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Author: Nathaniel Kangpan

  • Private Real Estate Funds: Tax Benefits, Income, and What to Watch Out For

    If you’re trying to live off portfolio income, you need to bring together stable, after-tax income from diversified sources. And very few asset classes look better on paper for this purpose than mature, cash-flowing real estate properties.

    I’ve always wanted to own a broadly diversified real estate portfolio for the predictable, monthly income. But, as Sheila can attest to, my handyman skills don’t extend much beyond putting together Ikea furniture and hanging the paintings we find antiquing. 

    Enter Private Real Estate Funds.

    In this primer we’ll cover:

    • What is a Private Real Estate Fund?
    • The three key benefits they can bring to a portfolio
    • The downsides of this asset class

    What is a Private Real Estate fund?

    As the name implies, Private Real Estate funds are investment vehicles that primarily invest in… real estate. This could be any type of real estate from multi-family housing to data centers. 

    Since the underlying assets are physical properties charging rent, returns from these funds typically include a meaningful dividend yield as well as underlying appreciation of the assets over time. 

    These funds are typically managed by an outside investor who charges a fee for sourcing and managing the underlying investments. Private funds are not traded on stock exchanges but can be purchased through certain financial advisors. The partnerships we’ve developed ensure clients of Kangpan & Co. have access to many of the same institutional funds that the private investment arms of large banks do. 

    Before we dig into the characteristics that make Private Real Estate funds a core component of the Personal Endowment investment portfolio, I need to note that these funds are generally for accredited investors as defined by the SEC. This post is for educational purposes only and is not an investment recommendation or endorsement of anything specific strategy or fund. Kangpan & Co. is a fee-only RIA, we do not accept commissions or any other form of compensation from fund providers. We like our recommendations to clients to be free from conflicts of interest.

    Now let’s get to three ways these funds can benefit a portfolio.

    Benefit 1: Diversification vs. Other Core Assets

    If you’re trying to build a portfolio that generates income across different types of economic environments, you need genuine diversification. Investments need to have returns with low long-term correlations to each other so that when a shock hits, your entire portfolio doesn’t move in the same direction at once.

    This is the canonical argument for holding both stocks and bonds. But as 2022 demonstrated clearly, a two-asset portfolio has real limits. When inflation drove interest rates sharply higher, both stocks and bonds fell simultaneously, leaving portfolios that assumed low correlation between the two with nowhere to hide. 

    Private real estate has historically shown low correlation to both public equities and fixed income. According to an analysis from CAIS, private real estate returns have had a correlation of approximately 0.11 to the S&P 500 and -0.28 to the Bloomberg Aggregate Bond Index over a recent 15-year period.

    The economic drivers of real estate returns – rental income, occupancy rates, property values – respond to different forces than corporate earnings or interest rate movements, even if they’re not entirely immune to macro conditions. 

    This doesn’t mean private real estate is uncorrelated to everything all the time. A severe recession can affect private real estate too. But adding it to a portfolio of dividend equities and fixed income creates a third set of return drivers (which is the point). 

    Our Personal Endowment portfolios incorporate real estate positions by default as well as additional asset classes to further diversify income sources.

    Benefit 2: Tax-Deferred Income

    Much like an individual investing directly in an apartment building, certain non-cash expenses like depreciation are deducted from the income generated by properties owned by private real estate funds. 

    These deductions get wrapped into what’s known as Return of Capital, or ROC. ROC distributions aren’t taxed as current income. Instead they reduce the cost basis of your investment over time, deferring the tax liability until you eventually sell. Potentially at lower long-term capital gains rates rather than ordinary income rates.

    For someone living off portfolio income, or for anyone in a meaningful tax bracket, this distinction is significant. 

    Here’s how this works in practice.

    Let’s say you’re in the 35% federal tax bracket and pay state taxes of 5.0%. We’ll ignore NIIT and local taxes for now to keep things simple.

    Scenario 1: You have $300k in a taxable corporate bond fund that yields 4.5%. 

    • $300k * 4.5% yield = $13,500 in pre-tax income
    • $13,500 * 40% combined tax rate = ~$5,400 in taxes
    • Leaving you with $8,100 after-tax income

    Scenario 2: Let’s look at the same math with a Private Real Estate fund that also yields 4.5% but 80% of it categorized as ROC.

    • $300k * 4.5% yield = $13,500 in pre-tax income
    • $13,500 * (1-80% ROC) = $2,700 in taxable income
    • $2,700 taxable income *  40% tax rate = $1,080 in taxes
    • Leaving you with $12,420 after-tax income

    Same yield. Same tax bracket. $4,320 more in your pocket annually simply from how the income is classified. On $300,000 that’s a 53% improvement in after-tax income from a single asset class. 

    Keep in mind, this example was only looking at the yield of a private real estate fund and not underlying appreciation of the fund’s properties which can add even more to the total return over time.

    ROC can range significantly between funds and shouldn’t be the primary lever you look for when evaluating options. That said, we always look at ROC for funds within our Personal Endowment portfolios since we use these strategies to optimize after-tax income for our clients.

    If you’re wondering how much of your current portfolio income is being unnecessarily eroded by taxes, this is one of the first things we look at in our Personal Endowment review. Contact us or schedule a complimentary consultation if you want us to audit your current situation.

    Benefit 3: Reduced Volatility via Appraisal-Based Pricing

    Public stocks and bonds are priced continuously by the market. Every piece of news, every Fed statement, every earnings miss moves the price in real time – often dramatically and in ways disconnected from the underlying business fundamentals.

    Private real estate funds are generally valued quarterly through formal appraisals by standardized internal pricing models and independent valuators. The inputs are things like rental income, occupancy rates, cap rates, and comparable property transactions – not sentiment, momentum, or a Twitter thread about interest rates.

    What this means practically is that the reported value of your private real estate allocation moves more slowly and in response to genuine changes in the underlying properties. This has the effect of dampening the day to day swings in your portfolio.

