Hugh Wynn's Two Cents

While I'm not an investor by profession, I have been curating sound personal financial habits and practicing those techniques since I was a youngster. Although the focus of this blog is on our three youngest generations, I will ceaselessly emphasize to all investors the importance of an early and routine savings habit, a common sense buy-and-hold strategy, a diversified investment portfolio, the wisdom of shunning market timing, and a “stick to your guns” attitude regardless of negative outside influences. I believe it is imperative that you keep your investment strategy simple and your investment costs as low as possible. Like the small investor’s best friend, Jack Bogle, was quick to remind us, “In the fund business, you get what you don’t pay for.”


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past Posts

Pandemic Pins 'n Needles
September 17, 2020
It’s a fair statement to suggest that younger people – Millennials, for example – have suffered some particularly catastrophic economic hardships in recent years.
Dare to be Average
September 10, 2020
Investors – particularly young, inexperienced investors – tend to believe that they can “beat the stock market." At one point, I, too, held that belief. Experience taught me otherwise leading me to develop a taste for the average. Let's discuss the concept of "Daring to Be Average."
Maximize Your Compounding
September 3, 2020
According the experts at Bloomberg Intelligence, the three biggest firms that execute individual investors’ orders traded a combined 69.4 billion shares over the counter in June 2020, more than triple the level from November 2019. This trend encourages me to remind those who follow this blog of the impact compounding plays on the accumulation – or diminution – of wealth.
read more
Don't Hoard Financial Docs
August 27, 2020
Many of us swear that we’re not hoarders, and in many respects, we’re not…until it comes to hanging on to old financial records of all types.
read more
Capital Gains Explained
August 20, 2020
Concerns abound regarding a capital gains taxation upheaval should the approaching November election result in a change in the Washington power structure. The most prevalent concern involves “step-up” rules on capital gains (and losses) of inherited stock.
The Pandemic has Millennials on Financial Pins 'n Needles
September 17, 2020

It’s a fair statement to suggest that younger people – Millennials, for example – have suffered some particularly catastrophic economic hardships in recent years. VIEW VIDEO

Catastrophic Economics

Studies show that Millennials – those born 1981-1996 and now in their mid-20s to late 30s – have accumulated much less wealth than their parents and grandparents had at similar stages in their lives. This could be attributed to those catastropic economic hardships. Case in point is the older group of Millennials whose financial short straws started being drawn during the recent Great Recession that began in December 2007 and ended in June 2009. Having already suffered a less than ideal job market during those years, they and their younger cohorts are now being battered by multiple Covid-19 pandemic torments… if not the virus itself, a job loss, a pay cut, a temporary layoff, a loss of health insurance, etc. “What to do?” they might be heard muttering.

Pandemic Pins 'n Needles

An obvious first thing to do in the instance of job interruption or loss is to determine your eligibility for unemployment insurance, and if eligible, to apply. The CARES Act signed into law in March 2020 provided pandemic-related unemployed workers with an additional $600 per week on top of regular unemployment benefits, but that ended in July and has yet to be renewed by Congress. However, the President signed an August 8 executive action partially restoring the lapsed $600-a-week unemployment supplement. Under this edict, the federal government is providing unemployed workers an extra $300 in weekly payments. Forty-four billion dollars from FEMA’s Disaster Relief Fund is being used to finance the benefit until it's exhausted.

Confronted with job losses, Millennials must consider where they can save the most – perhaps in housing by moving in with family or renegotiating rent or lease payments with a willing landlord. Failing that, it then becomes a matter of prioritizing rent and mortgage payments with groceries, utilities, and other essentials.

If you still have a job but haven’t yet started an emergency fund, start one if at all possible. Rainy Day funds represent a firewall against both unexpected financial challenges and against having to interrupt long-term retirement savings plans.

Debt Conundrum

Along with credit cards and mortgages, many Millennials still face the prospect of paying off those pesky and burdensome student loans. Because many lenders have programs to help debtors address financial difficulties, now is the time to discuss “revised” payment options with them. If student loan deferrals or mortgage refinance opportunities are available, resultant savings might be redirected into a Rainy Day fund. Whatever you do, don’t fail to address these financial problems head on. To those fortunate enough to have long-term savings, if possible, avoid raiding these valuable retirement accounts to pay off debt. But don’t let debt pile up that will plague you for years to come. Therein lies the conundrum.

