diet

The Bond Buyer, March 2019

“you can stack the deck in your favor for retirement by having time on your side,”

“Time is a special thing...”
“...you can stack the deck in your favor for retirement by having time on your side ,” says Jason Escamilla, chief investment officer of ImpactAdvisor in San Francisco.
“...putting a long time horizon on your investment planning.”

Making One Smart Move as a New Grad Can Set You Up for Financial Independence

Acorns+CNBC, June 2019

“With Apple, you have a well-run growth company with extraordinary profit margins at a reasonable valuation...further de-risked when you consider...”

Jason Escamilla, Chief Investment Officer with San Francisco based ImpactAdvisor, says, “With Apple, you have a well-run growth company with extraordinary profit margins at a reasonable valuation.”
“As a long-term investment, it is further de-risked when you consider the company's demonstrated preference for buying back shares over pursuing low-margin and higher-risk growth.”
Apple has repurchased nearly $73 billion of its own stock over the past four quarters.

12 Stocks You Should Never Sell
Kiplinger, Dec. 11, 2018

Through May 1, 2019 Apple was up 30%+ YTD; +25% since the Dec 11.

Ten years after 2009: S&P 500 is 4x; international markets have only doubled

Since 2009 "the S&P 500 has roughly quadrupled, while the MSCI All Country World ex-US, measuring international markets, has only doubled, he noted.”
“Meanwhile, the strength of the US dollar this year has been painful for US investors who allocated overseas,” Escamilla said.
"More accommodating monetary policy and lower valuations in the international markets present an attractive opportunity” -Jason R. Escamilla, CEO of ImpactAdvisor

IndexIQ launches international ETF, eyes smart-beta ETF expansion in 2019
Fund Intelligence, Dec. 13, 2018

“Factor investing essentially distills what’s been the largest driver of the performance”

Jason Escamilla, CEO and Chief Investment Officer of ImpactAdvisor, said.
It’s everything that the industry wants: they all want something shiny, something interesting to sell, and this is a cost-efficient way to do it that also works well with the ETF structure.”

WisdomTree hires Vanguard’s quant PM to lead active multifactor ETFs
Fund Intelligence, Nov. 15, 2018

Why 2018 is not like 2008

No, we are not always bullish on the market

“No doubt (in 2008) I was very bearish on the market, launching a short-fund most of 2008.”
"Today, our economy and corporations are among the most efficient in the world. The number of blatant signs of excess pales by comparison with 10 years ago.”
"Meanwhile, the social effects from 10 years ago cannot be underestimated… Lehman and Bernie Madoff left individual investors highly skeptical."
"The new visceral skepticism today helps keep the industry in check."

A Decade After Lehman's Collapse, Some Say It Can Happen Again
Bisnow, Sept. 11, 2018

“What's your edge over the person selling to you?”

"As an investor, you have to ask yourself, if you are getting into bitcoin today: what's your edge over the person selling to you?" Escamilla says.
"Simply looking at a chart showing the price rise is not enough,"
For bitcoin or any competitively traded second-hand asset like shares of publicly traded companies.

Should I Invest in Bitcoin and Blockchain Technology?
U.S News, Nov. 13, 2017 (~$6K/BTC)

“This provides a margin of safety or potential for better resale value at some point in the future”

"Escamilla says the current 8% discount is greater than the fund’s 12-month average discount.
"This provides a margin of safety or potential for better resale value at some point in the future, he says."

8 Best Municipal Bond Funds to Buy and Hold
U.S News, May 9, 2019

The superior model in High-Performance Wealth Management is 'human + machine'.

It's not a question of 'human vs. machine'.
As with Freestyle Chess, the superior model in High-Performance Wealth Management is 'human + machine'.
"Human advisors have a good sense of the value of their client's time and when to make the call," says Jason R. Escamilla, CFA, CEO and chief investment officer at ImpactAdvisor in San Francisco.
"When tax reform passed last year, days before the year's end, we were able to save our clients thousands of dollars each with tax-smart, last-minute action items. There was no iPhone app making those phone calls."