    It’s important to clarify, appraisal-based pricing doesn’t mean you’re getting a better deal than the market would offer. It just means the price reflects a fundamental assessment of the asset rather than a real-time market clearing price.  The valuation of a private real estate fund could be lower or higher than publicly traded REIT equivalents depending on current market sentiment.

    What are the risks of Private Real Estate Funds?

    No asset class is without tradeoffs, and private real estate funds have specific ones worth understanding clearly before investing.

    Gated redemptions: Unlike a stock or ETF you can sell tomorrow, private real estate funds typically have strict limits on when and how much you can redeem. Most funds allow redemption on a quarterly basis with meaningful advance notice requirements, and during periods of market stress funds can gate redemptions entirely. Meaning you cannot access all your original capital regardless of how much you need it in the moment. This is the illiquidity premium at work. You earn higher after-tax income in part because you’re accepting that the capital is not freely accessible. For anyone investing in these funds the capital should be genuinely long-term, money you don’t need to touch for five to seven years minimum.

    Manager Quality and Fees: In a public index fund the manager is largely irrelevant — you’re buying the market. In private real estate, the manager’s skill at sourcing deals, managing properties, and timing the cycle determines a significant portion of your return. And the managers get paid to do this work. Private fund fees can be meaningful, typically 1% to 1.5% in management fees plus performance incentives. Private funds need to be evaluated against the net return of fees they deliver rather than the topline gross return marketing materials may highlight. We evaluate our funds carefully before recommending them and access institutional share classes where available to minimize fee drag.

    Valuation Opacity: Quarterly appraisals reduce volatility but also mean you have limited visibility into what your investment would actually fetch in a sale at any given moment. The reported value of a private real estate fund should be treated as an estimate rather than a market price. Some funds report when they sell their underlying assets and comparing the market price they receive for their assets vs. the underlying valuation can be a good way to check the fund’s homework.

    The Bottom Line

    Private real estate funds are not right for every client or every dollar. They require genuine long-term capital, tolerance for illiquidity, and access to institutional-quality managers. Which is why they remain largely unavailable to retail investors outside of advisor relationships.

    For accredited clients that want portfolio diversification and tax-deferred income streams, we feel private real estate funds earn their place. This is particularly the case for accredited investors that want to build a Personal Endowment style portfolio – the tax efficiency, the income stability, and the diversification against public market volatility all serve the core goal: durable, growing income that doesn’t require selling principal.

    If you’re building towards a life fueled by portfolio income and want to understand how private real estate fits into your specific situation, contact us or book a complimentary consultation.

    Not ready to talk yet? Every letter in this series goes deeper into how the Personal Endowment works – subscribe to get them directly.

    Food for Thought

    • The Historical Benefits of US Private Real Estate via Invesco: A deeper look at how US Private Real Estate as an overall asset class has performed over time vs. stock and bonds
    • Is it Better to Rent or Buy via The Economist: Buying a home doesn’t always come out ahead financially vs. renting long term. It all depends on interest rates, rent levels, etc. At the end of the day, even if the math doesn’t work out, owning the home you raise your family in has emotional benefits that far outweigh what the numbers say either way.

    Thank you for being part of our community – whether you’re a client, a reader, or somewhere in between. If this letter resonated with your own situation, I’d genuinely enjoy hearing about it.

    Nathan
    Founder & Lead Advisor

    Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. We do not receive any direct payments or commissions for securities discussed in our posts. Private funds are generally available only to ‘Accredited Investors’ as defined by the SEC. The Personal Endowment is a conceptual investment framework customized to each client and does not represent a specific fund or guaranteed outcome. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

  • Letter# 8: What Everything Costs in Portfolio Terms

    Dear Friends,

    When we were looking for our family home during late 2020, our realtor tried to convince us to look for homes $300k above the price point we were shopping for because mortgage rates were so low. His logic was that the extra $1,000-$1,500 a month weren’t meaningful in the context of a C-level career.

    That would be the case if I were thinking just about the income I was making from my job. But I was already thinking about everything in terms of portfolio income tradeoffs in 2020.

    Sheila had already left her job in advertising to focus on raising our children. So the calculation for how we would make this work if we were going to be fully living off income from a portfolio went like this:

    • $1,000 a month is $12,000 a year in additional yearly mortgage payments (before corresponding property tax, insurance, and maintenance increases)
    • $12,000 a year means another $300,000 I would need to build up in my portfolio if I was going to live off 4% a year in income distributions
    • Saving up an $300,000 could mean an additional year of working

    We decided not to go for the homes that cost an extra $300k.

    Now, we have what we think is a very nice home but Ryan Serhant isn’t about to come knocking on our door to do a video tour. I would call it reasonable luxury, not egregious ostentation. 

    If you’re trying to become financially independent, you don’t have to be Spartan about everything in life but you do need to be intentional with the big decisions. 

    The nondiscretionary expenses are what really matter. Housing, cars, education, etc. These fixed costs are the baseline for what your portfolio income needs to cover.  

    If you’re trying to become financially independent, it’s critical to think about these major expenses in terms of what size portfolio can support the incremental costs and how long it will take you to build that portfolio. 

    Housing is the biggest fixed cost most families carry. But it’s not the only one that can have a significant impact on portfolio income calculations. Let’s talk about education. Specifically K-12 education. 

    Like many of you, education is important to us. We specifically picked a school district that had a very strong K-12 public school system. There were two layers of decisions that went into this.

    • First, we both went to public schools growing up and we wanted our kids to have a similar experience
    • Second, we also knew private school was not something we wanted to have to pay for

    We didn’t have kids in 2020, but knew we wanted to end up with at least two (which is exactly where we’ve landed since). 

    In a good public school system, we could expect to pay somewhere around $5-10k a year in school taxes which would cover K-12 for our children.

    If the school system was lacking and we had to go to private school, that could easily end up being $60k+ for two kids.

    That $50k-55k difference translates to at least an incremental portfolio of $1.25M assuming a 4% rate of income distributions. This could mean another 3-4 years of work to build up. I love my children and would gladly work any job as long as I needed to in order to support them and make sure they got a good education.