Retirement Life Raft

If your financial woes are attributable to Covid-19, and if you have a retirement plan and all other sources of financial relief have been exhausted, under terms of the CARES Act, you may qualify to withdraw up to $100,000 from retirement accounts through December 2020… without penalty, if under 59½ years of age. Personal income tax will be due on the amount withdrawn, but it’s payable over the following three years. Such a distribution could be paid back anytime during that period and a tax refund claimed on any taxes already paid. This withdrawal option should be avoided if possible because of its potential negative impact on future retirement plans, but folks must occasionally do what they have to do during sudden financial setbacks in their lives.

Skill Redux

If a temporary layoff becomes permanent, this might be the time… call it an opportunity… to learn a new skill or enhance existing qualifications that might help land a new job. Online courses are readily available and new skill sets might be gained by doing different types of part-time work. You might even consider going back to school to train for a career in a promising “new” industry as opposed to one decimated by the pandemic or technical obsolescence. In short, acquiring new skills, building new relationships, and focusing on developing trends will put you in position to grab emerging opportunities when presented. Broaden your thinking and focus on these new challenges. By the way, developing these sorts of outlooks are good even in “normal” times.

Financial Wellbeing

Managing your financial wellbeing, particularly during hard times, can be incredibly stressful, but carefully monitoring your credit is especially important in your overall financial wellbeing. Because current personal financial dilemmas are so widespread, the three top credit agencies – Equifax, TransUnion, and Experian – are all offering free weekly access to credit reports through

If you need career advice, reach out to family, friend, and workplace networks for trustworthy help. Thousands of people are currently dealing with serious financial circumstances, and it’s highly likely that someone in your circle will be more than willing to provide advice or encouragement in this time of crisis. Help is out there. Go for it.

And remember: This, too, shall pass.

Dare to be Average and You'll Come Out on Top
September 10, 2020

In my The Amazing Power Of Compounding blog, I mentioned a growing concern about individual investors’ increasing proclivity to trade stock in today’s volatile stock market. Investors – particularly young, inexperienced investors – tend to believe that they can “beat the stock market." At one point, I, too, held that belief. Experience taught me otherwise leading me to develop a taste for the average. Let's discuss the concept of "Daring to Be Average."

What's Average?

I once felt that diversification – a form of loss mitigation – would limit my rewards. And it’s true. Bad picks will limit the reward of good picks. For example, by selecting an index fund, you are acquiring an ownership in its low-performing companies as well as its average and high-performing companies. My original thinking was that although I happened to be a “part-time” investor, I could also be an above-average investor… that I could successfully compete against the pros (Wazoos, I call ‘em). Well, like most amateur and/or part-time investors, I couldn’t. Coming to that realization steered me in the direction of building a portfolio around index funds and accepting the humbling experience of daring to be average. My ego was soon soothed by an increasing number of studies showing that unmanaged index funds routinely outperformed Wazoo-managed funds. And, yes, diversification helps manage risk.

Do Rewards Require Risk?

Risk and reward are most certainly connected. High risk can be rewarded with high returns. But that same measure of risk can also be rewarded with low or no returns. An undiversified portfolio combined with good luck can achieve amazing returns… but with bad luck (and luck is part of the investment game) it can be a devastating experience. On the other hand, a diversified portfolio combined with good luck can achieve those same amazing results… but with bad luck, a devastating result can be somewhat mitigated through diversification. In short, not all risk is rewarded, but a stretch of bad luck can be mitigated by proper diversification.

Mitigating Risk

The Amazing Power of Compounding is a function of time and yield. But the time factor deserves some amplification. There’s a common perception that the risk of stock ownership declines as the investment horizon increases. I don’t agree. Holding a stock for a long time doesn’t reduce or eliminate its risk. Nor does holding a diversified portfolio for a long period eliminate the risk factor. In the latter case, the risk is simply mitigated because of diversification… not eliminated.

Dollar-Cost Averaging  

I utilize dollar-cost averaging in investing because it offers the risk-reduction benefit of investing over time. It involves investing the same amount of money on the same day each week or date each month… in for example, a Total Stock Market Index or S&P 500 Index Fund. Dollar-cost averaging over a period of time theoretically lowers the risk associated with lump-sum investing. But note that I said, “over a period of time”. Once a period of time ends, normal investment risk reappears. To genuinely enjoy the fruitful “risk-reduction” of dollar-cost averaging, it must continue long-term. The only real benefit of “short-term” dollar-cost averaging is avoiding disappointment… an emotion decision-makers feel when they realize, after the fact, that another choice would have been more profitable (i.e., taking a big loss on a lump-sum investment versus a smaller loss by dollar-cost averaging over time).

