Accredited WealthManagementSteve Giacobbe, CFA, CFP®6010 Brownsboro Park Blvd.Louisville, KY 40207502-290-1905sgiacobbe@accreditedwm.comwww.accreditedwm.com

July 2018

Going Public: An IPO's Market Debut May Not LiveUp to the Hype

Protect Your Heirs by Naming a Trust as IRABeneficiary

I received a large refund on my tax return this year.Should I adjust my withholding?

What is the difference between a tax deduction anda tax credit?

Wealth Planning: InvestmentsIs Your Strategy Ready for a Changing Market?

Invest Strategically, Not Emotionally!

See disclaimer on final page

Choosing the right financial advisor to helpmanage your retirement assets is one of themost important decisions you can make. Adecision that can be overwhelming, especiallysince there are over 300,000 advisors in theU.S., and most of them are brokers that arepaid to sell you financial products for acommission that don't have to be in your bestinterest.

In fact, it's estimated that only 1.6% offinancial advisors are considered truefiduciaries that are required to work in yourbest interest. This group is your best bet forsound financial advice!

Here are a few key questions we recommendyou should ask a financial advisor:• Are you a Fiduciary?• How are you compensated?• Do you sell products for a commission?• Do you have any industry certifications?• What is your investment philosophy &process?

For a more detailed list of questions, give us acall. We suggest you also do your own duediligence by going tohttps://brokercheck.finra.org/ to learn moreabout your advisor.

Unfortunately when it comes to investing, manyinvestors tend to be their own worst enemy.Numerous studies have shown that investorson average earn returns well below the popularbenchmarks, mainly because of the emotionalinvesting mistakes they make. The field ofbehavioral finance has grown rapidly over thepast decade and is based on an integration ofpsychology and finance. Studying and learningfrom the mistakes of others, without makingthem on your own, is one of the smartest waysto improve your investment returns.

Warren Buffett famously wrote in one of hisannual letters “You don’t need to be a rocketscientist. Investing is not a game where theguy with the 160 IQ beats the guy with the130 IQ.”The point being that emotionalintelligence and avoiding mistakes is just asimportant as IQ when it comes to investing.Here’s a list of some of the most commonbehavioral mistakes investors make, and a fewtips on how to avoid them.

• Over confidence- Investors often overestimate their knowledge and skill, leadingto overly aggressive bets and lack ofdiversification. Tip: Think critically andevaluate investments from as manyperspectives as possible. Ask yourself if youhave the expertise or have done enoughresearch to justify the level of confidenceyou feel. If the answer is no, you may wantto hold off making that investment.

• Loss aversion- The fear of loss often leadsto the selling of assets at the worst possibletime, also known as “panic-selling.” Tip:Evaluate each investment on its own meritand ask yourself if the fundamentals havechanged before hitting the panic button andselling. It’s not unusual for stocks toexperience periodic sell-offs, and if thefundamentals haven’t changed it may betime to consider buying more rather thanselling.

• Herding- Though we are often unconsciousof it, the human tendency is to "go with thecrowd." This leads to investment decisionsbased on what everyone else is doing,which is often buying at the top of the

market and selling at the bottom. Tip: Askyourself what is the basis for a popular trend tocontinue, and if the trend is so well known is thevalue already reflected in the investment’sprice.

• Confirmation bias- The tendency to onlyseek out information that supports ourcurrent beliefs. For example, investors thatbelieve the market will rise, tend to onlyseek out news and information that supportsthat view. Tip: Play devil’s advocate andseek out opinions that differ from your own.If it still seems like a good investment go forit.

Here are a few more ideas that will also helpyou become a better than average investor:

• Create an Investment Policy Statement(IPS). An IPS will keep you focused on yourlong-term investment objectives and avoidoverreacting to the short-term news cycle. Agood IPS should reflect your own financialgoals and needs, including your preferencefor risk and return, your time horizon,liquidity needs and other unique factors.

• Keep your costs low. A recent Morningstarstudy, Predictive Power of Fees: WhyMutual Fund Fees Are So Important,concluded that “the expense ratio is themost proven predictor of future fundreturns.”

