Ed Kadala

Comments

• This is what I like about Humble Dollar, being able to interact with other readers, whose opinions I very much appreciate & value. Your points are valid. As far as an actively managed ETF, there are narrow benchmarks to compare performance to. I'm familiar with the management of the ETF, since they managed my SMA. It would be prudent to research the management team of any new fund and gain a level of conviction before investing in it. I think my next article will be on Bitcoin. I have a new perspective after reading "The little Book of Bitcoin" by Anthony Scaramucci.

  Post: 351 Exchange – Tax-Free Transfer of Individual Stocks to an ETF

  Link to comment from October 18, 2025

• Michael, thank you for your comment. On whether the cost basis in the ETF would be stepped up to heirs, the answer is yes as long as the ETF is included in the decedent’s estate. The basis is stepped up (or down) to the fair market value at the date of death (§1014 of the Internal Revenue Code). I completed 3 tax loss harvesting events while owning the SMA. I didn’t wait until the end of the year, but instead did them when there was a reasonable loss to be worth the effort, e.g., record keeping, completing tax forms, etc. Each time, on average, the value of stocks sold advanced slightly more during the 30-day period than at the time of sale. So did the index fund I bought in their place (which provided a realized short-term capital gain). So, I’d call it about even, while harvesting the losses. So that worked out well. The timing was a gut call. Yes, I will lose that capability, but when factoring the size of this investment to my overall portfolio, it only had a marginal impact. That’s one reason I opted for simplicity and consolidation. In the future I hope to exchange this focused growth ETF to a more broad-based fund. 

  Post: 351 Exchange – Tax-Free Transfer of Individual Stocks to an ETF

  Link to comment from October 18, 2025

• Bogdan, thank you for your interest. I am not an expert on the process. I worked with my financial consultant, who works for a wealth management firm and alerted me of this opportunity. From what I gathered many of the firm's clients participated in this exchange. They provided me a Primer on the 351 exchange, described the process, answered my questions and handled all the paperwork. Bottom line is you need to become aware of an investment management company that is establishing a new ETF using a 351 exchange where you can participate in seeding the ETF with securities. Polen, Cambria, Alpha Architect and Longview are a few companies that have launched ETFs using a 351 exchange and more will follow. The process was straight forward for me since the same company that managed my separate managed account (SMA) started the ETF and handled the transactions. Shares were removed from the SMA and exchange for shares in the ETF without triggering a taxable event. Capital gains carried over. I tracked the process and recordkeeping online through my brokerage (custodian) account and loaded the pertinent data into Quicken. There were no additional costs to me. The ETF expense fee is actually 0.01% less than the SMA fee.

  Post: 351 Exchange – Tax-Free Transfer of Individual Stocks to an ETF

  Link to comment from October 17, 2025

• For you folks interested in AI, check out: ‘The Coming Wave, Technology, Power and the 21st Century’s Greatest Dilemma’ by Mustafa Suleymen. Bill Gates, et al, recommended this book in a WSJ article. Suleymen is co-founder of Deepmind an AI company bought by Google. He became vice president of AI product management and policy at Google. I asked ChatGPT to summaries the book.   The book describes how artificial intelligence is becoming a “meta-technology” — a kind of master tool that will supercharge progress in almost every field. He explains that today’s large language models (like ChatGPT) are just the start; the next generation, which he calls Artificial Capable Intelligence (ACI), will be able to plan, make decisions, and carry out complex real-world tasks on its own. AI is already speeding up drug discovery, helping diagnose rare diseases, and driving new breakthroughs in science. Combined with robotics, it could transform industries from farming to shipping, while advances like quantum computing may make AI even more powerful — and also threaten current cybersecurity. Suleyman also warns about what he calls the “Gorilla Problem”: just as humans vastly outthink gorillas, future AI might surpass human intelligence so much that we can’t control it. Because AI is made of software and can spread easily, it’s harder to “contain” than physical inventions like nuclear technology. He argues that the coming wave of AI and related tech — robotics, biotech, quantum computing — will bring huge benefits but also serious risks, so we need to think now about how to steer it safely.

  Post: Are We an AI-Driven Economy?

