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March 26, 2020

It seems we are in the season of breaking records. From severe daily market movements both to the upside and downside along with now record breaking unemployment, each day seems to bring new unforeseen changes. Along with the extreme measures being taken to combat the disease’s spread, we are all experiencing a new sense of isolation. While importantly prioritizing human health, we have in turn had to shut down large swaths of the economy, closing schools and businesses and limiting human interaction. Having to do so makes it unfortunately clear that a global recession is at hand. Yet despite all the turmoil, looking outside of our country and this short period of time, the possible exit for some from all of this is starting to be realized.

The initial impact of the virus in China resulted in their economy beginning a severe decline in late January. Yet with their extreme virus measures, two months later we have begun to see a rebound in key economic indicators such as home purchasing and transportation. Using this Chinese pattern for the US and Europe, we would hope to begin to see a rebound in the economic data for the US and Europe sometime in late April or May. An argument for a possible faster rebound is the aggressiveness of the monetary and fiscal response in the US and Europe. Albeit, an argument for a slower rebound is the lack of willingness in some countries to aggressively contain the spreading of the virus. Nonetheless we have seen a clear demonstration that we can get to the other side of this period of time.

For some time, we have been estimating the likely impacts of the virus’ spread through a number of channels, including reduced trade, restrictions in supply chains, tighter financial conditions, and, perhaps most significantly, social distancing measures. This latter effect is leading to a profound decline in consumer spending in the “face-to-face” sectors of the economy, namely hotels, restaurants, air travel, and related activities. We expect consumer spending in the months ahead to decline at the sharpest pace since at least World War II, with clear impacts to employment.

As shown in the illustration, real GDP is likely to contract in the coming quarter by nearly 17% on an annualized basis. This would mark the deepest quarterly decline since at least the 1950s. This will be a trying time for all of us, and certainly for the U.S. economy.

We expect, however, that this could also turn out to be among the shortest recessions in our history. Importantly, we assume that the need to significantly restrain activity, such as the closure of non-essential businesses, will dissipate by late in the second quarter. Under such a scenario, and with aggressive fiscal and monetary policy measures, we would foresee a rebound in growth in the third quarter to mark the end of this sharp yet short recession.

A ray of light is that, looking over the next ten years, our stock market outlook is starting to improve. The reason? The role that current valuations, which have contracted in the recent sell-off, play in our long-term forecast. Put simply, the price of most equities has become much lower than it had been, giving equities more room to grow before they reach what we’d consider to be their fair value. The theme broadly holds true for ex-U.S. equities. A similar dynamic also occurred in 2009, when the global economy was in a deep recession and stock prices were low.

We are by no means through this chaotic time. As domestic infection rates rise and the ripple of the closure of the US economy continues, we will continue to feel the impact of that in our daily lives. We are however on the eve of one of the largest fiscal stimulus packages to ever be passed and we continue to see new found ingenuity in both monetary and fiscal policy. We hold true to our philosophy that our diversified portfolios serve us in good times and bad, and over time we will see continued growth and a return to better times. We thank you for your trust in our guidance through these historic times.

March 18, 2020

Today we again witnessed a very volatile market as we anxiously await to see what type of fiscal stimulus we can expect, and as the impact from the Covid-19 virus continues to expand.

Attached below we have included a few key charts that we selected from JP Morgan that highlights the importance of diversification, discipline, and the wisdom of investing.

The first slide, Annual returns and intra-year declines, shows that despite average intra-year drops of 13.8%,the stock market has positive annual calendar returns 3 out of every 4 times. The second slide, Diversification and the average investor, shows the impact over the long run of utilizing a diversified portfolio. Please keep in mind that the diversified portfolio shown here is limited to just equities and bonds. Even in that case, holding just 60% in equities and 40% in bonds recovered to previous October 2007 values after the Great Recession in just three years. While at Optivest our clients diversify more broadly than just stocks and bonds. We also invest in REITs, real estate, gold, longevity contracts, and other alternatives. In slide three, Time, diversification and the volatility of returns, illustrates the dramatic trading range portfolios can experience in a shorter periods of time but that those volatile movements actually smooth out when looking over a longer period of time.And lastly, slide four, …but it’s extremely challenging to time the markets, repeats our advice from an earlier article that despite all the negative emotions, bad news and panic behavior all around us, staying fully invested achieves nearly 5 times the return over the panicked investor who sells out of investments and misses 10 best market snap back days and so on.We stand committed to serving you. We want to thank you for your trust and confidence in these perilous time. Never hesitate to reach us with questions and of course we happily accept gifts of toilet paper if you’re in the neighborhood!

Keep well and stay healthy.

March 16, 2020

We know these times create anxiety so we plan to keep frequent communications coming to you as we see events worth reporting on.

