You should not look at the stock market to make you wealthy. You should think of the stock market as a place where your wealth can be protected and grown if managed prudently. Over $1 trillion in value has been lost in Cisco Systems, Microsoft, and Intel. Very few people have actually created their personal wealth solely by investing in the stock market. Most people create their wealth through their personal initiative and hard work. No matter how you create your wealth, it is important to protect, grow, and manage it to meet your goals.

We have a unique mix of financial and estate planning services. Our goal is to identify and understand our client’s goals and assist them in protecting and growing their assets. Our emphasis is on formulating comprehensive family wealth and investment plans to avoid excessive market risks and the burden of taxes.

The following are just a few ideas to consider. Before implementing any strategy, you should check with your advisor.

Stock Losers
If you have substantial losses in any stock in a taxable account, you should consider selling it to “bank” the capital loss and put up to 50% of your loss back in your pocket. You can repurchase it 31 days later or immediately buy something similar to replicate the position.

Capital Gains
In this volatile market, many investors have tried to hold onto stocks for a few more months just to get the long-term capital gain tax rate. In so doing, they have often seen their stock price fall more than the tax savings would have been. Don’t let the “tax” tail wag the “investment” dog.

Re-pricing Stock Options
Many companies are considering re-pricing their stock options so that their employees are not so far out-of-the-money. While this may be great for the employees, it can really hurt the company’s P&L. Instead, consider canceling the options and issuing stock for notes.

Acquisition Bailout
Many key employees of companies with depressed valuations or cashflow concerns are hoping for a quick buyout to pop their stock price up. While this may appear to be a windfall, it often triggers costly “golden parachute” issues for key executives.

Covered Calls
Whether your large holdings are up and you’re worried they might go down, or they’re down and your not sure how quickly they’ll recover, consider writing covered calls on them to take in fat premiums. For example, January 65 2002 calls for Amgen currently at $63 will pay you $12 per share. This 19% current return caps your upside at $77 and protects you down to $51 per share.

Private Wealth Management takes control of your financial situation and creates a strategy to insure that your wealth is not squandered by taking speculative or unnecessary risks. We work with our clients to understand their goals and then create and manage a complete portfolio. We take care of business, which to us is protecting and growing your money. If you’d like to understand the difference that professional wealth management can make, please call 805-495-4405.

Published in Westlake Magazine – April 2001