Rolls Royce v. Chevy

When I (often) speak of my PDQ Principles, I am obviously inferring that, along with Patience and Diversification, it is important to invest in high Quality companies. That’s common advice, but is it necessarily good advice? It depends on a couple of questions we must ask ourselves when making important buying decisions. Without question, at fixed points in time, some companies are of higher quality than others. But are those “really good” companies worth the difference in price over "less good" companies? A Rolls Royce is a better car than a Chevy, but is it that much better? Is the investment in stocks of great companies better than in companies that are not so great? This is when valuation becomes important.

Value is Relative

During the buying process, it is especially important to consider the price of stocks relative to their value. Seven years ago, Exxon Mobil was the world’s most valuable company. Last Friday, Tesla, a company struggling for profitability, was valued by investors at $390 billion, twice a very profitable Exxon’s current market value of $165 billion. And Apple computer lost $180 billion in value that same daymore than Exxon’s total current valuation. By the way, if you’re lamenting last Friday’s losses in the stock market, the Omaha Sage, Warren Buffett, lost $19 billion on his position in Apple alone. That’s why I stick with mutual funds – in large part, index funds – and dare to be average.

Ditch Day Trading

Each investor has his or her own agenda and risk tolerance. Some become speculative day traders, where today’s gains can be quickly eroded by tomorrow’s losses. That was my experience, finally prompting me to ask, “Why gain 25-30% this month and lose most if not all of it next month?” More conservative, long-term investment practices might not deliver those occasional sensational results, but a highly diversified, buy and hold approach is a powerful form of risk mitigation that appeals to the dare to be average crowd. Yes, there are those with the proper tools and skills to be extraordinarily successful at day trading, but it’s a stressful approach with little appeal to me.

Short-Term Speculation Erodes the Power of Compounding
September 3, 2020

According to the experts at Bloomberg Intelligence, the three biggest firms that execute individual investors’ orders traded a combined 69.4 billion shares over the counter in June 2020, more than triple the level from November 2019. This trend encourages me to remind those who follow this blog of the impact compounding plays on the accumulation – or diminution – of wealth. VIEW VIDEO

Compounding Core Values

Compounding is at the very core of developing an optimal long-term saving and investment program… and its value is THE primary reason why my target audiences are the younger generations of savers. Simply put, they have more time to benefit from compounding. Too often, unfortunately, they display the least amount of patience. And why does that matter? According to the 90-year-old Sage of Omaha, Warren Buffett:

“Building wealth depends not only on how much your money grows, but how long it grows.”

BTW: The Sage’s wealth is estimated to be over $80 billion, 90% of which he acquired after age 65.

In a recent WSJ interview by Jason Zweig, Buffett mentioned what he termed his Methuselah Technique:

“Investing wisely is important, but investing wisely for a long time matters even more.”

Astounding Example

Zweig mentioned in the WSJ article that most folks routinely underestimate the power of compounding (an observation with which I absolutely concur)… and that such errors worsen over longer time horizons and at higher rates of return. He offered an example inspired by Buffett. It’s a theoretical exercise, but what an attention grabber! If the Dow Jones Industrial Average (DJIA)… about 29,100 yesterday… compounded at slightly under 1.6% annually, what would it be on December 31, 2099? The answer: 100,000.  What if it earned 4.6% annually? The December 31, 2099 value would be 1,000,000. And what if it earned 7.7% annually (below its 8.4% average over the past 30 years)? 10,000,000 by December 31, 2099.

In a nutshell, that’s the potential of The Amazing Power Of Compounding. Crazy numbers… not so much. In August 1940, the DJIA was roughly 130. On September 2, 2020, it closed at 29,100. By the way, none of the rates in the Zweig/Buffett example include the reinvestment of dividends.

Patience is Vital

As I’ve often mentioned in my blog posts, even while experiencing low to moderate rates of return on investment portfolios, lengthy periods of steady growth can morph small sums of money into large amounts. But it takes a truckload of patience and the steady accumulation of a low-cost, highly-diversified, quality portfolio to take advantage of compounding. For this reason, it’s troubling to see more and more speculation by folks – particularly younger investors – buy and hold stocks for noticeably short periods of time… so very destructive to the essence of compounding.  