    But why do it if I don’t have to? It’s much easier to land in a good public school district in the first place. 

    This is just how we thought about education for our family. Education is a deeply personal thing and there may be other reasons such as religion, specific values, etc. for why you want to send your children to private school. 

    Affording private school is one of the most common issues I discuss with mid-career professionals and an important component of how quickly someone can reach financial independence.

    These kinds of life vs. portfolio tradeoffs and income planning scenarios are a core part of the Personal Endowment strategy I work on with clients. The income-centric portfolio is just the fuel that supports the intentional life that we design together. 

    If you’re in the middle of decisions like these and haven’t mapped what they mean for your transition timeline, that’s exactly the conversation I have with clients. I’m happy to run high level numbers with you.  Feel free to reach out for a complimentary 30-minute consultation if you’re thinking about these things.

    Food for Thought

    • Your Money or Your Life by Vicki Robin: The foundational book on understanding the real cost of major life decisions — not in dollars but in the hours of your life required to earn them. Most contemporary thinking on intentional living and financial independence traces back to this.
    • How Financial Independence Can Quietly Shrink Your World by Jordan Grumet: Jordan is an MD who achieved financial independence and writes about the philosophical dimensions of this lifestyle on his Substack, The Purpose Code. This is a piece about the perils of focusing too much on trying to reduce costs to reach financial independence rather than being intentional about the life your portfolio is meant to fund.

    Thank you for being part of our community – whether you’re a client, a reader, or somewhere in between. If this letter resonated with your own situation, I’d genuinely enjoy hearing about it.

    Nathan
    Founder & Lead Advisor

    Sign up for our letters: Our twice-monthly letters break down strategies we develop for our clients who are generally mid-career professionals with $1M to $20M in assets that have outgrown standard retail advice. See how we’re engineering our HNW clients’ capital to match the lifestyles they want.
    > Sign up here

    Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. We do not receive any direct payments or commissions for securities discussed in our posts. The Personal Endowment is a conceptual investment framework customized to each client and does not represent a specific fund or guaranteed outcome. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

  • Client Letter #7: When Six-Figure Incomes Don’t Feel Like Enough for Private School

    Private real estate investments, when high earners don’t know if they can afford private school, a primer on infrastructure investing, Hu Anyan’s I Deliver Parcels in Beijing

    Dear Friends,

    The most common financial anxiety I encounter has nothing to do with how much someone earns.

    Whether a family is making $300,000 a year or clearing seven figures, the worry is almost always the same: can we afford the life we want without quietly trading away the future we’re building toward?

    One question that keeps surfacing — especially among families with school-age children — is whether private K-12 education can realistically fit into the budget without compromising long term goals. That’s what today’s deep dive addresses.

    But first, a quick update on how we’re incorporating private investments into client portfolios.

    Firm Updates

    Investing: Private Real Estate

    We’ve started incorporating private real estate funds into client portfolios. As I mentioned in Client Letter #5, we have developed a partnership with a leading private fund platform that works with independent wealth managers to provide access to the same institutional private equity, real estate, infrastructure, and credit funds as the largest banks and brokerages.

    The difference is they bring a level of fees, investment minimums, transparency, and operational processes that I feel good about using for my own family’s private fund needs – which means I feel good about bringing them to clients.

    I have been impressed with what I have seen from them so far and will be sharing my findings and recommendations with those of you who are accredited investors during our upcoming quarterly reviews.

    As a reminder, unlike many other advisory firms, we are a fee-only fiduciary. We do not accept third party commissions or payments for the services or investments we recommend. We want our clients to feel confident when we recommend a strategy or fund that we have no hidden incentives in doing so.

    Deep Dive

    Making K-12 Private School Work

    These middle years can be tough. You need to balance your career with the demands of caring for young children, and in many cases, for aging parents.

    You’ve had a lot of professional success but costs are adding up and you’re not sure if your mid to high six-figure family income is enough to provide the life you want for your family today while still making sure you’re not robbing yourself of your future goals.

    We have two young children and I’ll be 40 in two months so I’m intimately familiar with what many of you are going through.

    One item that has come up repeatedly in conversations with mid-career professionals is the enormous cost of private school for the K-12 years. Even C-Level executives at mid-sized firms and doctors are struggling to come up with the $100,000+ per year it takes to put three kids through private school while also paying for the mortgage, family vacations, and day-to-day life in a high cost-of-living city.

    Figuring out how to make the yearly budget accommodate school tuition is a painful but relatively straight-forward exercise for this group. However, the most common question I get is whether paying for school now is going to significantly impact retirement in the future.

    How Much Will Spending Tens of Thousands on Private School for the Next Decade Impact My Retirement?

    The wealth management industry has done a good job educating people on the need to aggressively contribute funds to retirement throughout their entire career. This is sound advice for the average household making the median income throughout their lives.

    But some of this is manufactured fear created by an industry that makes money off of how much people keep in their accounts – not when people choose to spend their money intentionally on the things that are important to them.

    Many of our clients have been aggressive both in their careers and in putting excess funds towards retirement and other investments. They are lucky enough to already have seven figures saved up by the time they come to the end of their 30s. Our financial planning algorithms show that for these people, putting more money towards retirement is a nice to have, not a necessity, to live the retired life they want in the future.

    Here’s an example.

    • You and your spouse have both worked high paying jobs since graduating.
    • You’re both around 40 years old and already have $2,000,000 saved up across your retirement and investment accounts.
    • You have three kids you want to put in private school but that would mean not being able to contribute nearly as much to your savings and investments as you have been.

    Even if you never contributed to these funds again, your nest egg could be worth just a bit over $13.6 million by the time you retire at 65 (assuming a moderately aggressive allocation that returns 8.0% a year).

    Whether $13.6 million is enough to retire on depends on your ultimate goals and what you want your lifestyle to be. But using the simplified 4% rule of retirement, those assets could support a yearly retirement spend of $544,000.