How AI Will Change Investing
U.S. News, Oct. 16, 2018

“Being emotional is not an edge in investing.”

For Jason Escamilla, CEO of ImpactAdvisor, a wealth management firm that focuses on values-based investments, emotions and money are inextricably linked, as values-based investments are often driven by emotional responses to causes.
For example, an investor may choose not to invest in companies that he or she sees engages in practices detrimental to the environment.
But "…Being emotional is not an edge in investing," he said.

The Newest Metric for Financial Success: Customers’ Emotions
Tearsheet, August 2017

Tax Planning for High-Tax-Bracket Individuals

Jason gives an overview of the tax considerations professionals should consider and what can be done to help.

MIT Sloan School of Management, Dec. 2018

Non-profits Get a Raw Deal in this Tax Bill

December 31, 2017

Mainstream philanthropists and non-profit organizations drew the short straw.
If you regularly make an impact with philanthropy, but otherwise, you have few deductions, you may have lost your tax deduction from donating, especially if you are married.
If you are married, in 2018 you get a $24K standard deduction just for breathing.
If single: $12K.

NOTE: Tap here for the fastest marginal tax calculator on the Internet. Within seconds you can estimate your tax benefit from charitable gifting in 2018: TaxImpacts.com

Next 24-hours: make up to 30%+ with this ‘trade’, after-tax.

December 31, 2017

At ImpactAdvisor, we’ve been busy all week with tax-optimization.
The #1 action item: topping up your estimated state income taxes before year-end.
Our clients who took this advice expect to save thousands of dollars, each.
In some extreme cases, if you underpay $10,000 in state income taxes before 2018, you will have missed out on $3900+ in federal tax savings.

NOTE: Tap here to fastest marginal tax calculator on the Internet. Within seconds you can estimate what Tax Reform did to your estimated 2018 tax bill: TaxImpacts.com

Will 2018 be the Year of the Crypto Asset Class?

November 28, 2017

The unleashing of professional sales & marketing for crypto-based investment products over the next few months will make 2018 The Year of the Crypto Asset Class.
It’s anyone’s guess when and at what level this bubble in bitcoin will burst.
The last thing I’d want to be right now is short bitcoin.
With a good sales & marketing team just about anything can and will be sold; especially a sexy new asset class.
Nonetheless, with respect to bitcoin, I still believe, as quoted in Forbes this month: “The price level and energy usage are unsustainable. There is far better technology emerging to meet the same needs.”

NOTE: 2.5 weeks later BTC had doubled to more than $19,000/BTC before trading below $7,000/BTC 2.5 months later.

“But it is anybody’s guess what inning. It looks to me like we’re well ahead of the 7th-inning stretch.”

"But it is anybody’s guess what inning. It looks to me like we’re well ahead of the 7th-inning stretch,” said Jason R. Escamilla, CEO of ImpactAdvisor, an investment advisory firm in San Francisco.
“The price level and energy usage are unsustainable. There is far better technology emerging to meet the same needs.”

Beware Of The Bitcoin Bubble: Investment and Financial Advisors Warn
Forbes, Nov. 4, 2017 (~$7K/BTC)

Leveraged ETFs: “few investment professionals understand the risks over time”

In fact, "very few investment professionals understand the risks over time, let alone retail investors and people in the media," says Jason R. Escamilla, CEO of ImpactAdvisor. These risky investments don't work the same way as typical funds and magnify losses exponentially.
When you understand the math, leveraged ETFs (e.g +/- 3x) generally perform as expected. The main problem lies in how poorly understood leveraged ETFs can be, relative to properly executing one’s long-term investment strategy.
The #1 reason these are generally poor long-term investment products is that their daily rebalancing can cause a lot of “buy-high, sell-low”. Over time they will tend to lose the battle against volatility.

Leveraged ETFs Are a Loser's Game
U.S News, April 18, 2018

“We view crypto-investing as driven by the greater fool theory...”

"We view crypto-investing as driven by the greater fool theory of investing or speculation, and we genuinely mean that in a bullish way for now," says Jason R. Escamilla, CEO of ImpactAdvisor, a wealth management firm in San Francisco