Buffett’s Folly

Buffett revealed an interesting inclination (that also afflicts yours truly) in his interview with Zweig… a habit of the afflicted that causes them to weigh a “current” expenditure against what they might be able to buy with the same money compounded for decades into the future. An example used was the initial $31,500 cost of Buffett’s Omaha home. He called the “then troubling” 1958 acquisition "Buffett’s Folly" in The Snowball, written by Alice Schroeder. In his mind, the cost of the home was $1 million after compounding its initial cost into the future. He wasn’t far off. The home is now worth close to $700,000 and the $31,500 he spent on it in 1958 is equivalent to about $250,000 in today’s dollars.

Stop Starting Over

To my young investor friends, the more often you trade holdings in your investment portfolio, the more you disrupt compounding. After each disruption, you essentially start the process all over again. In short, avoid excessive trading. Follow those PDQ Principles of investing. Buy low-cost, highly-diversified, good quality investments, and then exercise the patience of Job with your portfolio. You’ll be glad you did.

Hoarder Alert: Know When to Toss Financial Docs
August 27, 2020

Many of us swear that we’re not hoarders, and in many respects, we’re not… until it comes to throwing away old financial records of all types. The Motley Fool shared this sort kind of information with their readers recently, and because the Fool seemed to have targeted me directly, I decided to pass along some of their thoughts. VIEW VIDEO.

Tax Returns

After reviewing the Fool's remarks, I did a quick inventory of my file room…  soon realizing that when it comes to retaining financial documents, I deserved the target on my back. I have federal tax returns going back to the year Teddy Roosevelt and his Rough Riders charged up San Juan Hill in the late 1800s, forcing Cuba’s Spanish overlords off the island. That’s an exaggeration, of course, but I still have all of ‘em, and I’m not a spring chicken.

One early return documented that I swept floors for Oklahoma State University for $.50/hour. They also charged me $4 per hour for tuition, so I suppose it evened out. Generally speaking, the IRS suggests that you keep returns (and supporting documents) for three years; six years if you overlooked reporting certain income; seven years if you file a claim for a loss from worthless securities or bad debt deduction; and indefinitely if you filed a fraudulent return or didn’t file one at all. And by the way, if you’re employed by others, keep paycheck stubs through the end of the current year as a check against your employer’s W-2 form. Uncle Sam is watching.

Mortgage Must-Keeps

Keep mortgage or mortgage refinance documents for as long as you own your home. Prior to selling a home, keep paperwork related to its purchase and of any major work to improve the home (to support the home’s cost basis at point of sale). After a sale, hang onto those prior records along with records related to its sale for at least six years.

Insurance Policies

Keep life and other insurance policies indefinitely (as long as they are in effect). Speaking of insurance policies, keep receipts for all costly acquisitions in case of theft or catastrophic loss for purposes of confirming the purchase price to skeptical insurers.

Estate Records

Keep all estate-related items such as IRA contributions and other pension-related records indefinitely…  including of course, your last will and testament, durable powers of attorney, medical powers of attorney, directives to physicians and HIPAA releases.

Medical Docs

If you have included a medical tax deduction on your return, the IRS allows itself up to seven years to request documentation related to your health insurance records. These same records and explanation of benefits (EOBs) might also be useful in sorting out after-the-fact difficulties with medical service providers.   BTW - an explanation of benefits is not a bill. It is dispensed to both patient and provider as a means of identifying how a claim is processed and what amount may be owed by the patient.

Monthly Statements

If you verify bank and credit card statements upon receipt… if you balance your checkbooks periodically… and if you have online access to these statements, there is really no reason to keep the monthly paper documents. Certainly not for more than one year.

Trade Confirmations

Unlike bank and credit card statements, trade confirmations and brokerage statements should be kept as long as you own the securities they represent. This is how you will ultimately document your basis in the securities you own when sold. Remember, Uncle Grabby is watching, and occasionally he will inquire about tax basis documentation.


Titles to vehicles and other valuable assets (i.e., real estate, etc.) including documentation of improvement and/or insurance claims on these properties should be kept for as long as such assets are owned.  

Shred the Evidence

In summary, don’t be a financial documents hoarder, but do keep certain documents that will prove useful in the conduct of your family’s financial dealings. But in this age of hacking and meddling, once you decide to discard important financial documents it’s important to remember that more than Uncle Grabby is watching. There is an industry of ne’er-do-wells out there looking for every opportunity to syphon off your various account numbers, Social Security number, date of birth, and other identifying information. So, consider shredding all discarded documents. And, for your own purposes, back up all important digital documents and store paper versions of those documents you choose to retain in a safe place to avoid theft or catastrophic loss.