This past weekend, The Fed Reserve made another massive rate cut and committed to buy at least $700 billion in government and mortgage related bonds and the Federal Government continues to float ideas of social and economic aid to help offset the yet to be seen effects of the COVID-19 pandemic. This rocked markets today and markets plummeted further as President Trump warned that the outbreak could last until July or August.

The Coronavirus – The market does not like uncertainty but we can see that China and Korea are already improving as the reported cases has flattened in both countries. Both these countries imposed quarantining on the population so we should assume, other countries can contain if they practice the same whether be it government mandated or self-imposed.

The Market – While dramatic moves are very hard to witness on short-term day-to-day basis, what is really important is how our portfolios will be priced a year and more from today.

Our long-running bull market has ended and we have a lot of unknowns that can be solved quickly when transmission stops, treatments prove successful and vaccines are created.

Portfolio Strategy – We are long-term investors by trade and training. Buy and Hold is absolutely proven to outperform picking tops and bottoms. We have long been tweaking our investment models to stave off market correlation and pullbacks. We have durable investment portfolios that are holding up very well and the value of staying invested is that we get to participate in market snapbacks that will indeed occur when we start to see containment progress coming to a state near you.

March 11, 2020

The impact of the Coronavirus otherwise known as COVID-19 continues to rattle market and world confidence. As new developments in the detection of the virus have continued to lead headlines, the result has been the development of an incredibly emotionally charged environment. Beginning last year and into earlier this year, we took pre-emptive steps to de-risk the portfolio including a shift to more large cap domestic exposure over international equities, increased exposure to gold and self-storage, and the elimination of our floating rate bond positions. These moves have positioned us well for the current volatility.

As a reminder, a diversified portfolio is meant to serve you in good markets and bad. The decrease in equity value is mitigated by our counter-balancing non-correlated Longevity contract hedge funds, low correlation alternatives, and high credit quality/short duration bond exposure. And of course, our niche real estate investments are diversified between self-storage, multi-family, limited service hotels, essential high-credit tenant office and retail, and some legacy retail plazas. Again, the diversity of the investments serves as a counter-balance; there may be supply-chain or travel interruptions but debt service is either lower if floating or refinanced in the current low rate environment.

The markets appear panicked but we are certain algorithmic and program trading make markets much more volatile and can exaggerate the feeling of panic. Analysis says US financial stress is at 2011 levels and 2011 was a flat year for the S&P 500 as evidenced in the next graph.

Our philosophy remains unwavering in the need to have a diversified investment strategy. A diversified portfolio is meant to serve you in both good markets and bad. Our diversification edict is to continue to maintain positions in equities, bonds, real assets, and alternatives. As reflected in the graph below, this is not the time to pick the high of the market or the low.

This is the time to hold fast to our durable and diverse portfolio holdings and allow the COVID-19 virus and resulting issues to be resolved. Although we do not yet have an end in sight to the control of the virus, we do know that in time this too shall pass. We remain vigilant and focused on the ongoing changes in the world and will take action and communicate if anything changes our current approach. Please feel free to reach out with questions, we are here to serve your needs.

February 25, 2020

Needless to say, the last couple of weeks have been a rollercoaster in the stock market. Continued headlines about the Coronavirus have stoked additional fear as the world comes to grips with the prospect of this becoming a global phenomenon. Although this creates anxiety for us individually, and the markets based on anticipated effects on business productivity, this is precisely the time that we stand by our investment allocations.

As a reminder, we believe in and are advocates for diversified portfolios exactly for situations like this. A number of other investment advisors believe diversification is achieved by holding equities and bonds. Optivest is advantaged in that we specialize and can include two additional asset classes: Alternatives and Real Assets. Our Alternatives, such as our Longevity Contract funds, exist to not only provide cash flow but to remain completely uncorrelated to the general stock market. Our Real Assets investment, such as our Real Estate holdings, also continue to provide cash flow with a greatly reduced correlation to the general stock market as well. Furthermore, we do not just relegate ourselves to domestic companies; we look at both equities and bonds on a global scale, providing even more diversification.

The sum of our efforts is to reduce volatility and preserve capital, while still capturing upside potential and income. Our diversified strategies have and should continue to provide you confidence that although there will be market swings, over time our disciplined approach will provide more value to you than trying to predict the tops and bottoms of markets.

If you have any further questions, we encourage you to reach out at any time. Rest assured if we do see an event that would change our opinions, we will communicate our strategy and take action.

December 2019

This holiday season, Optivest wanted to give back to our local communities. We partnered with a local charitable organization called Action Angels that identifies families in Orange County in need during the holidays. Optivest was able to sponsor 5 different families that in total represented 45 people. We provided everything from shoes and bus passes to mattresses and of course toys for the children. After wrapping the presents, the Optivest crew delivered the gifts to the families. It was a wonderful occasion of giving that brought joy to our hearts and help to those in need.