• Develop a disciplined investmentprocess that you can consistentlyimplement over the long-term. A goodinvestment process should document howyou will make investment decisions beforeyou are actually required to do so, makingyou less prone to making the behavioralmistakes discussed above.

If picking your own investments seem toodaunting, don’t worry there are other goodoptions available. Simply invest in broad indexfunds at a very low cost that will match themarkets performance, or consider working withan experienced investment advisor that willremain objective and invest as a fiduciary inyour best interest. Both options should put youwell ahead of the “ average ” investor!

Page 1 of 4

Going Public: An IPO's Market Debut May Not Live Up to the HypeAn initial public offering (IPO) is the first publicsale of stock by a private company. Companiestend to schedule IPOs when investors arefeeling good about their financial prospects andare more inclined to take on the risk associatedwith a new venture.

Thus, IPOs tend to reflect broader economicand market trends. And not surprisingly, 2017was the busiest year for the global IPO marketsince 2007.1

Company insiders who have been waiting forthe opportunity to cash out may have the mostto gain from an IPO. The higher the price set onIPO shares, the more money the company andits executives, employees, and early investorsstand to make.

Nevertheless, the IPO process is important tothe financial markets because it helps fuel thegrowth of young companies and adds newstocks to the pool of potential investmentopportunities.

IPO market trendsNewer, smaller companies have traditionallyused IPOs to raise capital for expansion.However, some companies are relying onprivate capital to fund their early growth anddevelopment, so they can wait longer to testpublic markets. These companies oftenbecome larger, more mature, and morevaluable before they are publicly traded.

This trend may help explain why the amount ofmoney raised through IPOs has increased overthe past decade, even as the number of newIPOs has waned. From 2007 to 2016, thenumber of corporate IPOs averaged 164 peryear, down 47% from the previous decade. Butaverage annual IPO proceeds rose 82% overthe same period to $284 million.2

A privately held company with an estimatedvalue of $1 billion or more is often called a"unicorn," and it's estimated that there are nowmore than 200 of them in the technology sectoralone.3

Since the term was first coined in late 2013,unicorns have received most of the media'sattention, even though they still make up arelatively small part of the IPO market. Theproceeds of 18 unicorn IPOs accounted for 5%of the capital raised from 2014 through 2016.4

Pop or fizzleWhen IPO share prices shoot up on the firstday of exchange trading, it's referred to as a"pop." A significant first-day gain may suggestthat investor demand for the company's shareswas underestimated. Of course, this doesn'tmean that the company will outperform itspeers in the long run.

One catch is that it is often difficult to obtain"allocated" stock. Investors who don't have theopportunity to buy shares at the offering price —the price at which insiders are selling to themarket — can buy the stock after it starts tradingon the exchange. However, much of an IPO'spop can take place between its pricing and thefirst stock trade. This means investors who buyshares after trading starts often miss out on alarge part of the appreciation.

Investors who buy IPO shares on the first daymight even pay inflated prices because that'swhen media coverage, public interest, anddemand for the stock may be greatest. Shareprices often drop in the weeks following a largefirst-day gain as the excitement dies down andfundamental performance measures such asrevenues and profits take center stage.

Back to realityA young company may have a limited trackrecord, and an established one may have todisclose more information to investors after itbecomes publicly traded. If you're interested inthe stock of a newly public company, youshould have a relatively high risk tolerancebecause shares can be especially volatile in thefirst few months after an IPO. You might evenconsider waiting until you can evaluate at leasttwo quarters of earnings.

The return and principal value of all stocksfluctuate with changes in market conditions.Shares, when sold, may be worth more or lessthan their original cost. Investments offering thepotential for higher rates of return also involve ahigher degree of risk.1, 4 EY, 2017

2-3 Bloomberg.com, September 11, 2017

The IPO process is importantto the financial marketsbecause it helps fuel thegrowth of young companiesand adds new stocks to thepool of potential investmentopportunities.

Page 2 of 4, see disclaimer on final page

Protect Your Heirs by Naming a Trust as IRA BeneficiaryOften, tax-qualified retirement accounts such asIRAs make up a significant part of one's estate.Naming beneficiaries of an IRA can be animportant part of an estate plan. One option isdesignating a trust as the IRA beneficiary.

