Morning Download from Invincible Money 

Personal finance + economics + markets

Together with Holi - Sustainable Brands

Good morning investors! Monday started on a positive note with some stocks showing impressive gains. Let’s start the day with this interesting stat:

“The average person starts investing at 33.3 years of age (but you shouldn't wait this long).”

Today we cover:

• Goldman Sachs is changing.

• The stock market is roaring.

• Ways to save income tax money.

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📊 Economy & News 

Goldman Sachs looking to sell the investment advisory business?

Goldman Sachs is in the news for plans to sell the investment advisory business. This indicates the company is serious about attracting mass-market customers.

According to the official report, the company is “currently evaluating alternatives” to sell the business that it acquired for about $750 million in 2019. The business currently manages assets worth over $29 billion and is one of the biggest names in the industry.

This comes at a time when investment advisors are leaving banks and taking their clients with them.

Quick hits:

• The Australian dollar continues to fall.

• 10-year yield climbs to new levels.

• The German economy is having a hard time.

📈 Stocks

S&P 500 4,399.77 (0.69%)
DJIA 34,463.69 (-0.11%)
NASDAQ 14,936.69 (1.65%)
VIX 16.96 (-1.97%)
* Prices as of Aug 22nd, 12:20 AM UTC

The stock market comes back to life

Nasdaq went up for the first time in five days on Monday as most sectors closed green. This comes as a surprise despite Treasury yields hitting new highs. 

Tech was the biggest gainer with Nvidia and Tesla both rising 8.4% and 7.3%, respectively. Moderna saw a jump of 9.3% due to the new Covid vaccine that's said to be effective against the latest variant.

Some stocks, however, were red, including Johnson & Johnson and Target Corporation, each falling about 2.2%.

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🔐 Crypto

Bitcoin $26,100, (-0.01%)
Ethereum $1,660 (-0.04%)
Total market cap $1.09T (-0.8%)
* Prices as of Aug 22nd, 12:20 AM UTC

Ethereum cofounder stirs the market with a $1m Ether transfer

Ethereum co-founder Vitalik Buterin is in the news for sending 600 Ether, worth about $1 million, to Coinbase yesterday.

The man is yet to comment on the move. Moreover, this isn't the first time that Buterin has transferred crypto to an exchange. He was earlier in the news for sending 200 ETH to Kraken.

This move, however, is of importance as it comes at a time when the crypto market is going through a difficult time. ETH is currently trading under $1,700 –for the first time in about three months.

This video discusses the potential reasons why Buterin moved 600 ETH to the wallet; however, we must mention that it’s speculative.

💵 Personal Finance

Do this to save income tax money - Part III

We talked about ‘HSAs’ in the previous newsletter, today we’ll talk about another proven way to save income tax money – municipal bonds.

Introduction to municipal bonds

Also called muni, municipal bonds are bonds issued by local or state governments, or government-owned entities.

These 'investment instruments' work like traditional bonds. When you buy a municipal bond, you lend money to the government in exchange for interest that is to be paid over a predetermined period.

Once the bond reaches maturity date, the owner receives the full payment (the original investment) from the buyer.

Commonly used in the US, these bonds are also available in other countries under different names, such as local authority bonds.

How can municipal bonds help save tax money?

Though not all, most municipal bonds are tax-exempt, including federal and state taxes. However, you may have to pay state taxes if you do not live in the state where the bond is issued.

This feature enhances the bond’s value and give investors a chance to diversify their investment portfolio.

Let’s compare how municipal bonds fare against traditional or taxable bonds. We can use this formula to calculate the yield:

Let’s say an investor is in the 35% tax bracket and he chooses to invest in tax-free muni bonds that yield a return of 4%.

Now, apply these to the formula:

Now, you will have to find a taxable bond that offers at leas 6.15% to enjoy the same returns as the municipal bond.

Also, we must mention that not all activities enjoy the tax-exempt status and that bonds that originally enjoy the tax-free status may eventually be taxed if the IRS determines the proceeds aren’t used as suggested. However, this isn’t very common.

Careful how you buy them

Warning: Be careful when checking the secondary market as munis bought ad a discount will be taxed at the capital gains rate. The table below shows how it's taxed:

The difference between the bond's net present value and the principal payment at the time of maturity is taxed at 15% (capital gains rate). Based on this, it can be concluded that the bond bought at a discount rate will be worthless. Here’s how:

You might end up paying more than the bond's value ($96.22 versus $95.62) due to this rule. Hence, don't just look at the price of the bond but also the yield to maturity to ensure tax consequences do not affect your return.

The best way to buy municipal bonds is from a broker-dealer, bank or investment advisor, through a self-managed account or ETF.

Find this too confusing? Check the video below for more:

We’ll continue our ‘how to save tax’ guide next week so stay tuned and let us know what else you'd like us to talk about by replying to this email.

💰 Be a Better Investor

👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.