What do high valuation differences in the market mean for your portfolio? 

What do high valuation differences in the market mean for your portfolio? 

One way to characterize stocks is by the ratio of its price to earnings. The stock of companies that have high expected growth rates naturally sell for higher prices. These stocks are often referred to as “growth stocks.” However, an investor’s return is the difference between the price one buys the stock for and the price at a later date. “Value” stocks, by contrast, are stocks that sell for low prices relative to the overall market.

Historically, investors have paid high prices for growth stocks and been disappointed during most long periods, as expectations of growth failed to manifest or were perceived to be at risk. Value stocks have produced better long-term results in markets around the world. This makes perfect sense because of the lower prices paid for value stocks.

While a good portfolio always holds small company value stocks because the expected returns are always higher than that of large growth stocks, the difference between the performance of growth and value stocks can be significant over short periods of time.

While a good portfolio always holds small company value stocks because the expected returns are always higher than that of large growth stocks, the difference between the performance of growth and value stocks can be significant over short periods of time. In the U.S., value stocks did significantly better in both 2021 and 2022, but growth stocks have been better thus far in 2023. Investing involves longer time frames than that. Over longer periods of time, the simple concept that paying a lower price has been and is likely to be superior to paying a high price for a given level of earnings.

image of papers on a deskAs of July 31, 2023, for every dollar of earnings the companies in the S&P 500 Index made, a buyer would have needed to pay $23.30. That is more than 20% higher than the average since the start of 2000. Contrast that to the smaller companies that make up the S&P 600 Value Index. For every dollar of earnings, investors would pay just $12.70. That is just shy of 25% below the average over the same time period.

This does not mean we should put everything in small value stocks because a dramatic increase in value is imminent. Timing shifts in growth versus value stocks are just as problematic as timing the market as a whole. That is speculation, not investing, and may indicate a lack of discipline or patience. What the current difference in the valuation between the two asset classes means is the diversified, patient, and disciplined investors are more likely to be rewarded in time.

Plan now to avoid the year end crush

Many tax-related transactions must occur by year-end. While the IRS has a deadline of December 31, most financial institutions will not guarantee a transaction will be completed unless initiated before a date a couple of weeks earlier than that. They do this because they are inundated by transaction requests.

Transactions often requested in December include:

  • Required Minimum Distributions from retirement accounts and IRAs
  • Qualified Charitable Distributions (Only permitted for persons over 70 ½ and only from IRAs. See note below)
  • Transfers or donations of securities
  • Sales of securities for “loss harvesting”
  • Sales of appreciated securities for “gain harvesting”
  • Roth conversions

Waiting until the last minute is not likely to make a significant difference in your tax bill versus the result achieved by executing these transactions earlier. By planning ahead, you can avoid the year end crush. Once you and our advisory team have determined what needs to be done, please proceed with the needed transactions. If you must wait, Schwab will not guarantee execution before year end if the request is not properly made before the deadline set by Schwab, which we anticipate will be no later than December 15, 2023.

Note on Qualified Charitable Distributions: There are two ways to make a Qualified Charitable Distribution (QCD). One is to submit a distribution authorization request to the IRA custodian authorizing a check be made payable to the charity and mailed to the client, who can then give the check to the charity. The second is to use checks from a special checkbook linked to the IRA. If a client makes a QCD via the first option (a distribution authorization) by the submission deadline, the QCD will count for 2023 even if the check isn’t fully processed by the charity before the end of the year. However, if a client writes a QCD check but the check is not fully processed by the charity by December 29, 2023 (the last business day of the year), the QCD will not count for 2023 and instead count for 2024.

The checkbook method makes ad hoc donations easy. However, most clients find that for larger donations, making a QCD via a distribution authorization request eliminates concern about processing. For most charities, December is their busiest month for donations. Further, for recurring donations to a particular charity such as a family’s tithe or a donation to an annual fund at one’s alma mater, most clients find keeping a distribution authorization on file is more convenient.

Additional resources at moisandfitzgerald.com:

Beauty is in the eye of the beholder

Should you donate shares or cash?

Tax-smart charitable giving

Should I convert to a Roth IRA?

News & Notes

Social Security payments and retirement plan contributions expected to rise. Several government related items such as Social Security payments, the allowable contribution amounts to IRAs and retirement plans, and the thresholds for marginal tax brackets are adjusted based on inflation readings. With inflation at lower levels in 2023 than the year prior, the increases are modest. For instance, Social Security payments will rise by 3.2%. Contribution limits to retirement plans should also rise. We will have exact figures for you in our January newsletter.

Charlie Fitzgerald speaking at the University of FloridaFitzgerald helps UF program grow. Charlie Fitzgerald, CFP® recently spoke to 100 students enrolled in the Wealth Management program at the Warrington School of Business at the University of Florida. Fitzgerald, a 1983 graduate of the school’s Finance program, addressed three different classes at the invitation of Dr. John Banko and Dr. Max Dolinski. According to Dean Saby Mitra, this Wealth Management minor program enters its second year with enough demand to warrant adding an additional “Introduction to Financial Planning and Wealth Management” course accommodating 40 additional students.

