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We think the trend toward value stocks ‘will continue into 2021 and beyond’: Aspiriant Managing Director

Sandi Bragar, Aspiriant Partner & Managing Director, joins Yahoo Finance’s Julie Hyman and Brian Sozzi to discuss her thoughts on the markets and where people should be investing into the new year.

Video Transcript

JULIE HYMAN: All right. Let's talk more about the broader markets here and what various money managers are talking about with their clients. I want to bring in Sandi Bragar. She is Aspiriant partner and managing director. Sandi, thanks for being here.

You know, I, I want to kind of build off of that conversation we were just having about Bitcoin because this year, interestingly, has been characterized by this sort of thirsty cash looking to chase these various trends, right, whether it's Bitcoin, whether it's IPOs, whether it's SPACs. Are you, you know, hearing from your clients, like, get me in this stuff? And are they complaining if they're not and just sort of, oh, only benefiting from the 15% or so gain that we've seen in the S&P 500?

SANDI BRAGAR: Good morning, Julie. Yes, the reaction by our clients is across the board. There are certainly clients-- and we work primarily with corporate executives, entrepreneurs, family business owners. So, many of our clients are involved in startups, either creating them working within them, or funding them. So there's been a lot of participation in the IPO space, which has been really exciting. So the concentration there from our part is helping clients think through diversification strategies for their concentrated stock positions, which is quite exciting.

We spoke to each client, and it was really based on what's most important to them. On the other side of the range, clients are-- are a little fearful of-- of some of this froth, and they haven't wanted to have anything to do with it. And when we look at managing our clients' diversified portfolios, diversification is really key for us as we head into 2021. We think that being invested is really important. We're definitely not sitting on the sidelines in any way, shape, or form.

But we are looking for corners of the market that haven't appreciated as much and haven't gotten as much attention. And lately that's been the value stocks. You know, they've had a really ha-- tough run for the last couple of decades. Up until the fourth quarter of this year, we've seen a rotation away from growth or toward value. We think that's going to continue into 2021 and beyond.

So we've been making a lot of investments there, and we've also seen a rotation out of the United States and into overseas investments. And we're very excited about the overseas investments we're making. We're invested in China, Taiwan, Japan, the UK, a lot of diversification there and in big names that people are aware of, you know, Samsung, Tencent, Alibaba. So these are-- are-- are big companies. There's a lot of opportunities. But in the diversified portfolios, we are staying away from what we view could be a frothy situation. We're trying to be more balanced there.

BRIAN SOZZI: So, Sandi, on your-- on the first day of trading for the new year, what should investors do? What's their first plan of attack? Do they sell winners and-- and go all in on value stocks? I mean, so many folks that we talk to, they're sitting on big gains in Apple, big gains in Tesla, and I know they think those gains are likely to continue, but, really, who knows?

SANDI BRAGAR: Yeah, well, the answer, Brian, is really based upon each investor's individual goals. What are they trying to achieve? If they-- if they're requiring the returns from-- from those big investments to fund their financial objectives, taking some money off the table might be a good idea. And diversifying it into some of these value stocks or-- or international stocks, as I mentioned, could be great. The i-- the idea of pushing it into 2021 is nice from a tax perspective because you have a whole other year to make tax payments on the resulting gain. But, you know, it-- it depends on each investor's longer term perspective.

I think the important thing, as I mentioned before, is staying invested and for those who have money available to continue to make investments in-- in the stock market. An easy way to do that is through retirement plans and, you know, certainly maxing out 401(k) plans for people who can do that. And there's a great strategy that we love called a mega backdoor Roth conversion, which sounds a little nefarious and illicit.

But it involves making additional contributions to a 401(k) plan when your employer allows that beyond the $19,500 that everyone can make and then converting those-- when you make the additional contributions, they are made on an after-tax basis, meaning you're using money that's left over after you've covered withholding and other benefits. And you're contributing that to the plan and then converting it to a Roth.

So it's a tax-free exchange from after-tax money into a Roth, being put away in total $58,000 per year in 2021 in 401(k) plans, including whatever match your employer might give. We think that's a really great way to start saving for the future and capitalizing on growth in the stock market over long periods of time, a sure money maker.

MYLES UDLAND: Yeah, Sandi, I love that-- that phrase, mega backdoor Roth because, you know, mega just makes it a lot more official, right, than I think it other-- otherwise would have sounded. And I, I guess along those lines I, I'm curious, you know, how-- how-- how much your conversations with clients are about individual names or-- or styles that you like and how much is about, hey, we need to be in this kind of a strategy to minimize our tax burden, and-- and we can just-- let's just let that ride for 15, 20 years and then revisit. And-- or maybe we can carve out a side account where, you know, you can play value stocks or whatever. But-- but all that kind of stuff is really window dressing around, I, I think, some of this, you know, planning stuff that-- that you're talking about.

SANDI BRAGAR: Right. And so, Myles, when we're investing portfolios for clients, we're definitely focused more on the asset class level and on the style level as opposed to individual names. We think it's really important. We take a dynamic approach to asset allocation, so we're not suggesting that clients take a set-it-and-forget-it approach. We're making changes to the asset allocation as the market and economic-- our economic views change. So we think that's really important.

And for clients who can afford to do so and want to take the risk and ha-- feel really-- really passionate about certain stock names, we do open side accounts and help them make investments there when they don't otherwise fit in the portfolio. But I have to say, our portfolios are very broadly diversified, so we have a lot of-- of-- of the high-growth names in the portfolio, just not as much as an investor would have if they were investing in a more passive, broad-based approach.

JULIE HYMAN: Sandi, thanks for being here bright and early on the West Coast. Appreciate it. Sandi Bragar is Aspiriant partner and managing director. Thank you.