Firm:
Crane Asset Management LLC
Job Title:
Chief Investment Officer
Biography:
Crane Asset Management LLC is a full-service investment counseling firm providing investment management services to private individuals, retirement plans, endowments, and charitable foundations. All accounts are managed on a discretionary basis. While investment portfolio consist primarily of equities, we also use fixed income securities for clients whose objectives require increased income and reduced risk. John Frye co-founded the firm in 2003, with a partner who remains Chief Operating Officer. They work with all of their clients to formulate a long-term investment strategy that will meet their investment objectives while addressing their risk profiles. Understanding their clients in this way enables them to develop unique plans based upon each of their clients’ needs to help them achieve their financial goals.
Before co-founding Crane Asset Management LLC, John served as Executive Vice President and Portfolio Manager at Renberg & Associates in Beverly Hills. He began his career with E. F. Hutton & Company in New York and subsequently worked with Alex. Brown & Sons in Baltimore. He received his Bachelor of Arts in Politics from Princeton University in 1977 and his M.B.A. from Columbia University Graduate School of Business. John holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Los Angeles.
Education:
BA, Politics, Princeton University
MBA, Finance, Columbia Graduate School of Business
Assets Under Management:
$84 million
Fee Structure:
Asset-Based
CRD Number:
849182
Disclaimer:
Crane Asset Management is registered with the State of California. A copy of Crane's Form ADV filing (Parts 2A and 2B) can be accessed here. In addition, Crane's Form ADV (Part 1) can be downloaded from the SEC's website. (Type in Crane's name in the field provided and follow the instructions on the site to download the information required.)
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Introduction and Overview
I generally address this question by asking a client to provide their annual budget. What will it cost you, per year, to live? I don't mean just the basic food, shelter, utilities, taxes, etc.; I also ask for what you will spend on travel, entertainment, meals, hobbies, gifts and the other pleasures of life. Then, add something for emergencies (a new car, a new roof, an accident or illness) knowing that those will not occur every year, but can be large when they do occur.
Then, take that number and subtract all income from all sources -- your Social Security (which you should possibly wait to take until you turn 67); your spouse's, if applicable; any other pension income or retirement assets. The result is the amount you will need to take from your investments every year. At this point your primary goal is to make sure that whatever happens in the capital markets, you will have enough to sustain you for the rest of your life. There are general rules-of-thumb for this -- you probably can stay solvent over the long term by taking $60,000 or less per year, I would think -- but no hard-and-fast rule that applies to everyone. Those of us responding to you don't know, for example, whether you might expect to receive an inheritance some time in the future; and you have not stated what other savings you have. So that number could grow.
If you have any questions, feel free to get in touch.
The stock.
Aside from the (tiny) 0.25% extra yield keep in mind that dividends are taxed at lower rates than interest. In addition, most companies have a history of increasing their dividends year after year (even though there is no requirement to do so) and thus you might be getting substantially more cash income from your investment in future years.
Balance this with the fact that while both stocks and bonds will fluctuate in price and can decline, bonds tend to be more stable. If you know that you will not need to sell your stock in the near term then the extra volatility is not an issue and you might benefit from the company's growth. A stock could be much higher in 10 years but you know the bond won't be.
Besides -- this is just arithmetic and not speculation -- if a company raises its dividend every year but continues to trade at a 3.25% yield, then the stock price must rise. Here's an example: Suppose the stock trades at $100 per share and pays a $3.25 annual dividend that it raises by 15 cents per year. After five years the annual dividend will be $4.00. (Right?) Therefore, in order for the yield to be 3.25%, the stock price would have to be $123.08. That's a 5-year price return of 4.24% per year, meaning that your total return would be 7.49% Sure beats 3%, right?
Obviously you can't be sure that the 3.25% yield would be sustained, so there are no guarantees. But over time stocks have meaningfully outperformed bonds and you should give yourself the best chance at success by buying stocks.
You will get many good answers that cover the entirety of your question, so I will offer one piece of targeted advice.
Credit card debt is very expensive. I will assume you are being charged 20% interest, or nearly that amount. So stop paying more than required on your student loans and focus on eliminating the credit card debt first. Don't stop the 401K contributions -- in fact, I applaud your desire to stretch and work extra in order to max out what you get from the profit sharing -- so if you have a shortfall you should cut back on the Roth contributions first.
I hope that by doing this you will eliminate the credit card debt sooner. Than, make yourself a promise NEVER to let a month go by without paying off that card in full. Never incur an interest charge again. Ever.
I understood you up to your last sentence. If you save money, what will you do with it if you don't invest it? Stick it under the mattress?
You absolutely should invest every dollar you don't spend. Cash is not a good investment asset because it produces no return. I grant that you need to have something in the bank for your ongoing expenses, but not any more than that. I am also delighted to hear that you can potentially save 65% of your income. (Is that after taxes? If not, it's still impressive.) Set yourself up for regular paycheck deposit to your TDA account and make sure you have a TDA checkbook and debit card. It's also a good idea to have access to margin credit for flexibility, even if you don't use leverage. Our firm uses TDA and I know they do a good job in making this easy for you.
I will assume that most of the money you are putting away will not be needed to support you for many years. At your age you are a classic long term investor. Don't stop buying stocks just because the market looks scary (it always looks scary). If we get a dip in stock prices that just makes it easier to find and buy good long term investments. Also, rental real estate is a good investment, assuming you know the market in your area and have the time and resources to manage that real estate sensibly.
Never use the words "invested" and "cryptocurrencies" in the same sentence. They are a gamble, not an investment. You might make money (or you might get wiped out) but never commit more funds to them than you can afford to lose.
Absolutely not. Markets are uncertain but if you hold nothing but cash you can be certain of two things: you will earn next to nothing on it, and your purchasing power will decline every year.
Once you turn 70-1/2 you will have to take required minimum distributions (RMDs) from the 401(k)s. (Probably, you will first remove the assets from the 401(k) and roll them into a rollover IRA.) Going forward you will have to take an increasing proportion of your IRA that will be more than $30,000 per year. You need to have investments that pay income at least equal to 4% of the portfolio. This can be achieved with a mix of bonds, preferred stocks, high-dividend blue chip stocks, and growth stocks (yes, you should have at least some). If you are earning a consistent cash return on your portfolio you don't need to worry about the short-term fluctuations in the market. You can't time them anyway, and you should stay fully invested because over the long term you should position yourself to keep pace with inflation. Meet with an advisor and work out an appropriate asset allocation. But cash should be never more than a tiny bit of the total.