MFT was named to Financial Advisor magazine’s list of the top Registered Investment Advisory firms in the U.S. The list is based on assets under management.

Mike Salmon, CFP® EA, continues to help educate the commercial real estate community. He recently appeared as the guest on the CRE Deal Room podcast.

If you are a member of an organization in need of a personal finance speaker, we are happy to talk with your group’s organizers at no cost.

Fall Conference season is underway. Dan gave the attendees of the XY Planning Network an update on activities at CFP Board. At the FPA National Conference in Phoenix, Dan was on stage for three different sessions. He gave another CFP Board update, presented a talk on CFP Board’s disciplinary process, and was a panelist on the future of the profession.

Important Dates:

November 1: Start of open enrollment for existing Health Insurance Marketplace enrollees

December 7: End of open enrollment for existing Medicare enrollees

December 15:

  • End of open enrollment for existing Health Insurance Marketplace enrollees
  • Q4 estimated tax payment deadline for C-corporation and multi-member LLCs that elect to be treated as a corporation

Friday, December 22, 2023 – Monday, January 1, 2024: Offices of Moisand Fitzgerald Tamayo are closed. As has been our custom for many years, all staff have this time off so they can spend it with their families. Offices will reopen on Tuesday, January 2, 2024.

January 1:

  • Start of General Enrollment Period for Medicare Part A and B
  • Start of Open Enrollment Period for Medicare Advantage

January 15 (or February 15th for some Florida taxpayers):

  • Q4 estimated payment deadline for 2023 tax year. Due to hurricane Idalia, the deadline is February 15, 2024 for taxpayers that reside or have a business in Alachua, Baker, Bay, Bradford, Brevard, Calhoun, Charlotte, Citrus, Clay, Collier, Columbia, DeSoto, Dixie, Duval, Flagler, Franklin, Gadsden, Gilchrist, Gulf, Hamilton, Hardee, Hernando, Hillsborough, Jefferson, Lafayette, Lake, Lee, Leon, Levy, Liberty, Madison, Manatee, Marion, Nassau, Orange, Osceola, Pasco, Pinellas, Polk, Putnam, Sarasota, Seminole, St. Johns, Sumter, Suwannee, Taylor, Union, Volusia and Wakulla counties.

Please remember to call us: When anything significant happens in your life, including changes in your finances, family, or health that could affect your financial plan, please let us know so that we can adapt our planning and portfolio work for you accordingly. Also, if you ever fail to receive a monthly statement for one of the Schwab Institutional accounts under our management, please let us know so we may assure the respective custodian delivers your statements promptly.

Yours truly,

The Team at Moisand Fitzgerald Tamayo, LLC

 Contact Us

Moisand Fitzgerald Tamayo, LLC is an Orlando, Tampa and Melbourne, Florida based fee-only financial planner serving central Florida and clients across the country. Moisand Fitzgerald Tamayo, LLC specializes in providing objective financial planning, retirement planning, and investment management to help clients build, manage, grow, and protect their assets through all phases of one’s life and the many transitions in between. If you have any questions or would like to discuss anything further, please give us a call or send us a note. If you are not a client and wish to receive emails notifying you of new posts – no more than once per month – fill out the subscription information in the sidebar to the right. For more frequent updates, follow us on FacebookLinkedIn, or Twitter.  

Important Additional Information & Disclosures

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Moisand Fitzgerald Tamayo, LLC-“MFT”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. 

Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from MFT. 

Please remember that if you are a MFT client, it remains your responsibility to advise MFT, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MFT is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. Tax advice is given only to clients and only when agreed to by MFT. A copy of the MFT’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request.

Please Note: MFT does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to MFT’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Please Note: Limitations:  While MFT does NOT pay for recognition, awards, or publicity, neither rankings and/or recognition by unaffiliated rating services, publications, or other organizations, nor the achievement of any designation or certification, should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if MFT is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers. No ranking or recognition should be construed as a current or past endorsement of MFT by any of its clients.  ANY QUESTIONS: MFT’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including providing the criteria used for any reflected ranking.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your MFT account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your MFT accounts; and, (3) a description of each comparative benchmark/index is available upon request.


About Dan Moisand

Dan Moisand is a fee-only financial advisor with Moisand Fitzgerald Tamayo, LLC. He is a regular contributor for multiple outlets, including Florida Today, MarketWatch, and The Wall Street Journal. His writing and financial advice have also been featured in Financial Planning, Investment Advisor, Wealth Manager/Advising Boomers, Forbes, Smart Money, and The New York Times, among other publications. He is the only two-time winner of the Journal of Financial Planning’s “Call for Papers” competition and has been named a top financial planner and advisor by multiple publications. Investment News named Dan one of the “twenty most influential men and women” in the history of financial planning. He currently serves on the Board of Directors for the CFP (Certified Financial Planner) Board.


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