Capital Gains - and Possible Change - Explained
August 20, 2020

Concerns abound regarding a capital gains taxation upheaval should the approaching November election result in a change in the Washington power structure. The most prevalent concern involves “step-up” rules on capital gains (and losses) of inherited stock, so I thought some refresher information on the subject might be in order. VIEW THE VIDEO.

What is a Capital Gain?

A capital gain is the profit generated by the sale of an asset such as a stock, land, a business. Generally speaking this is considered taxable income. The tax rate on capital gains vary based on how long an asset has been held before selling, the seller’s income during the year of sale, and in what type of financial vehicle the gains-generating asset is held (i.e., tax-advantaged account, taxable account, etc.).

In 2020 the capital gains tax rates are either 0%, 15% or 20% for most assets held for longer than a year. For less than a year, tax rates on most assets correspond to an individual’s ordinary income tax brackets (10%, 12%, 22%, 24%, 32%, 35% or 37%). Since we’re discussing inherited stock here, the foregoing information suffices only as a clarifying prelude to our subject matter.

Tax-Advantaged Accounts

Tax-advantaged accounts include 401(k) plans, IRAs (traditional and Roth) and 529 college savings accounts where investments grow tax-free or tax-deferred. In short, you don’t have to pay capital gains tax on investment sales within these accounts as they occur. Roth IRAs and 529s, in particular, offer significant – tax-free – qualified distributions. That’s right, you don’t pay any taxes on such investment earnings. With traditional IRAs and 401(k)s, however, you’ll pay taxes when you receive distributions, required (i.e., RMDs) or otherwise, from those accounts.

Inherited Stock Gains

So, what is the tax on inherited stock gains? As mentioned earlier, it depends on the financial vehicle holding the gains-producing asset. But one simple fact never changes – Uncle Grabby always gets his cut, now or at some future date whether capital gains occur in a tax-deferred traditional or Roth IRA, or if a person (decedent) dies and leaves shares of stock to his or her heirs in a taxable account.

With regard to Roth IRA assets (purchased with after-tax dollars), Grabby has already taken a bite from that apple; thus, withdrawals are generally tax-free to the lucky heirs. With traditional IRA assets (purchased with pre-tax dollars) withdrawals are treated as taxable income – paid at the individual’s ordinary income tax rates, not at capital gains rates.

Taxable Accounts

For inherited stock held in non-tax-deferred accounts, a different set of rules called “step up” rules apply. In short, an heir’s cost basis in a stock is its fair market value on the date of the decedent’s death. This is a good deal for the heir, certainly better than it would have been for the original owner (decedent), had the decedent sold the asset (in this case, stock) prior to his or her untimely demise. An example:

1. Decedent buys a share of stock for $100 (the basis) and later sells it for $125 a share. Decedent would be taxed on the $25 gain over basis.

2. Decedent who paid $100 for a share of stock dies and bequeaths the share, worth $125 on the date of his or her death, to an heir. The heir’s basis of the stock “steps up” to $125. By the way, it can also “step down”.

3. The heir, needing money, immediately sells the inherited stock for $125. Because the heir’s basis is $125, there is no gain on the sale and no tax due.

4. If the heir holds the share of stock and later sells it for $150, there is a taxable gain of $25 above the heir’s “step-up” basis of $125. Any capital gain or loss that is the result of selling inherited stock is always long-term. This rule applies regardless of how long the heir or the original owner held the stock.  Once passed to an heir, the decedent’s original basis of $100 has no bearing on the heir’s sale in either case.

This is a simplified explanation of capital gains taxation. A sale involving a capital gain can become complicated because of extraneous factors like income level, carry over and capital loss offsets, “collectible assets” which are generally taxed at 28%, the 3.8% net investment income tax thresholds, etc. So keep your CPA’s phone number handy. And fair warning, heirs should remain ever vigilant. The only deal Uncle Grabby really likes is one in his favor. At some point the aforementioned “step-up” deal could fall victim to an estate tax legislative reshuffling, and Grabby would be incredibly pleased.

Change is in the Air

Because of COVID-19 and/or the looming election, a reshuffling may be coming sooner than you think. Under current law, assets that pass directly to heirs benefit from the “step-up in basis”, which means the heir receives the asset valued as of the date of decedent’s death. If the heir should sell this holding quickly, he or she would pay little to no capital gains taxes.

According to the Tax Policy Center, the Democrat Presidential candidate proposes to tax an asset’s “unrealized appreciation” at transfer and at an ordinary income tax rate potentially as high as 39.6%. Such a hugely dramatic change would, of course, require Congressional approval.