Caution: This discussion applies to traditionalIRAs, not to Roth IRAs. Special considerationsapply to beneficiary designations for Roth IRAs.

Why use a trust?Here are the most common reasons fordesignating a trust as an IRA beneficiary:

• Generally, inherited IRAs are not protectedfrom the IRA beneficiary's creditors. However,IRA funds left to a properly drafted trust mayoffer considerable protection against thecreditors of trust beneficiaries.

• When you designate one or more individualsas beneficiary of your IRA, thosebeneficiaries are generally free to dowhatever they want with the inherited IRAfunds, after your death. But if you set up atrust for the benefit of your intendedbeneficiaries and name that trust asbeneficiary of your IRA, you can retain somecontrol over the funds after your death. Yourintended beneficiaries will receivedistributions according to your wishes asspelled out in the trust document.

• Through use of a trust as IRA beneficiary,you may "stretch" IRA payments over thelifetimes of more than one generation ofbeneficiaries. Payments to IRA trustbeneficiaries must comply with distributionrules depending on the type of IRA plan.

What is a trust?A trust is a legal entity that you can set up anduse to hold property for the benefit of one ormore individuals (the trust beneficiaries). Everytrust has one or more trustees charged with theresponsibility of managing the trust propertyand distributing trust income and/or principal tothe trust beneficiaries according to the terms ofthe trust agreement. If the trust meets certainrequirements, the beneficiaries of the trust canbe treated as the designated beneficiaries ofyour IRA for purposes of calculating thedistributions that must be taken following yourdeath.

Special rules apply to trusts as IRAbeneficiariesCertain special requirements must be met inorder for an underlying beneficiary of a trust toqualify as a designated beneficiary of an IRA.The beneficiaries of a trust can be designatedbeneficiaries under the IRS distribution rulesonly if the following four trust requirements are

met in a timely manner:

• The trust beneficiaries must be individualsclearly identifiable from the trust document asdesignated beneficiaries as of September 30following the year of the IRA owner's death.

• The trust must be valid under state law. Atrust that would be valid under state law,except for the fact that the trust lacks a trust"corpus" or principal, will qualify.

• The trust must be irrevocable, or by its termsbecome irrevocable upon the death of theIRA owner.

• The trust document, all amendments, and thelist of trust beneficiaries must be provided tothe IRA custodian or plan administrator byOctober 31 following the year of the IRAowner's death. An exception to this rulearises when the sole trust beneficiary is theIRA owner's surviving spouse who is 10 yearsyounger than the IRA owner, and the IRAowner wants to base lifetime requiredminimum distributions (RMDs) on joint andsurvivor life expectancy. In this case, trustdocumentation should be provided beforelifetime RMDs begin.

Note: Withdrawals from tax-deferred retirementplans are taxed as ordinary income and may besubject to a 10% federal income tax penalty ifwithdrawn by the IRA owner prior to age 59½,with certain exceptions as outlined by the IRS.

Disadvantages of naming a trust as IRAbeneficiaryIf you name your surviving spouse as the trustbeneficiary of your IRA rather than naming yourspouse as a direct beneficiary, certainpost-death options that would otherwise beavailable to your spouse may be limited orunavailable. Naming your spouse as primarybeneficiary of your IRA provides greater optionsand maximum flexibility in terms of post-deathdistribution planning.

Setting up a trust can be expensive, andmaintaining it from year to year can beburdensome and complicated. So the cost ofestablishing the trust and the effort involved inproperly administering the trust should beweighed against the perceived advantages ofusing a trust as an IRA beneficiary. In addition,if the trust is not properly drafted, you may betreated as if you died without a designatedbeneficiary for your IRA. That would likelyshorten the payout period for requiredpost-death distributions.

While trusts offer numerousadvantages, they incur up-frontcosts and often have ongoingadministrative fees. The use oftrusts involves a complex webof tax rules and regulations.You should consider thecounsel of an experiencedestate planning professionaland your legal and tax advisersbefore implementing suchstrategies.

Page 3 of 4, see disclaimer on final page

Accredited WealthManagementSteve Giacobbe, CFA, CFP®6010 Brownsboro Park Blvd.Louisville, KY 40207502-290-1905sgiacobbe@accreditedwm.comwww.accreditedwm.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018

IMPORTANT DISCLOSURES

Accredited Wealth Managementprovides this information for educationalpurposes only; it is not intended to bespecific to any individual's personalcircumstances.

