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KKM Financial’s Essential 40 stock fund is now an ETF

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2 hours ago

October 21, 2024

Business Finance News

The Nasdaq MarketSite in New York, US, on Monday, Sept. 16, 2024.

Yuki Iwamura | Bloomberg | Getty Images

KKM Financial has converted its Essential 40 mutual fund into an ETF, joining the growing shift by asset managers to a more tax-efficient fund model.

ETFs make it easier for investors and financial advisors with taxable accounts to choose when to create capital gains or losses. This differs from mutual funds, which can sometimes hit their investors with an unwanted tax bill due to withdrawals or portfolio changes.

“When you look at the tax efficiency of an ETF compared to a mutual fund, it is much more advantageous,” said Jeff Kilburg, founder and CEO of KKM and a CNBC contributor. “A lot of the wealth advisors that I work with really have issues with the capital gain distribution typical to a mutual fund.”

Many asset managers have been converting their mutual funds to ETFs in recent years, due in part to a 2019 SEC rule change that made it easier to run active investment strategies within an ETF. The number of active equity mutual funds has fallen to its lowest level in 24 years, according to Strategas.

More broadly, many asset managers are pushing the SEC to allow ETFs to be added as a separate share class within existing mutual funds.

The newly-converted KKM fund will trade on the Nasdaq under the ticker ESN. The goal of the Essential 40 is to allow investors to “buy what you use” in one equal-weighted fund, according to Kilburg. Its holdings include JPMorgan Chase, Amazon, Waste Management and Eli Lilly, according to FactSet.

“We believe without these companies, the U.S. economy would be hindered, or would be in trouble,” he said.

The old mutual fund version of the Essential 40 had a three star rating from Morningstar. Its best relative performance in recent years came in 2022, when it declined less than 11% — much better than the category average of about 17%, according to Morningstar.

Equal-weighted funds can often outperform market-cap weighted indexes during downturns. They’ve also been a popular strategy this year, due in part to concerns that the market was too reliant on the so-called Magnificent 7 stocks. The Invesco S&P 500 Equal Weight ETF (RSP) has brought in more than $14 billion in new investor funds this year, according to FactSet.

In 2024, the KKM fund was up about 16% year to date before its conversion, with roughly $70 million in assets, according to FactSet.

The ETF will have a net expense ratio of 0.70%, equal to that of the old mutual fund.

Finance

Why some Americans will receive an extra Social Security check in November

Published

3 hours ago

October 21, 2024

Business Finance News

Ramsey Solutions personality Jade Warshaw breaks down how to get the most out of your Social Security check and more on The Bottom Line.

Some Americans will receive two Social Security payments in November due to a quirk in the system that results in a second monthly payment on rare occasions.

Typically, the Social Security Administration (SSA) sends out one payment each week, delivering Social Security checks on the second, third and fourth Wednesdays of each month. Then it pays Supplemental Social Security Income (SSI) – which provides support for disabled people and older Americans with low incomes – on the first of the month unless it falls on a weekend or holiday.

Because Dec. 1 falls on a Sunday, SSI recipients will receive two payments in the month of November. The first check will arrive on Friday, Nov. 1, while the second check will come on Friday, Nov. 29.

Roughly 7.4 million Americans collect SSI benefits. The back-to-back deposits do not mean retirees are receiving extra money – it’s just an early payment for the following month.

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Some Social Security recipients will get an extra check in November due to the calendar quirk. ((Photo illustration by Kevin Dietsch/Getty Images) / Getty Images)

Social Security recipients recently learned the size of the cost-of-living adjustment (COLA) they will receive for 2025, which will be smaller than this year’s.

The Social Security COLA for 2025 will be 2.5%, which is the smallest since 2021. That means Social Security retirement benefits will, on average, increase by roughly $50 per month starting in January, the SSA said earlier this month.

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The Social Security Administration’s schedule shows SSI payments will be disbursed on Nov. 1 and Nov. 29. (Photo by: Jeffrey Greenberg/Education Images/Universal Images Group via Getty Images / Getty Images)

“Social Security benefits and SSI payments will increase in 2025, helping tens of millions of people keep up with expenses even as inflation has started to cool,” said Social Security Commissioner Martin O’Malley.

Next year’s 2.5% COLA is less than the 3.2% adjustment that Social Security beneficiaries received in 2024, but would be roughly in line with the historical norm, as it’s averaged 2.6% over the last 20 years.

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Social Security recipients will receive a 2.5% COLA next year, raising average benefits by about $50 a month. (iStock / iStock)

Inflation has cooled over the past year, which reduced the size of the COLA as the pace of price growth slowed.

“This adjustment means older Americans will receive needed relief to help better afford essential items from groceries to gas,” AARP CEO Jo Ann Jenkins said in a statement. “Inflation took a financial toll this past year, particularly on retirees, who often rely on Social Security as a key source of income. Even with this adjustment, we know many older Americans who rely on Social Security may find it hard to pay their bills.”

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Beneficiaries saw an 8.7% increase in 2023, which was the largest since the early 1980s, due to surging inflation that had peaked at a 40-year high of 9.1% in June 2022.