Monthly Insights Newsletter: February 2023

Pat’s Planning Post

2022 Retirement Account Contributions
There is still time to make IRA contributions for 2022. We often will suggest making back-door Roth IRA contributions for those who are unable to make direct contributions to Roth IRAs. Remember, you must have earned income to contribute to personal IRAs (Roth or Traditional) for the year in question, and there are income limits that dictate deductibility and eligibility. If you have savings you’d like to contribute for 2022, please reach out to me with any questions, and we can review what’s best for your situation.


Liebmans’ Library

In this section, which we call Liebman’s Library, Matt Liebman and Sam Liebman will share 1-2 articles or charts per month that caught their attention related to the Investment Markets. When Matt was in Elementary school, he would walk into his room and find newspaper or magazine articles about sports, politics, business, or markets that Sam had cut out for Matt to read. The tradition has continued for over 30 years.

For this month, an article from the Wall Street Journal caught our attention. The article highlights some of the recent performance trends of newly added and newly removed components of the Dow Jones Industrial Average. What interested us most about this article is what it indicates about index construction. There is a concept called “Passive Investing,” which usually refers to investing one’s assets in an index of stocks and holding for the long term. While we are big believers in the benefits of indexation, we do not think it’s fair to characterize any portfolio as truly passive. For starters, the decision to put all of one’s money into one index is just that, a decision.
Actually, the process could be better described as a series of decisions – What index should I track? Which fund or ETF tracks it best? How low is the cost? Should I own only one index? – to name a few. Further, the construction of the index itself can take on many forms from committee-based to quantitative rules-based and many others. Again, we are NOT anti-indexation – we use index-based solutions for our clients regularly. Instead, we are pointing out that all investment actions made by individuals, institutions, and advisors are, in many ways, active decisions.