The Intelligent Investor's Almanac
Your Bi-Weekly Guide to Markets, Movements, & Money.
Presented By Ken Majmudar & Ridgewood Investments
Issue 6 • May 16 to May 31, 2025
Never miss another valuable edition of The Intelligent Investor's Almanac again.
Your TL;DR Institutional Intelligence
- Risk Alert: Cyber fraud losses reached an all-time high of $16.6 billion in 2024, with seniors losing $4.8 billion alone.
- New Reality: Scammers now use AI to mimic voices, spoof emails, and craft highly personalized messages.
- Tax Drag Alert: Tax drag on dividends, interest, and capital gains can quietly erode over 1% from your annual compound return.
- Action Point: Plug that leak by holding long‑term, choosing low‑turnover investments, sheltering income assets in tax‑advantaged accounts and harvesting losses appropriately.
The Value Investor
Ken Majmudar, CFA & Founder of Ridgewood Investments
“The saddest aspect of life right now is that science gathers knowledge faster than society gathers wisdom.”
~ Isaac Asimov
When most people think of investment risk, they think of stock market volatility, interest rate changes, or economic cycles. But today, a new kind of risk is quietly eroding the financial security of thousands of Americans: highly sophisticated fraud powered by artificial intelligence.
In 2024, Americans lost over $16.6 billion to cyber fraud, according to the FBI’s Internet Crime Complaint Center (IC3). And seniors over 60? They accounted for nearly $4.9 billion of that loss.
What’s fueling this surge is something new: AI-powered deception. Scammers now use voice clones, fake emails, and real social data to create scams that feel urgent and familiar. These aren’t generic spam, they’re emotionally tailored, often impersonating loved ones or trusted brands using AI tools. From emergency cons to crypto fraud, the result is a wave of scams that are harder to spot and more personal than ever.
At Ridgewood, we help clients grow wealth thoughtfully. But our deeper purpose is helping you make decisions from a place of clarity and intention, not pressure or fear. If you take away one thing from this issue, let it be this: in a world of high-tech scams, your best defense isn’t software. It’s your mindset.
When to Be Cautious — And What to Do
- Unexpected link or attachment → Don’t click. Hover to preview the URL. Use Gmail warnings or browser security tools.
- Banks asking for personal info → Stop. No legitimate bank asks for SSN, PIN, or passwords via email or phone.
- Urgent message from family → Could be AI voice fraud. Call them back on a known number to confirm.
- A pop-up says, “Device infected.” → Don’t call or download. Close your browser and run an antivirus (e.g., Malwarebytes).
- “You’ve won a prize!” → Ignore. Never pay fees to claim winnings you didn’t sign up for.
- Unsolicited investment offer → Search the company + “scam.” Check with Ridgewood before acting.
- Want extra safety? → Consider cyber insurance for fraud and identity theft protection.
Best Cybersecurity Practices: Simple Steps That Make a Big Difference
At Ridgewood, we believe protecting your wealth also means protecting your digital presence. One of the best things you can do is to stay cautious and adopt a few good practices when it comes to cybersecurity. Always enable two-factor authentication (2FA) on your banking, investment, and email accounts; it adds a strong second layer of protection. If your device supports it, turn on biometric authentication like Face ID or fingerprint login. Use strong, unique passwords for each account, and avoid reusing old credentials; these are often the first to be targeted in data leaks.
Also, be alert when clicking on links, especially those sent by email or text. Before clicking, hover over the link to check where it leads. If something looks off or you weren’t expecting it, don’t click. When in doubt, verify directly with us at Ridgewood Investments or the organization in question using a trusted phone number or website.
Navigating High-Stakes Moments: Three Questions to Disarm Deception
What if you’re already in a high-pressure situation that feels urgent, personal, and deeply convincing?
That’s when it’s crucial to pause and switch from instinct to reflection.
Scammers think differently than we do. While we’re reacting in real time, they’ve already scripted the interaction. They don’t just craft the message, they engineer the moment and exploit what’s missing.
In those moments, your pause becomes your power. To guard against deception at the moment it matters most, use this simple mental checkpoint:
Dynastic Wealth – Tips on Preserving and Building Your Legacy
Tax Drag: The Silent Killer of Compounding
“Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t, pays it.”
~ Often attributed to Albert Einstein
We talk a lot about how to grow wealth. But today, let’s talk about how you unintentionally lose it, not through bad investments, but through inefficient tax strategy. The culprit? Something most investors rarely see coming: tax drag.