  Link to comment from August 14, 2025

• For many years a portion of our portfolio has been managed by a financial advisor whose fee was based on a percent of assets under management (AUM). He taught me a lot about investing, to understand what’s a signal and what’s noise, introduced me to investment ideas and asset allocation, tax loss harvesting, Roth conversions, etc. As I gained knowledge, experience and confidence, I built up to managing over 50% of our portfolio. We think a lot alike, both leaning toward value investing and are firm believers in diversification. My advisor was always available to discuss questions and provide advice if asked even on the portion of funds I oversaw. When he did end-of-year reviews he would include my portion for an overall analysis and assessment. I read extensively about investing and behavioral finance, leaning toward a Bogle Head type investor. A few years ago, after reading Charlie Ellis’ book “Figuring it Out”, I thought about the fee structure based on a percent of AUM. As Ellis mentions, if a portfolio returns 7% for the year and the advisor’s fee is 1% of AUM, that’s 15% of your profit going to the advisor. This fee structure was unrelated to the level of interaction. There was redundancy between what I and my advisor did. I had complete oversite of our portfolio using Quicken and our online brokerage accounts. I used TurboTax to file our taxes. I tracked our portfolio performance, asset allocation and reviewed our realized and unrealized capital gains for opportunities for tax loss harvesting. My advisor enlightened me about Roth conversions where we would coordinate and each handled the respective funds we managed. I decided I could handle all the transactions. I am a fairly disciplined investor and don’t need hand-holding during market turbulence. What I needed at this point was for my advisor to act as a consultant and provide a second opinion in evaluating our asset allocation and portfolio risk and in making informed financial decisions. This included periodic review of our total investment portfolio using financial tools he has access to such as Blackrock Portfolio Summary and Scenario Tester. He and his team would then offer suggestions and recommendations within our risk tolerance profile and future goals. I’d get the benefit of some really smart financial professionals within his firm providing guidance. In addition, I want him to perform future value analysis to support various financial decisions such as when to take social security, and offer candid feedback even if it challenges my current strategy. I drafted an agreement of roles and responsibilities and we negotiated a yearly fixed rate. His firm doesn’t provide fee-for-service. Another benefit from this arrangement is I get the reduced fee structures (institutional rate) for various investments his firm has negotiated. 

  Post: Finding Flat-Fee Financial Advisors

  Link to comment from July 13, 2025

• It’s great to see the interest in sharing reviews of books that HumbleDollar readers feel are relevant to the community. As Jonathan mentioned, book reviews are welcomed as regular Forum posts. But, in my “humble” opinion (I couldn’t resist), it would be helpful to have a dedicated section for book reviews, similar to the one set aside for Articles. Otherwise, these posts can easily get buried within the broader Forum discussions. A dedicated space would make it easier for readers to browse and discover titles others have found valuable. I’m not familiar with the level of effort required to modify the site to enable this suggestion, but if it’s feasible, I think it would be a nice addition to HumbleDollar.

  Post: Sharing What We Read: Book Reviews for HD Readers

  Link to comment from May 7, 2025

• This is a follow-up comment to my earlier comment on Adam’s article. I read an interesting article in Forbes.com titled “Why Private Equity Is Betting On Tokenization” by Azeem Khan, dated May 04, 2025. By tokenizing private investments Wall Street firms find a slick way to distribute illiquid, risky and potentially non-profitable assets to the public under the guise of block-chain technology. Here’s a ChatGPT summary of Khan’s article: Over the past decade, private equity (PE) firms thrived in an environment of low interest rates and easy capital, rapidly expanding their holdings across real estate, healthcare, tech, and infrastructure. Assets under management surged past $13 trillion by 2022. But by 2025, the macroeconomic climate has reversed: inflation remains persistent, interest rates are high, and liquidity has dried up. Traditional exit routes—IPOs, acquisitions, and secondary sales—have stalled, leaving PE firms sitting on vast portfolios they can’t easily monetize. In this new landscape, tokenization is emerging not just as a novel innovation but as a strategic necessity. By converting illiquid assets into blockchain-based digital tokens, firms can fractionalize ownership, enable round-the-clock trading, and potentially tap a broader global investor base. Major financial institutions like BlackRock and Franklin Templeton are already building tokenized fund structures, signaling a broader shift toward blockchain infrastructure. Crucially, this shift isn’t being driven by a sudden love for blockchain—it’s being driven by pressure and need. Firms are turning to tokenization because they need new "liquidity rails" for assets that no longer have viable exit paths. The technology is becoming a distribution tool for offloading hard-to-sell holdings, especially to retail investors, who are being invited into markets that were previously the domain of large institutions. That’s why understanding the motivations behind tokenization is vital. While it may democratize access and improve capital efficiency, it also risks becoming a mechanism for transferring illiquidity and valuation risk to less sophisticated investors under the guise of innovation. Without adequate regulation and investor protections, tokenization could mask deep structural problems in private markets.