    In this situation, you can likely focus on providing the education and lifestyle you want for your family now while knowing time is going to do a lot of heavy lifting on the assets you’ve already built.

    This is where having a solid idea of what you want your future lifestyle to be can better define the tradeoffs you might be making today.

    Making Private School Payments Slightly Less Painful

    There are a few ways to reduce out-of-pocket private school costs for high-earners. Note, these can vary significantly based on state and school policies:

    • Using a 529 as a tax-advantaged K-12 private tuition payment account
    • Paying tuition upfront
    • SBLOCs or other specialized loan vehicles

    I. Using 529 as a tax-advantaged payment account

    As of January 1st 2026, parents can now use up to $20,000 a year per student in 529 Plan funds to pay for K-12 tuition expenses without Federal penalties.

    But the real benefits come at the state level due to state tax deductions. Because there are generally no time restrictions on how long funds need to be in a 529 before being used for qualified expenses, you can effectively use your 529 Plan as a state tax deductible payment account for your K-12 tuition.

    Each state has different rules but let’s look at Pennsylvania as an example. In PA, a married couple can contribute up to $38,000 a year per beneficiary per 529 plan. PA has a flat state income tax rate of 3.07%.

    Let’s say you have two kids in private school and you’re paying $30k a year for each of them. Here’s how your 529 Plan could generate up to $1,228 in yearly “savings” on your tuition payments:

    • Contribute Tuition Funds to the 529: Instead of paying your tuition out of your bank account, first contribute up to $20k each school year into each child’s 529 Plan. Remember, $20k is the federal limit for using 529 funds for K-12 expenses without penalties.
    • Pay the Tuition Out of the 529: Pay the tuition out of your 529 Plan.
    • Get you state tax deduction: Since the $20k contribution to the 529 is state tax deductible, you will get a state tax deduction worth $614 ($20k * 3.07% PA state tax rate) for a combined $1,228 between your two children.

    This isn’t life changing by any means, but every bit helps when you’re in the squeeze years of trying to pay for school, your mortgage(s), and day-to-day living expenses. You are saving $1,228 by paying tuition that you would have paid anyway.

    If you’re a client using our managed services, we will handle most of these steps for you, including letting your accountant know to properly file each of these items.

    If you’re doing this on your own, make sure you coordinate with your accountant or other tax advisor on all of these steps and check your state tax code. Every state has different rules for how / if 529 funds can be used for K-12 expenses.

    II. Paying Tuition Upfront

    Some schools offer small discounts for paying tuition upfront vs. paying throughout the year. This is typically 2-3% but depends on your school’s specific policies. In some cases you need to specifically ask for or negotiate a discount for upfront payment.

    Some people may see the 2-3% as being lower than what you could get in a high yield savings account or money market fund at this time and be tempted to try and squeeze out an extra percentage or two.

    For example, if your tuition is $30,000 you might look at something like this:

    • 2.5% discount on $30,000 paid now = $750 in tuition savings
    • $30,000 invested at 3.5% in a High Yield Savings Account = $1,050 in potential yearly interest if I pay tuition throughout the year

    If you’re doing a calculation like this, you need to keep in mind the after-tax impact of your strategies.

    In the first scenario, your $750 in tuition savings goes straight to your bottom line.

    If you’re a high earner (which you likely are if you have kids in $30k / yr private school), then your $1,050 could be subject to federal, state, and local taxes which could add up to well over 45%. Your $1,050 in interest ends up being $567 after 45% taxes.

    III. SBLOCs or Other Specialized Loan Vehicles

    Depending on current rates and your broader personal risk tolerance, net worth, and cashflow profile, you may be able to fund your private school needs through various loans with favorable rates relative to the rest of your financial assets. Higher net worth families have options available to them that go beyond educational loans such as borrowing against investment accounts, home equity, etc.

    This is a nuanced, complex topic that we won’t be able to fully cover in a newsletter. We can work with any of you who are interested in this to understand the tradeoffs and how it may impact your broader financial plans.

    Private Consultation: We advise our clients on education strategies as part of their broader financial planning. If you’re not a client but would like someone to help you understand the short and long-term financial tradeoffs of sending your kids to private school, you can schedule a complimentary 30-minute session with me. We waive fees for newsletter subscribers for any initial consultations.
    > Schedule a consultation

    Food for Thought

    A collection of articles or books I’ve read that might be interesting to many of you.

    • Assessing Private Infrastructure via CAIS: We’ve started incorporating private real assets into client portfolios and came across this piece during our research into the risks and potential benefits of private infrastructure funds. As CAIS notes:

    “Private infrastructure funds, in aggregate, have demonstrated a low correlation to public equities and fixed income, while maintaining a moderate correlation to private real estate. They also had smaller drawdowns than public equities, perhaps most significantly following the 2022 Fed rate hikes.”

    • I Deliver Parcels in Beijing by Anyan Hu: I kept coming across this book in various “Best of 2025” lists from the Financial Times, Economist, etc. I agree with the sentiment, it’s one of the best books I’ve read in the past year. It’s a first person account of what it’s been like working in China over the past 10-15 years as a cog in the vast machinery of the platform companies. It’s both an informative look at how Chinese companies operate and an interesting meditation on the purpose and meaning of work in one’s life.

    Thank you for the continued partnership and for the opportunity to help steer your family’s capital toward what matters most.

    Nathan
    Founder & Lead Advisor

    Not a client yet? 

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    Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. We do not receive any direct payments or commissions for securities discussed in our posts. Private funds are illiquid, speculative, and carry higher fees. Private funds are generally available only to ‘Accredited Investors’ as defined by the SEC. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

  • Client Letter #6: Why This Executive’s $2.9m Portfolio Was Underperforming

    Developing our own technology solutions, 529 passthroughs, fives issues our Portfolio Efficiency Audit identified in an executive’s portfolio, AI’s impact on careers for college students, will the next recession affect digital advertising?

