Ken Van Wagenen, an Original Founder of the Investment Subsidiary of…

Ken Van Wagenen of Los Angeles, California.  Ken is close with his children Melissa and Ryan Van Wagenen.

Ken Van Wagenen of Los Angeles shares his “Magic 12” with UCLA Anderson MBA Students

I encourage all investors to maintain equity exposure, but do not chase those investments that look ‘cheap’ and have not participated in the recent market uptrend

A reliable investment portfolio can be built around accumulating tax-exempt bonds for stability of principal and tax-free interest income. In addition, a portion of everyone’s nest egg should be allocated in stock market equity exposure for complimentary growth of principal. This news release is an update of just such a possible portfolio as described by Ken Van Wagenen, an investment professional with some 30 years of experience in the Los Angeles area.

There are many ways to accomplish a balanced portfolio and often the question comes to an efficiency formula to minimize costs and maximize returns over the long haul. It is easy to buy exchange traded funds for maximum diversification, but the real returns are found by sourcing the correct equity in companies themselves. Becoming a part owner, and watching good business management grow those companies can be a rewarding experience. Oftentimes even the best companies “stub their toe” and temporarily underperform. These missteps are often the best opportunity to buy and hold as management corrects the course and returns to traditional upward profits and stock price momentum. This was true over the past decade when financial stocks and big money center banks were crippled during the housing crises of 2008-2009. The returns gained from such positions have been staggering. Ken Van Wagenen of Los Angeles believes the banking sector has more “room to run” as interest rates finally normalize and lending banks can increase loan rates and their profit margin “spreads” expand.

Since the 2016 presidential election, we have noticed numerous successive all time highs in stock market performance. We have also seen the 60 day volatility for stock markets slip to below that of bonds for the first time this year. The US Treasury Bond yield curve has continued to flatten. This flattening means that the longer dated maturities return progressively less than expected for the additional risk associated with buying maturities far into the future. This yield curve anomaly typically anticipates a future sluggish economy. European high yield “junk bond” debt has slipped to below 3% for the first time in 2017. It would seem everywhere we look there are “bubbles” in the various markets. The most pronounced run up in value can be found in the crypto currencies such as Bitcoin. This virtual currency has had a staggering tenfold rise in value in 2017 and recently broke $10,000 for the first time.

Prudent money management dictates a focus on the higher quality names as a hedge against the certain correction that will follow in the near future. The high quality “blue chip” names are those that hold their value much better than marginal, more highly leveraged, equity positions in a market correction. Additionally, most blue chip large cap equities have generous yields when compared to market interest rates. When asked for advice, Ken Van Wagenen said, “I encourage all investors to maintain equity exposure, but do not chase those investments that look ‘cheap’ and have not participated in the recent market uptrend.” For this reason, Mr. Van Wagenen suggested investors consider holding and adding cautiously to such names as: Amgen, Apple, Bank of America, Caterpillar, Citigroup, Costco, Facebook, Home Depot, Netflix, Oracle, Priceline, and Raytheon.

Although not all of these “Magic 12” stocks have generous dividends, many do offer dividend distributions that help compensate for patience in your investment holding horizon. Never forget to include a significant investment in the tax-free municipal bond market. These high quality loans with very low default rates routinely have returns exceeding that of taxable government bonds and high-grade corporate issues.    

Although the anticipated tax overhaul is being sold as meaningful, it appears now to have a moderated positive bias. The main benefits are chiefly based upon the notion of simplicity to individual taxpayers. Those few earning significant income and paying heavy income taxes are losing tax deductions historically relied upon. The closing of such deduction “loopholes” compensates to a great extent for any cut in marginal tax rates. Congress cannot seem to internalize growth in the economic “pie” therefore they have reduced the positive impact of a tax cut by insisting that the cut must be “paid for” by reducing or eliminating tax deductions. It would be preferable to shrink the size of government and benefit from an expanding economy. The real upside momentum still may come from the corporate tax cuts which will hopefully provide meaningful momentum to business hiring and profitability in 2018.

Ken Van Wagenen anticipates 2018 to be another strong year. Barring political instability, there should be a few insignificant corrections as is expected in a growing economy and a “toppy” volatile marketplace. Mr. Van Wagenen encourages the savvy investor to stay invested and disciplined and watch your portfolio grow.

Mr. Van Wagenen’s opinions are his own and do not represent solicitations or recommendations to buy or sell. All investments should be transacted with the input from a competent investment professional familiar with your particular investment horizon, situation and risk tolerance.

More about Ken: Ken Van Wagenen currently resides in Los Angeles, California as a retired investor. Ken was an original founder of the Wells Fargo Investments. Ken presided over client investment assets exceeding $2 billion by the year 2000. For most his years at Wells Fargo, Ken ranked as the top Advisor at the firm – Three times Ken was recognized by Barron’s national business magazine as one of the top 100 advisors in the country. He became known in the Southwest US for his conservative style of investment management.

Ken received an MBA from the Anderson Graduate School of Management at University of California Los Angeles in the mid 80s. Prior to UCLA, Ken graduated cum laude from Brigham Young University with a Bachelor of Science in Business Administration. During his time at BYU, Ken took two years off to live abroad in Europe where he served a church mission in Scotland and Northern Ireland. Shortly after graduating from UCLA, Ken got married in Los Angeles and had two children, Ryan Van Wagenen and Melissa Van Wagenen. Melissa has a Masters Degree in Psychology and works as a student counselor for various high schools in the bay area. Ryan Van Wagenen is following in Ken’s footsteps, and has been working in finance the past 7 years for Citi and UBS. Ken currently serves in the Los Angeles area as a Sunday school teacher in his local church congregation. For the past 15 years, Ken has also been involved with philanthropy and has held many charitable fundraisers to benefit the Pasadena Museum of History and other worthy causes.

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