Wrap fees are the industry's method for monetizing inactive accounts. It is an annual fee intended to cover all account charges. Wrap fees specifically exclude portfolio management or advisory services. The fee primarily covers all trading commissions, and provides enhanced reporting and access to research. Historically, 80% of a broker's commissions are derived from 20% of his or her clients. Wrap fees change that reality as every account, active or inactive, generate

Unfortunately, over twenty years or so, the $1 million cost for many is no exaggeration, much of it is hidden by rising markets and lost appreciation. If you understand one thing about risk, this should be it. Click on the Fee Illustration that I have prepared and print it out. I used an 8% straight line growth rate and a 4% ($40,000/yr) withdrawal rate on a $1 million dollar portfolio over 20 years to illustrate. I am saving commentary for later posts but the facts are c

If you currently receive monthly distributions from an equities portfolio or fund through an automatic withdrawal plan, chances are you're doing just that! By today's standards 4% annual distributions seems to be the limit for sustainability of a portfolio. The dividend yield on the SP500 is 1% leaving a 3% annual cash shortfall. That shortfall is made up through monthly share liquidations regardless of performance. Look at it this way, automatic withdrawal plans liquidate

"Volatility" refers to the propensity of a stock or index's market growth rate to diverge up or down from its average growth rate over time. Assume for discussion that the SP 500 has an average growth rate of 10% with a standard deviation of 15%. Standard deviation is a principally a portfolio measurement; it is both added and subtracted from the 10% average return to determine a likely outcome range. In this example, an investor can anticipate performance ranging in any s

"Sequence Risk" or "Sequence of Return Risk" applies to equity accounts burdened by fixed distributions. If Negative or even flat returns occur in the early years of withdrawals, long-term sustainability of the distributions will be permanently impaired. In short, lose money early and you will run out of money years before you planned. This is called Sequence of Return Risk and it only applies to accounts in distribution like retirement accounts. Google the term for broad