Blinkers on, beware the disruptors, 529 plans
With the start of the Saratoga Thoroughbred meet less than a month away and given the recent volatility in the stock market, the phrase “blinkers on” seems appropriate. For the uninitiated, blinkers are shades that cover the eyes of horses allowing them to only to see straight ahead, preventing distraction from events around them. It would be of benefit to investors if they were able to focus on the financial merits of long-term investing and avoid the pitfalls of short-term distractions.
Recognize that shortterm volatility is what provides long-term gains. If the stock market moved up in a straight line and there was no volatility or risk of loss, then the longterm gains would be commensurate with a bank account. Historically, investors that shoulder risk are rewarded over a full economic cycle.
In our memory, there has never been a company that has disrupted other businesses, Wall Street, Main Street and the economy quite like Amazon. This past Thursday the company announced that, through a new offering they were “inviting” entrepreneurs to “build their own companies delivering Amazon packages.” According to Amazon, by investing as little as $10,000, these new business owners can qualify for negotiated discounts on resources necessary to begin to build a fleet of up to forty delivery vehicles.
Amazon tried to allay Wall Street fears that the move will negatively impact their relationship with current carriers, some of which include the U.S. Postal Service, FedEx, United Parcel Service and XPO Logistics. According to Dave Clark, Amazon’s senior Vice-President of Worldwide Operations, “we have great partners in our traditional carriers and it’s exciting to continue to see the logistics industry grow. Customer demand is higher than ever and we have a need to build more capacity.” With nearly fifty percent of online sales being purchased through Amazon, it has changed the way Americans shop. However, it has also severely eroded the value of many private and publicly traded companies it competes with, even sending some into bankruptcy. As shareholders of XPO Logistics and United Parcel Service, please excuse us if we take this statement by Mr. Clark with a grain of salt.
Other disruptive companies to keep an eye on as their progress may either positively or negatively impact the share value of one of your investments include Uber, Lyft, Tesla, and Facebook. One thing is for certain in this industry – change is constant so you better be on your toes.
The Tax Cut and Jobs Act of 2017 had many components. However, one that did not get a lot of press included the changes to 529 Plans. This now allows withdrawals of up to $10,000 to pay for private tuition payments at primary and secondary educational institutions. You will obviously forego the tax-deferred growth under the 529 plan if you remove it early. However, you will still get the benefit of the state tax deduction. Food for thought. Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, Please call (518) 279-1044.