Are You Churning Your Florida Trust? a look at buying and selling investments for your Florida wealth

Are you buying and selling stocks, bonds and mutual funds too much and too often?  Are you sick of not capturing the investment returns and gains that so many money managers brag about?

If you are a Florida resident, there’s a good chance that you have a revocable trust. A revocable trust is sometimes referred to as a living trust.  Many Florida residents have a revocable trust that works with your will when you pass away.  At death, the will and revocable trust (now irrevocable at your death) work to leave your wealth to give inheritances, and to manage your affairs and your estate and money.

Florida is full of probate lawyers and those that write wills and trusts.  Many of these trust lawyers prepare dozens if not hundreds of trusts for Florida residents every year.  But most trust lawyers in Florida won’t serve as your trustee, and they won’t invest your trust funds.

During your lifetime, you are typically your own trustee.  It’s your trust, why not be in charge, right?  Many times, as you age, and as you might need some assistance with your financial affairs, you might ask a trusted love one or a bank to be a co trustee with you.

So, as you are trustee, and as most people invest their own money, how are you doing?  After all, as of this writing the S&P 500 index is at an all time high and the US stock market had a “raging bull” year to date.

As Wall Street Journal writer and financial commentator Jason Zweig points out in this past weekend edition of the Wall Street Journal, sometimes individual investors are not capturing the gains they want to because we are buying and selling too much.  www.wsj.com

Years ago, many Florida residents complained that their stock brokers churned their trust accounts: buy and sell too much and too often just to get commissions.  This complaint is increasingly a thing of the past, since commissions for the purchase and sale of stocks are literally pennies now.  But consider what Jason Zweig was writing about:  are you jumping in and out of funds because you need the cash or because the winds of investor nervousness are blowing ?  Jason Zweig and other commentators at the Wall Street Journal remind us that we may not be capturing the gains we think we should when we buy and sell , and not stay and hold.   We may be selling at a loss when we get out of a mutual fund or stock, or we may pay income tax on any gain.  These serve to diminish our returns.  The question also becomes, when we are not holding and when we jump in and out of mutual funds and stocks, where are going to put our money?   Individual trustees typically should not buy and sell individual stocks, but rather should use funds to invest and diversify.  Actively managing a trust fund is tough work.

Buying and selling a lot can increase risk, taxes and can decrease investment return.   Investing in businesses for the long haul, like legendary investors Sam Zell and Warren Buffett, can make sense.