    Dear Friends and Client Partners,

    We recently completed a Portfolio Efficiency Audit for an executive that led to them becoming a client. I’ll use today’s deep dive to go through five of the most impactful findings from this audit.

    If you’re a client, these will look familiar – we complete these and other audits for you during onboarding as we take over your portfolio and then regularly run new analyses and optimizations on your portfolio that we discuss together during quarterly reviews.

    If you’re not a client, these may be a useful reference to check up on your current or strategy. These are common gaps we see across nearly every portfolio we have taken over from other advisors. Depending on severity, these gaps can add up to tens of thousands per year in opportunity costs for multi-million dollar portfolios.

    But first, a couple company updates:

    Firm Updates

    Technology: Two New Analytics Modules

    I spent nearly 20 years leading technology and analytics teams before becoming a wealth manager. It should come as no surprise that I’ve started codifying some of Kangpan & Co.’s most common processes and analyses into proprietary technology that we will be using to ensure your family’s wealth is optimally aligned to your long term goals. This technology sits alongside the best-in-class platforms we already use to serve you, filling in gaps that these other platforms have rather than aiming to replace them.

    There are two analytics modules that are now being tested on your accounts:

    • Tax-Efficient Asset Location: A rebalancing algorithm that monitors your allocations across account types (taxable vs. retirement) to help optimize for after-tax returns on your total portfolio.
    • Stagnant Capital: A monitoring system that looks across every account we oversee and flags any cash sitting on the sidelines that should be invested.

    The Deep Dive below details what client problems these modules help solve. We built these because we couldn’t find acceptable solutions elsewhere that met the standards with which we want to serve you. We’ll continue adding to our technology going forward.

    In Brief: 529 Passthroughs

    Based on recent conversations, I’ve realized many people overlook the 529 as a powerful in-year tax management tool, including the expanded $20,000 K–12 limit effective this year.

    Even if you didn’t fully pre-fund an account years ago, you can use a 529 as a “tax-advantaged payment account” for tuition or other qualified expenses. By passing these costs through your 529, you capture immediate state tax deductions on dollars that were going to be spent anyway.

    If you’re not a client and are currently in the middle of paying educational expenses, let’s ensure you aren’t leaving easy tax savings on the table. Reach out if you’d like to understand any opportunities you may have.

    Deep Dive

    Five Structural Inefficiencies in an Executive’s $2.9m Core Portfolio

    Today’s deep dive is on the longer and more technical side. It is for those of you interested in the details of what we’re doing behind the scenes and how that may differ from what other advisors do.

    Note, I’ve provided illustrative examples of the kinds of impact these analyses can have for a $2.9m portfolio rather than the specific numbers we found for this client. This is out of both respect for client privacy and regulatory constraints that limit how much detail I share about a client’s analysis.

    That said, this client told us the clarity of our audit and the quantified impact of the findings directly led to them joining Kangpan & Co.

    The five analyses from our audit we’ll highlight here are:

    • Performance Benchmarking
    • Loss Harvesting
    • Tax-Efficient Asset Location
    • After-Tax Yield Optimization
    • Stagnant Capital

    I. Performance Benchmarking

    The first step of any audit is a cold, hard look at reality. We compare the performance of the current portfolio against an objective benchmark comprised of low-cost, passive ETFs across:

    • Global Stocks
    • US Stocks
    • Bonds

    This is a fairly straightforward exercise but we’ve found that most clients have never really sat down to do this. Even clients working with other advisors have rarely seen their portfolio results compared to a simple benchmark portfolio (three guesses why your current advisor may want to obscure this information).

    Being an effective multi-asset portfolio manager means understanding where to accept the market return and where active management is more likely to add value to a portfolio.

    Certain benchmarks are statistically hard to beat. S&P found 88.3% of active managers underperformed the S&P 500 index over the past 15 years.

    However, that same report shows 40.7% of US Muni Managers beat their index over the same 15 year timeframe.

    Knowing the benchmarks is important because the costs of underperforming are significant. A $2.9m portfolio moderately underperforming its benchmarks could be losing:

    • $14,500 a year if you underperform by 0.5%
    • $29,000 a year if you underperform by 1.0%
    • $43,500 a year if you underperform by 1.5%

    When we add or remove assets from our portfolios we are looking at how that individual asset has performed vs. a set of relevant benchmarks and potential opportunity costs across private and public markets. For example, a Private Real Estate fund will be compared against a broad, low-cost REIT index. But we also look at how incorporating an asset affects the overall portfolio’s structure. Does adding this asset increase overall returns? Does it decrease risks or correlations to economic shocks?

    If we’ve done a quarterly review together, then you know we transparently report out how our multi-asset portfolios perform against passive benchmarks. We think it’s important to remain intellectually honest with you and ourselves so that we have the data to consistently improve our investment strategies and processes.

    Private Consultation: If you want to benchmark your current portfolio against performance indexes or identify other tax and fee inefficiencies, you can schedule a 30-minute diagnostic session with me below. We waive the fees on our diagnostics for up to three qualified investors a month.
    > Schedule a consultation

    II. Loss Harvesting

    It’s never fun to look at your portfolio and see losses in your positions. Loss harvesting is the process of strategically making use of these losses to:

    • Deduct up to $3,000 a year from your income taxes
    • Help rebalance your portfolio while minimizing capital gains taxes
    • Reduce the future taxable gains on other positions

    It’s easy to quantify how much tax-loss harvesting opportunity may exist in a portfolio at any single point in time. Just look at the total dollar amount of losses you have.

    What’s more complicated is figuring out what to do about these losses such as understanding the tradeoffs between:

    • How much you should actually harvest
    • Whether to offset a winning position or take the tax deduction
    • Which winning positions to offset with losing ones
    • Whether to move your losses into cash or another type of position

    While you can tell how many losses you have on any given day by checking your portfolio, it’s harder to estimate how much benefit tax-loss harvesting might deliver over time.

    Research from JP Morgan suggests someone regularly contributing to their portfolio and taking advantage of active tax loss harvesting could harvest up to 1.0% a year in tax benefits.