March 2019

It is highly likely that in the past you may have been the victim of credit card fraud or some type of identity theft. Fraud is becoming so prevalent, the FBI is overwhelmed with investigations and once you have been scammed, the likelihood of recovering the stolen funds is increasingly less likely. So how can you avoid being the victim of fraud, to begin with?
To start, become aware of how criminals typically gain access to your personal data.

1.) Email hacking through phishing and social engineering
This can occur by allowing fraudulent access to sensitive information such as usernames, passwords, and bank or credit card details by individuals disguising themselves as a friend or trustworthy entity through emails and websites. An example of a potentially fraudulent contact could be something as simple as receiving an email that appears to be from the IRS or even Netflix that asks you to update your personal information. Perhaps you even had a delivery scheduled and are asked to “verify” your information by clicking on a displayed link. All of these could potentially be examples of fraudulent contact and should be reviewed closely before answering.

2.) Impersonation and Identity Theft
In these cases, a criminal uses your personal information to assume your identity for the purpose of committing fraud and other crimes. For example, this can include a criminal impersonating you in electronic or verbal means, or taking possession of your credit and ATM cards, financial statements, and your passwords. Criminals could have gained access to your information after you logged into an app on your phone using a non-secured Wi-Fi spot at the airport or a coffee shop.

Tips to prevent becoming a victim of fraud and cyber fraud:

  • Use only secured Wi-Fi connections and have strong AND unique and passwords on all sites and/or two-factor authentication when it is available.
  • Do not download programs or applications from unknown sources. Run regular virus scans on your computers, laptops, and mobile devices.
  • Deploy spam filters on your emails.
  • Watch for spoof emails that seem very similar to your contact’s email address such as vs daveI234@email. com; look for inconsistencies in language, spelling, punctuation, or even tone can also be frequent clues.
  • Never share your passwords or personal information in public venues or through open email.
  • Shred all printed materials which contain your personal information, account numbers and even signatures.
  • Review your bank and credit card statements regularly.
  • Change all your passwords regularly and keep them in a secure digital system such as LastPass.

If you do fall victim to fraud or cyber fraud, contact all of your financial institutions immediately (credit cards, investment advisors, bank accounts, etc.). Additionally, consider a credit freeze through the main credit reporting agencies: Equifax, Experian, TransUnion and Innovis. The most responsible action, though, is to remain vigilant and work with companies that take your security as seriously as you do.



Optivest – March 2019 Financial Fitness

A Delicate Balance

Did you know the Federal Reserve (aka The Fed) is not a part of the federal government and was created by an act of Congress? Its purpose is to serve the public but when you throw politics and the almighty U.S. dollar into the mix, it can be a delicate balance of power.

Created in 1913 to address financial crises, the central banking system was designed to control the monetary system and help alleviate panics (most notably the panic of 1907) and has three main objectives: maximizing employment, stabilizing prices, and moderating long-term interest rates.

It can create money. It can set the rates that large banks borrow from each other. Every move it makes has reverberations throughout our economy. It commands and wields power. Now, if you’re the president, can you see how you would want to influence The Fed? Job creation, fat portfolios, and easier borrowing; all of this is a winning recipe for the American consumer. And that can translate into a nice memoir and certainly a re-election for a sitting president.

The Fed doesn’t report to the president; however, The Federal Reserve Board (FRB) controls them which is appointed by…wait for it, the president! And here’s where it can get complicated because when you can appoint the Fed board the hope is you will be rewarded by a favorable monetary policy.

In 1972, former President Nixon arm-twisted the Fed Chairman, Arthur Burns, to continue a loose monetary policy during his reelection campaign. As a result, the economy continued to grow but by the 1980s inflation took root and The Fed was forced to sharply tighten policy which led us into a recession. Presidents give the thumbs up to The Fed when things are good but once the economy starts to shift, soften, and weaken they are not quite as gracious. President Trump has recently been more critical than past presidents but make no mistake, he is is only one of a long list of presidents to try and influence monetary policy.

But, throughout its history, The Federal Reserve System has been fiercely independent, and they strive to make decisions based on economics whereas politicians tend to make, well, political decisions. And, as an investor, you want this independence. 

Current Chairman Jerome Powell (a Trump appointee) recently said “We do our work in a strictly non-political way, based on detailed analysis, which we put on the record transparently, and we don’t … take political considerations into account. I would add though that no one in the administration has said anything to me that really gives me concern on this front.”

What The Fed does or does not do can impact your financial objectives, and things can get complicated when it comes to politics, the economy and your investments. At Optivest, we understand we are your portfolio’s first line of defense and your navigator through the high and low tides of the economy. We monitor The Fed’s actions and more importantly, how the markets react to their moves.

