Moral / Business Quandary For A Money Manager
I manage money for a very wealthy individual who tried my services out for a small amount, based on a friend's recommendation last January. My mission for him, and all he cared about was that I beat the S+P 500, something he hasn't found any of his investment advisors had been able to do.
When I received the funds to invest for him (Jan 15), the S+P sat at 1838, and is currently up at 2063, or a very healthy 12.24% gain.
I have invested his funds semi-conservatively from my perspective, until recently keeping much of it in cash, and am up almost 21% over that time, significantly beating the market averages.
Now, here is the dilemma. I can sell all, take a the proverbial knee, run out the clock, and even if the S+P continues to rise, I'll have still beat the market by the time Jan 15, 2015 rolls around, and I'll likely get a substantial amount more to invest.
Unfortunately, none of the gains made would be tax long term for my client. In fact, based on rather large gains I have especially in Apple, even if I knew that the stock would decline 3% over the next two months and hurt my "beat" my client would profit more overall from the lower tax rate if I were to sell it after a year's ownership. (to be considered long term gains, stocks must be sold a year or more after their initial purchase)
So, really there isn't much of a dilemma other than the fact that the game theory model of the world crosses my mind. I am there to serve my client, and my decisions must be made from that model not what's best for me.