    For a $2.9m portfolio, that means tax-loss harvesting could deliver:

    • $0 if all your assets were stable or steadily increasing all year
    • $14,500 a year at 0.5% in realized tax-loss harvests
    • $29,000 a year at 1.0% in realized tax-loss harvests

    Many advisors or self-managed investors will only do tax-loss harvesting just once a year. While that’s better than not doing it at all, we feel more regular tax-loss harvesting throughout the year bring better benefits to clients. This better captures ongoing tax opportunities, maintains target asset allocations, and continuously reduces the cost basis of appreciated positions.

    III. Tax-Efficient Asset Location

    This analysis checks to make sure assets that are:

    • Tax-inefficient, such as bond ETFs that generate substantial taxable dividends, are placed in tax-advantaged accounts such as 401ks, IRAs, and Roths
    • Tax-efficient, such as large cap growth stocks that typically pay very low dividends, are placed in taxable accounts

    There are two primary benefits to doing this. First, the dividends / distributions from assets that create significant taxable payments like bond funds are no longer taxed. Second, we can rebalance assets without incurring capital gains taxes.

    Let’s look at the math behind shielding dividends from taxes.

    Like many of you who subscribe to this letter, let’s say your family’s income is in the high six figures and you live in a high-tax state. Your federal tax rate is 35% and your state tax rate might be something like 7.5%.

    If you put $1,000,000 into a bond ETF with a 4.0% yield, you would get $40,000 in dividends over the course of the year.

    • If you hold this position in a taxable investment account you could end up paying $17,000 in taxes ($40,000 * combined tax rate of 42.5%) which means you’ll only keep $23,000
    • If you hold this position in a tax-advantaged account you would pay $0 in taxes on these dividends and keep the full $40,000

    The benefits to making use of tax-efficient asset location can be significant.

    However, many portfolios we’ve reviewed from clients working with other advisors don’t do this. There are various reasons we can think of for why this may be… but none have to do with what is in the best interest of clients.

    The primary challenge is that it is more analytically and operationally complex to manage portfolios this way and many automated trading tools available to advisors are not able to handle portfolio structures like this. Most firms avoid this level of detail because it is hard to scale. We lean into it because we embrace complexity since that’s where value is found for our clients.

    Unless there’s a reason to do otherwise, we take advantage of Tax-Efficient Asset Location when managing our clients assets and will go through the work it takes to migrate portfolios to this kind of approach.

    IV. After-Tax Cash Yield Optimization

    As we mentioned in Client Letter #3: Leaving a C-Level Corporate Career, we regularly optimize the yield of our client’s cash positions.

    We model more than a dozen different vehicles to find the optimal one for each client based on their unique tax situation. But we don’t just look at the topline yield number. The after-tax yields on these assets can vary significantly.

    Each of these vehicles has a different tax treatment – for example, high yield savings accounts are generally taxed at both the federal and state level while short term treasuries are primarily taxed at the federal level but often exempt from state taxes.

    Many of our clients’ cash strategies allocate between $100 to $250k to meet short term liquidity needs.

    For someone with $250k in cash, the incremental yield you could get from optimizing for after-tax returns are:

    • $2,500 a year if you get an extra 1.0% in after-tax yield
    • $5,000 a year if you get an extra 2.0% in after-tax yield
    • $7,500 a year if you get an extra 3.0% in after-tax yield

    It’s worth noting, we typically find a high yield savings account is not the best vehicle for optimizing after-tax yields.

    V. Stagnant Capital

    This is when you have cash that has unintentionally built up in your portfolio which is not being invested into higher returning assets. This tends to happen when dividends aren’t being reinvested or when you have retirement accounts from old jobs you’ve forgotten about over the years that haven’t been checked in awhile.

    It’s not surprising to see Stagnant Capital in portfolios that our clients were previously managing themselves – they’re busy executives that aren’t constantly thinking about their portfolios. What has been surprising is seeing how many portfolios we take over from other advisors and institutions that have significant amounts sitting in cash.

    We don’t just consider this “idle money,” but a significant opportunity cost in terms of reaching your long term goals.

    For every $100,000 in Dead Cash, you could be actively losing:

    • $3,000 a year in interest if you just moved it to a high yield savings account with 3.0% interest
    • $4,500 a year in distributions if you have an income-centric portfolio strategy targeting 4.5% in yearly yield
    • $9,000 a year if you have a more growth-centric strategy targeting 9.0% yearly total returns

    At Kangpan & Co., we don’t rely on manual oversight or ‘occasional’ checks. We’ve built a systematic cash-monitoring algorithm across our entire firm. This ensures that Stagnant Capital is regularly identified and re-deployed, maintaining the structural efficiency of the portfolio regardless of how busy our clients’ lives become.

    After the Audit

    These are just some of the highest level optimizations we identified for this executive’s portoflio before we started officially working together.

    Since onboarding this client, we:

    • Fixed most of the gaps that our audit identified
    • Developed a new portfolio strategy that incorporates alternative assets to help improve the diversification and resilience of the portfolio to different economic shocks
    • Realigned and rebalanced hundreds of thousands of dollars in assets across our client’s portfolio while incurring nearly zero capital gains taxes in the process
    • Are exploring integrating private assets to further align the risk / return profile of the portfolio to our client’s long term goals

    If you’re not a client and you suspect your portfolio may have performance or efficiency gaps, feel free to email us to request an audit.

    If we feel we can add value to your portfolio, we’ll run the same Portfolio Efficiency Audit we used for this executive. We’re currently waiving fees on this audit as we build up our proprietary benchmarking dataset. The analysis takes about an hour of your time in total. Even if we don’t work together afterwards, you’ll know exactly where your portfolio needs to be optimized.

    Food for Thought

    A collection of articles or books I’ve read that might be interesting to many of you.