  Post: Suffering in Private

  Link to comment from May 5, 2025

• Excellent article, Adam. This topic—does PE outperform publicly available investments—has interested me as I’ve had the opportunity to invest in private markets, but have remained skeptical. Having read various articles on the subject, I’ve reached the same conclusion as you have. I also perceive that PE is a way for wealth management firms to lock in clients and collect fees, since it’s difficult to leave a firm that has an investment association with a PE firm in which you are invested. The long lock-up periods inherent in PE investments reduce portability (clients staying with the firm) benefiting the advisor and in some cases more than the client. As expense fees have been reduced with the advent of index funds and ETFs, Wall Street has had to innovate—often cleverly—to protect and grow its fee base. PE investments have emerged as a profitable approach offering firms a means to reclaim margin lost to low-cost passive products. While some private equity funds have outperformed public benchmarks, persistent outperformance is rare, especially net of fees. The lack of transparency, high costs, and illiquidity make it difficult for the average investor to fully evaluate risk-adjusted returns. In many cases, the theoretical premium for illiquidity simply doesn’t materialize once all costs are accounted for. I recalled Charles Ellis broaching this subject in his book “Figuring it Out”. So, I asked ChatGPT to summarize Ellis’ position (a faster and more accurate approach than myself trying to):    1.    Illusion of Outperformance: Ellis argues that private equity (PE) and other private funds often appear to outperform due to the way returns are reported. Private funds use Internal Rate of Return (IRR), which can be misleading because it assumes reinvestment at the same high rate and ignores the timing of capital deployment. Public funds report time-weighted returns, which are more reflective of actual investor experience. 2.    Risk and Liquidity Premiums: While private investments do offer some premium, Ellis points out that much of their “excess return” can be attributed to illiquidity, concentration, and leverage—not superior skill. Essentially, you’re getting paid more because you’re taking on more risk and giving up liquidity, not because the investments are inherently better. 3.    Selection Bias: Ellis highlights survivorship and selection bias in private fund reporting. Underperforming funds are less likely to be included in performance databases, and firms selectively market only their best-performing funds. 4.    Declining Alpha Over Time: He emphasizes that as private equity has become more popular and capital has flooded into the space, the opportunity for consistent outperformance (alpha) has diminished. Competition has driven up prices and reduced the inefficiencies that early PE funds once exploited. 5.    Access and Fees: Ellis also critiques the high fees of private funds—typically “2 and 20” (2% management fee, 20% of profits)—which erode returns. He argues that these fees, combined with opaque reporting and limited liquidity, make private funds less attractive for most investors compared to low-cost index funds. Ellis’s overall conclusion is that the average investor is unlikely to benefit from private funds, especially when compared to the simplicity, liquidity, and transparency of public market index investing.

  Post: Suffering in Private

  Link to comment from May 3, 2025

• This past tax filing I was looking for clarification in completing Form 1040, line 4a “IRA distribution” and 4b “Taxable amount”. Our IRA distribution consisted of non-taxed funds rolled over into our Thrift Savings Plan (similar to a 401k) for civil servants, proceeded by converting the non-deductible funds into our Roth accounts. I carefully read the instructions that address these two lines. The instructions were fairly clear, but I still wasn’t 100% sure on the interpretation of the “Exceptions”.  So, I called the IRS before the end of the tax year, thinking they shouldn’t be overwhelmed by tax filers with questions. Well, getting to talk to an agent was quite a challenge between having to wait over 45 minutes just to get to the section that handles these types of questions to being hung up on as I was being transferred. This happened more than once. So, I decided to check with AI ChatGPT and received a coherent and straight forward explanation, which was how I had interpreted the rules. I still pursued having a discussion with an IRS agent and I finally got a hold of one. All they did was read the instructions back to me, really not much help. So, I asked the person if they were familiar with AI ChatGPT and they said no and didn’t have much interest in it. As I hung up the phone I thought, this person may be out of a job whenever the IRS employs AI. I used TurboTax to complete our tax return and it handled the required inputs and outputs and even typed “ROLLOVER” next to line 4b as mentioned in the 1040 instructions.    

  Post: TCJA – What to Keep, What to Toss

  Link to comment from April 23, 2025

• If I was not in a rush, I would definitely request the store correct the pricing error. Not so much for my sake, but to alleviate other customers from being overcharged or hassled with getting a refund. In fact the other day I picked out an item in the frozen section at Costco. When checking out the price was a few dollars more than I recalled seeing. So I went back to check the price and then to customer service. The one lady behind the counter was busy with a customer who was taking forever. My wife said let’s go and I said I didn’t want others buying the product getting ripped off. So I asked if they could get another person to the counter since there was now a line behind me. Another person came to help and sent someone with me to check the price. Well, the price I saw was on the shelf containing the stack of items, where the actual price was on the shelf above. My mistake,10 minutes lost. I’ll be more careful next time. 

  Post: Getting Rolled

  Link to comment from September 19, 2024