What is Tax Drag?
Tax drag refers to the reduction in investment returns due to taxes paid on capital gains, dividends, and interest. Even small inefficiencies, compounded over time, can significantly shrink your end wealth. Think of it as a slow leak in your compounding engine – barely visible, but quietly draining fuel.
How It Shows Up in Real Portfolios
Here are some of the most common ways tax drag quietly chips away at returns:
1. Mistimed Sales
Selling assets too early can trigger short-term capital gains, taxed at ordinary income rates (as high as 37% in the U.S.), compared to long-term gains, which are typically taxed at 0 to 20%.
Example: Selling a stock after 11 months instead of 12 could double your tax bill.
2. High-Turnover Funds
Actively managed mutual funds or ETFs with high turnover generate frequent taxable events, even if you never sold a single share. According to a study, some U.S. equity funds have turnover ratios exceeding 100%, exposing investors to year-round tax hits.
Pro tip: Consider tax-efficient index funds or ETFs with lower turnover and “in-kind” redemption benefits.
3. Dividends in Taxable Accounts
Qualified dividends may be taxed favorably, but interest from bonds, REITs, or non-qualified dividends can be taxed at higher rates, especially when held in taxable brokerage accounts.
Smart move: Place income-heavy assets in tax-deferred (401k) or tax-free (Roth IRA) accounts. This is called the asset location strategy.
4. Lack of Tax-Loss Harvesting
Not harvesting your losses strategically during down years means missing out on deductions that could offset gains elsewhere in your portfolio.
According to MIT research, tax-loss harvesting can improve after-tax returns by 0.85%–1.10% annually over time.
Why It Matters for Dynastic Wealth
When you’re building wealth that’s meant to last generations, small inefficiencies have outsized impacts. A portfolio that compounds at 7% annually vs. 6% due to tax drag may end up with over 60% more wealth in 30 years. That difference could be the legacy you pass on or the taxes you paid along the way.
Sometimes, Tax Drag Is Worth It
There are a few moments when tax drag could be the wise thing to do. For example, you might sell a stock before the one-year mark (and trigger a higher tax rate) because it no longer fits your long-term plan or because you need liquidity for a major life goal. Other times, rebalancing a portfolio or funding a charitable donation might justify a tax event in service of a greater financial purpose.
The point isn’t to avoid taxes at all costs. It’s to avoid unnecessary taxes, the kind that happen not because of thoughtful strategy, but because of unintentional habits.
Why Do Smart People Still Fall into Tax Drag?
Even very smart and thoughtful investors sometimes end up paying more in taxes than they need to. Why does that happen?
It’s not because they don’t know better, it’s because human nature gets in the way. According to behavioral finance expert Meir Statman, we tend to treat money differently depending on how we feel about it. This is called “mental accounting.”
For example, you might hold onto a winning stock because it feels good, even if selling it now would save you taxes later. Or you might ignore a small loss, even though it could help reduce taxes on gains. These decisions aren’t always logical, but they feel right in the moment.
The truth is, we’re not always purely rational. Emotions like pride, fear, or regret can quietly influence our choices. That’s why building a clear, intentional plan and sticking to it is so important for long-term wealth.
What We Recommend at Ridgewood
At Ridgewood, we help clients design portfolios that aren’t just built for returns, they’re smartly structured for tax efficiency, too. Here’s how we reduce tax drag for our clients:
Hold for the long term whenever possible
Favor tax-efficient ETFs and index funds
Place tax-inefficient assets in the right accounts
Harvest tax losses appropriately as needed
Coordinate gains with life events or income dips
The bottom line? You don’t need to take more risks to earn more. You just need to keep more of what you already earn.
Here’s to building lasting wealth,
Ken Majmudar, CFA
Founder & Chief Investment Officer Ridgewood Investments
P.S. If you’re ready to explore how our institutional-grade investment approach can work for your portfolio, let’s schedule a time to talk below.
Gain Industry – Level Intelligence For Your Investment Strategy
Transform your approach to wealth building with institutional-grade insights. Schedule a private discovery call with Ken and the Ridgewood team to:
- Analyze your current portfolio positioning
- Explore sophisticated investment opportunities
- Design your personalized wealth architecture
Building generational wealth requires institutional-grade thinking. Let’s discuss how our sophisticated approach can work for your family’s future.
Important Disclosure: Ridgewood Investments is a registered investment adviser. This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results.