    • AI job disruption may be good for children via the FT: A number of you with kids in or nearing college and expressed to me some concerns they may be picking career paths for prestige and money rather than what they may ultimately enjoy or be good at in the long run. I’ll be writing more about this topic in a future deep dive and this was a thought-provoking article in the meantime. As the FT writes:

    “We have legions of young people who have worked out how to get into great universities, get good grades and land prestigious internships. But when you ask them what they are passionate about, their faces go blank.”

    • Are Meta and Google ads really recession proof? via the Economist: A significant portion of subscribers are in the advertising or marketing industry. I’d be curious to get your take on whether digital ad budgets are likely to be cut during the next recession. Reach out if you want to chat about this. As the Economist notes:

    “The recessions of 2008-10 and 2020 are also an imperfect sample from which to extrapolate the future of digital ads. It is true that in both those cases online advertising held up even as offline varieties fell off a cliff. Yet in 2007-09 digital ads were climbing from a tiny base, so migration of advertising from print and television to the internet offset cyclical weakness. Now that digital advertising is so dominant, there is less offline share to snaffle.” 

    Thank you for the continued partnership and for the opportunity to help steer your family’s capital toward what matters most.

    Nathan
    Founder & Lead Advisor

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    Private Consultation: If you want to benchmark your current portfolio against performance indexes or identify other tax and fee inefficiencies, you can schedule a 30-minute diagnostic session with me here. We waive the fees on our diagnostics for up to three qualified investors a month.
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    Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. We do not receive any direct payments or commissions for securities discussed in our posts. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

  • Client Letter #5: The Opportunity Costs of Over-Saving

    Incorporating Private Assets into our strategies, Bitcoin as a portfolio hedge, the problem with not knowing how much is enough, concentrated stock positions, 1929

    Dear Friends and Client Partners,


    In this week’s Deep Dive we’ll talk about how to avoid the unintentional consequences of staying in a job for the paycheck when you already have enough to move on to something you’re more passionate about.

    But first, a quick announcement that I’m particularly excited about for Kangpan & Co. clients.

    Firm Updates

    Partnerships: Institutional Private Market Access

    We secured a partnership with a premier provider of private fund access, specifically designed for independent wealth firms. For clients who meet Accredited Investor standards, this provides a streamlined path into institutional-grade Private Credit, Private Equity, and Real Estate—asset classes that have traditionally been the domain of the world’s largest endowments and family offices. We will be discussing these options with eligible clients in the coming months to determine how private market exposure may complement your current strategy and to review the specific tradeoffs, such as illiquidity and diversification benefits.

    Research: Bitcoin as a Portfolio Hedge?

    We get lots of questions on whether Bitcoin can act as a hedge against equity volatility. Our recent analysis shows the opposite: it’s increasingly acting as a high-beta equity proxy.

    Deep Dive

    The Problem with Not Knowing How Much is Enough

    When I was getting licensed as a wealth manager, I assumed my primary value to clients would be technical: optimizing asset class returns or uncovering marginal tax savings. That’s why we use all kinds of sophisticated systems at Kangpan & Co. to model expected returns, run Monte Carlo simulations, and forecast dynamic withdrawal bands.

    However, these tools can’t answer the truly fundamental questions like:
    What are you saving for? 

    The more people I sit down with, the more I realize my most valuable work is helping clients bring clarity to their vision for their future lives. 

    Most people I meet with are saving and investing for a desirable but vaguely defined future. It’s usually “early retirement” or a “second act that is more aligned to long-term values.” 

    But the planning usually stops short of quantifiable specifics. Important details remain unanswered or only loosely defined.

    Are you going to keep living in the same high cost of living suburbs that you raised your family in? Do you want to maintain your current lifestyle or enhance it? Are you going to sell the business you’ve built or transition it to the next generation and live off its distributions? 

    You need to understand what your dream life will actually cost to live. If you don’t know what you’re specifically aiming for, you’ll have no idea if you’re even pointed in the right direction.

    Advisors often talk about the risk of not saving enough for retirement… which can be a problem. But it’s a pretty well-understood one.

    There is an equally problematic issue that’s not talked about enough: over-saving. 

    It’s very easy to get caught up in the momentum of the day-to-day and forget what your actual long-term goals for your life are. So you keep working and grinding and saving up more and more. You end up spending years longer than you needed to working in a job that you’re not passionate about that’s slowly eroding the most valuable asset you have, the rest of your life.

    You often need far less than you think to step away from what you’re doing today to start that next phase of your life. Some of my most rewarding work so far has been helping people realize they are much closer to financial independence than they imagined.

    The key to this assessment isn’t a complex investment product. It is the process of crystallizing and quantifying your goals. Once defined, we can engineer a personalized Playbook to reach—or even accelerate—that timeline. 

    This is exactly what I did for myself. I sat down in my early 30s and thought deeply about what I wanted from life and then iteratively built a personal Playbook to ensure I was able reach my goals before 40. 

    I focused on three quantifiable requirements:

    • A home Sheila and I both loved that our family could grow into with excellent K-12 public schools
    • The ability to go out to different restaurants in the area at least once a week as a family (and there is no shortage of places to try in the Philly area)
    • Going on three to four nice vacations together each year

    Beyond the numbers, I wanted a post-corporate work life defined by three types of independence:

    • Financial independence to build Kangpan & Co. intentionally, choosing only the clients I am best suited to serve
    • Schedule independence to ensure I never miss the important moments in the lives of my family and loved ones
    • Moral independence to ensure there are no conflicts of interest or compensatory arrangements that sacrifice the objectivity of the advice I provide to clients

    Making steady progress against these specific goals over the years allowed me to “retire” from a C-level role before 40. Each month I spent 30-minutes review my Playbook to ensure our costs, savings, and investments were on pace to meet these quantified goals. 

    Once I hit my target numbers, I shifted my portfolio towards an all-weather, multi-income investment strategy that would support my family’s financial needs in perpetuity. I then started the next phase of my life. 

    I increasingly think effective wealth management boils down to this:

    Envision the life you want and engineer your finances to make it a reality.