We are here to humbly serve you and encourage you to contact us with any questions you might have.

All the Best,

Mark, Bart, Leslie & Stella

1) Do: Focus on your financial plan. Make sure you have a long-term financial plan that focuses on holistic planning. A holistic plan focuses on your ideal life and goals and takes into account your Family Index, which is the pre-determined rate of return needed for you to achieve your identified longterm financial success. 

2) Don’t: Overreact and Lock in a Loss. One of the worst things you can do is sell during a market dip. Too many people make the mistake of buying high and selling low. Selling when your portfolio is down will lock in your loss instead of giving your investments time to recover. Market sell-offs are often followed by rebounds!

3) Do: Understand and Define Your Risk Tolerance. Your risk tolerance can change over time, and if current market volatility is making you weak in the knees, it might be time to reassess your tolerance for risk. Your individual situation, including your age, how close you are to retirement, your long-term goals, and how you are invested are a few factors to consider as you evaluate your tolerance and make portfolio adjustments. 

4) Don’t: Get Emotional Over Your Portfolio. Fear of loss is a normal reaction during market volatility, but don’t panic and let your emotions push you into making hasty decisions. It is important to remember that market corrections and downturns are normal and healthy. 

5) Do: Review Your Portfolio with a Financial Advisor. One of the reasons you have a financial plan is so that you can weather market ups and downs, so take this opportunity to meet with your financial advisor and get a portfolio checkup. Now is a good time to discuss your risk tolerance and re-evaluate your overall asset allocation. A good financial advisor will be able to guide you along a path that minimizes your risk and maximizes your upside. 

6) Don’t: Try to Time the Market. Here is an important phrase to remember: time in the market is what matters, not timing. Far more people have lost money than made money trying to time the market. Instead, stick to your long-term plan and set yourself up for long-term success. 

7) Do: Diversify. Diversification is one of the most important components of investing that helps you reach long-term financial goals while minimizing your risk. Though diversification does not guarantee against loss, it does maximize return by investing in different areas that each would react differently to the same event. At Optivest, we use a four-sector diversification strategy (equities, fixed income, real assets, alternative investments) rather than the standard two-sector (60/40 equities and fixed income split).

We are here to humbly serve you and encourage you to contact us with any questions you might have.

 All the Best,

Mark, Bart, Leslie & Stella

for High Net Worth Families

Strategic tax planning for high net worth individuals and families is not a passive exercise. Reducing your tax liabilities takes careful planning and knowledge of the complex tax system. Failing to consult with a financial expert may result in you paying more than your share, as well as not maximizing your income streams.

Here are three strategies we recommend you take advantage of  (if applicable): 

1. Tax Loss Harvesting: Tax loss harvesting provides a way to improve your after-tax return on taxable investments. It is a  strategy that entails selling securities at a loss and using those losses to offset taxes from gains realized from other investments and income.  Your financial advisor can help you identify investments that have realized gains incurred for the year and find losses to offset those gains. Tax-loss harvesting allows you to avoid paying capital gains tax. If you would like to keep your position in the account, it is possible to repurchase the same investment after the 30-day wash rule expires.  

2. Charitable Donations: With tax rates poised to go down because of the Tax Cuts and Jobs Act, you may get more “bang for your buck” if you give as much as you can this year while you can still deduct under the existing tax rules.  One way to accomplish this is through a Donor-Advised Fund  (DAF). Consider a DAF to be your own personal charitable savings account. For example, you might consider transferring your appreciated securities into a DAF, which would allow you to deduct the full current value of those securities from your taxable income this year. This powerful strategy allows you to take the tax deduction now and give the money away later.  

3. Bond Portfolios: Municipal bonds might not get the same amount of attention as stocks, cryptocurrencies, and other hot assets, however, when allocated appropriately, they can play an indispensable role in a well-balanced portfolio.  If you are currently holding a corporate bond portfolio and need to reduce your tax liability, you may benefit by converting it to a municipal bond portfolio to create a tax-free income stream.

Municipal bonds are always exempt from federal taxes and bonds issued by your home state are double tax-exempt – you will potentially avoid state and local taxes as well. For more detailed strategies that will help reduce your tax liability for 2018, please visit our blog at Take the time to review your tax planning strategies with your wealth management advisor or contact us for a complimentary second opinion. Wealth is built through making smart and informed choices. Optivest, Inc. provides true wealth management with extensive expertise in complex financial issues. Our holistic and integrated approach includes advanced planning for tax efficiency, wealth transfer, wealth protection, and philanthropy.

We are here to humbly serve you and encourage you to contact us with any questions you might have.

 All the Best,

Mark, Bart, Leslie & Stella