My latest: Rent or Buy in Greater Boston Right Now? The rent-versus-buy debate usually hardens into complicated dogma. So, I looked at the numbers for Greater Boston right now — the breakeven math, price-to-rent ratio, what recent tax changes mean — and the picture clears up. If you’re weighing the decision, or know someone who is, here’s where I landed and why.
This Week’s Takeaways:
- Asset location can improve after tax-returns by first setting your overall stock/bond mix, then placing the least tax‑efficient pieces (like bond funds) in tax‑advantaged accounts and more tax‑efficient stock funds in taxable accounts.
- Today’s record‑high S&P 500 profitability is heavily driven by a few AI‑benefiting mega‑caps, and the huge AI spending boom they’re undertaking is likely to erode those unusually high returns on equity over time, which could, in turn, pressure overall market valuations.
- Investors considering a Roth conversion may be able to reduce the tax impact by pairing the conversion with strategies such as charitable giving, tax-loss harvesting, or converting during lower-income years.
- The bull market is spreading beyond the S&P 500 and the Magnificent 7. All kinds of assets and types of stocks are outperforming the S&P 500 this year, and trailing returns for many asset classes are also stronger than the S&P 500 over various time periods.
- Business owners can significantly improve sale outcomes by using the final two years before a transaction to increase value, reduce taxes, and prepare both the business and themselves for the transition.
- Plus, my latest book recommendation and this week’s Boston Corner.
When and how asset location matters by Vanguard
Asset location is about deciding which accounts (taxable vs. tax‑advantaged) hold your stocks and bonds, not how much you own overall. Done well, it could lead to roughly a few‑tenth‑of‑a‑percent increase in after‑tax returns each year. In practice, that usually means prioritizing your least tax‑efficient assets (like traditional bond funds that throw off ordinary income) for tax‑advantaged accounts, and holding more tax‑efficient growth assets (like broad stock index funds) in taxable accounts. The key is to set your overall stock/bond mix first, then implement it across all your accounts with location in mind, rather than treating each account as a standalone portfolio.
The impact of the AI capex boom on S&P 500 return on equity by Goldman Sachs
AI spending has helped push big U.S. companies’ profits to record levels, especially a small group of giant tech firms and chip makers. But those same companies are now pouring so much money into AI data centers and hardware that their costs, debt, and assets are ballooning, which is likely to pull their profitability (ROE) down over the next few years unless earnings grow even faster. Because those few companies make up such a large share of the S&P 500, any hit to their profitability could drag down the overall market’s profitability and, in turn, the valuations investors are willing to pay. Longer term, AI could still boost productivity and profits more broadly, but that payoff is uncertain in timing and size, so investors shouldn’t assume today’s record‑high profitability and valuations will automatically last.
Three ways to offset income from a Roth conversion by Franklin Templeton
Roth conversions can provide long-term tax benefits, but the converted amount is generally taxable in the year of the conversion, which can create a significant tax bill. Strategies to offset that income include using charitable giving techniques, harvesting investment losses, or timing conversions during years when taxable income is temporarily lower. The broader goal is to capture the future benefits of tax-free Roth growth while minimizing the near-term tax impact of the conversion.
Everything is Beating the S&P 500 This Year by A Wealth of Common Sense
The bull market is spreading beyond the S&P 500 and the Magnificent 7. All kinds of assets and types of stocks are outperforming the S&P 500 this year, and trailing returns for many asset classes are also stronger than the S&P 500 over various time periods.
The 7 Mistakes Business Owners Make in the 24 Months Before a Sale by Savant Wealth
The two years before a business sale are often the most important for maximizing value, yet many owners wait too long to prepare. Common mistakes include failing to clean up financials, remaining too central to day-to-day operations, neglecting tax planning, overlooking personal financial readiness, and entering negotiations without a clear understanding of the company’s value drivers. Early preparation gives owners more opportunities to improve business value, reduce taxes, strengthen negotiating leverage, and align the sale with their personal and financial goals.
Book Recommendation
A Fever in the Heartland: The Ku Klux Klan’s Plot to Take Over America, and the Woman Who Stopped Them by Timothy Egan
A historical thriller by the Pulitzer and National Book Award-winning author that tells the riveting story of the Klan’s rise to power in the 1920s, the cunning con man who drove that rise, and the woman who stopped them.
Boston Corner
The Museum of American Finance to open in Boston with an AI-generated Alexander Hamilton