To the extent that this materialconcerns tax matters, it is not intendedor written to be used, and cannot beused, by a taxpayer for the purpose ofavoiding penalties that may be imposedby law. Each taxpayer should seekindependent advice from a taxprofessional based on his or herindividual circumstances. To the extentthat this material concerns legalmatters, individuals should consult theappropriate legal counsel given theirparticular situation.

These materials are provided forgeneral information and educationalpurposes based upon publicly availableinformation from sources believed to bereliable—we cannot assure the accuracyor completeness of these materials.The information in these materials maychange at any time and without notice.

What is the difference between a tax deduction and atax credit?Tax deductions and credits areterms often used togetherwhen talking about taxes.While you probably know that

they can lower your tax liability, you mightwonder about the difference between the two.

A tax deduction reduces your taxable income,so when you calculate your tax liability, you'redoing so against a lower amount. Essentially,your tax obligation is reduced by an amountequal to your deductions multiplied by yourmarginal tax rate. For example, if you're in the22% tax bracket and have $1,000 in taxdeductions, your tax liability will be reduced by$220 ($1,000 x 0.22 = $220). The reductionwould be even greater if you are in a higher taxbracket.

A tax credit, on the other hand, is adollar-for-dollar reduction of your tax liability.Generally, after you've calculated your federaltaxable income and determined how much taxyou owe, you subtract the amount of any taxcredit for which you are eligible from your taxobligation. For example, a $500 tax credit willreduce your tax liability by $500, regardless ofyour tax bracket.

The Tax Cuts and Jobs Act, signed into law latelast year, made significant changes to theindividual tax landscape, including changes toseveral tax deductions and credits.

The legislation roughly doubled existingstandard deduction amounts and repealed thededuction for personal exemptions. The higherstandard deduction amounts will generallymean that fewer taxpayers will itemizedeductions going forward.

The law also made changes to a number ofother deductions, such as those for state andlocal property taxes, home mortgage interest,medical expenses, and charitable contributions.

As for tax credits, the law doubled the child taxcredit from $1,000 to $2,000 for each qualifyingchild under the age of 17. In addition, it createda new $500 nonrefundable credit available forqualifying dependents who are not qualifyingchildren under age 17. The tax law provisionsexpire after 2025.

For more information on the various taxdeductions and credits that are available to you,visit irs.gov.

I received a large refund on my tax return this year.Should I adjust my withholding?You must have beenpleasantly surprised to find outyou'd be getting a refund fromthe IRS — especially if it was a

large sum. And while you may have consideredthis type of windfall a stroke of good fortune, isit really?

The IRS issued over 112 million federal incometax refunds, averaging $2,895, for tax year2016.1 You probably wouldn't pay someone$240 each month in order to receive $2,900back, without interest, at the end of a year. Butthat's essentially what a tax refund is — ashort-term loan to the government.

Because you received a large refund on yourtax return this year, you may want to reevaluateyour federal income tax withholding. That wayyou could end up taking home more of your payand putting it to good use.

When determining the correct withholdingamount, your objective is to have just enoughwithheld to prevent you from having to owe alarge amount of money or scramble for cash attax time next year, or from owing a penalty forhaving too little withheld.

It's generally a good idea to check yourwithholding periodically. This is particularlyimportant when something changes in your life;for example, if you get married, divorced, orhave a child; you or your spouse change jobs;or your financial situation changes significantly.

Furthermore, the implementation of the new taxlaw at the beginning of 2018 means yourwithholding could be off more than it might be ina typical year. Employers withhold taxes frompaychecks based on W-4 information and IRSwithholding tables. The IRS released 2018calculation tables reflecting the new rates andrules earlier this year. Even so, the old W-4 andworksheet you previously gave to youremployer reflect deductions and credits thathave changed or been eliminated under thenew tax law.

The IRS has revised a useful online withholdingcalculator that can help you determine theappropriate amount of withholding. You stillneed to complete and submit a new W-4 toyour employer to make any adjustments. Visitirs.gov for more information.1 Internal Revenue Service, 2018

Page 4 of 4