    That’s what I did for my own family and that’s what I love doing for the families I serve. This ethos is the foundation of Kangpan & Co.’s Personal Endowment framework that I’m steadily building to support our client base.

    If you aren’t a client yet but want a thought partner to help you quantify your vision for a more intentional financial future and engineer the strategies to get there, feel free to reach out.

    Food for Thought

    A collection of articles or books I’ve read that might be interesting to many of you.

    “Although continuing to hold a concentrated stock might seem like a status-quo stance, it is, in fact, one of the most risky investment strategies an investor could pursue, and it is especially problematic for those wealth creators who seek to become guardians of wealth for themselves and their families… Bessembinder (2018) shows that, during the 1926–2016 period, for all the 25,967 common stocks in the Center for Research in Securities Prices (CRSP) database, by far the most frequent one-decade buy-and-hold return is -100%.”

    • 1929 by Andrew Ross Sorkin: The first part of the book examines the build up to the crash of 1929 that led to the Great Depression. It’s a fascinating mirror of many of the same dynamics we’re seeing in markets today. I personally wasn’t a fan of the last third of the book focusing so heavily on the nuances behind the passage of the Glass-Steagall act but the entire book is highly readable for such a heavy topic.

    Thank you for the continued partnership and for the opportunity to help steer your family’s capital toward what matters most.

    Nathan
    Founder & Lead Advisor

    Not a client yet? 

    Subscribe to this bi-monthly client update for free to see all the engineered tax, investing, and planning strategies we run for high-earning and high net worth investors like you.

    Or reach out to us to get a complimentary, 30-minute Diagnostic to see what tax, investing, and planning opportunities your current strategy or advisor is overlooking.

    Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. The Personal Endowment is a conceptual investment framework customized to each client and does not represent a specific fund or guaranteed outcome. Asset allocation and yield targets are subject to market volatility. We do not receive any direct payments or commissions for securities discussed in our posts. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

  • Research Notes: Bitcoin as a Portfolio Hedge?

    Since we are a multi-asset manager, many of our clients ask whether Bitcoin can act as a hedge against short to medium-term volatility of the stock market.

    We like to use data to inform how we answer questions so we decided to take a look at:

    • The correlation of rolling 1y returns of the S&P 500 vs Bitcoin and other assets that are commonly used to hedge the equity portion of portfolios
    • How these same assets have performed during some of the more recent S&P 500 drawdown events

    Key Finding 1: Bitcoin’s correlation to the S&P 500 has steadily increased since 2010

    The table below shows 1yr return correlations between the S&P 500 and various assets. We have provided the tickers we used to proxy each asset class’s return.

    There are two points we want to highlight in this table:

    • Between Jan 1, 2010 and today, Bitcoin shows a 0.07 correlation to the S&P 500; but that low correlation appears to be heavily skewed by Bitcoin’s behavior in its early years. The correlation steadily rises to 0.77 since 2020 suggesting Bitcoin is acting more and more like a leveraged portfolio of equities than a non-correlated asset.
    • No other asset in the table shows a correlation greater than 0.30 across the time periods assessed.

    Key Finding 2: Bitcoin has generally experienced sharper drawdowns than the S&P 500 index during recent equity shocks

    The table below shows the relative performance of each asset during notable events that led to significant drawdowns in the S&P 500 over the past 10 years.

    • In three out of four of these events, Bitcoin experienced greater drawdowns than the S&P 500
    • No other assets in the table below experienced sharper drawdowns than the S&P 500 during these events. In all drawdown events at least one of the other assets experienced gains.

    Bitcoin does not appear to act as a volatility hedge for equity portfolios

    These two analyses suggest Bitcoin has not historically functioned well as a short to medium term hedge to equities (as proxied by the S&P 500). Instead, it has exhibited an increasing correlation in recent years and has experienced significantly sharper drawdowns than the S&P 500 in three out of four of the shock events analyzed. 

    I’m not against clients holding bitcoin – that’s an individual decision depending on how much you allocate, your risk tolerance, and what your point of view on Bitcoin’s long term prospects are. However, this analysis suggests that holding it as a short to medium term hedge to volatility in stocks is not a role it has played well.

    Hedges should exhibit low to negative correlation like some of the other assets in the analysis. When we design the hedge portions of our clients’ portfolios we are generally looking for assets that move more independently of equity holdings.

    As a disclaimer, I have a small amount of bitcoin – out of interest in the underlying technology and as a way to more closely follow how the crypto markets evolve over time – not as a hedge to anything in my core portfolio.

    Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. This post is not a solicitation for business. No post is an endorsement of any particular strategy or security. We do not receive any direct payments or commissions for securities discussed in our posts. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

  • Client Letter #4: Living Off a Portfolio’s Income

    2025 Tax Planning Summaries, engineering a Personal Endowment, capital-intensive infrastructure bubbles, and a primer on income-centric investing

    Dear Friends and Client Partners,

    In this week’s deep dive I’ll be talking a bit about the income strategy I’ve used to create the cashflows that support my family. This portfolio income took the place of my C-level salary when I left the corporate world and also provides the cashflow that allows me to be intentional and measured in who I decide to work with as I build Kangpan & Co.

    A number of you have asked about or expressed interest in living off your portfolio as you think about your future so hopefully this is a helpful start. But first, a quick update on Systematic Upgrades we’ve made for our clients’ financial lives.

    Systematic Upgrades

    Focus: 2025 Tax Planning Summary

    We have finalized your 2025 Tax Planning Summaries. These reports highlight actions we took together that have tax implications that are not readily apparent on your W-2s and 1099s (e.g. 529 plan contributions, IRA funding, etc.). 

    The goal of this summary is twofold: ensuring zero “tax leakage” and reducing the administrative drag on your accounting team. Implementation is as follows:

    • Comprehensive Tax Coordination: For clients utilizing our integrated tax coordination services, we’ll be sending summaries directly to you and your CPAs. No action is required.
    • Independent Tax Services: For clients managing their own accounting flow, your summary will be securely sent over to you if you have any notable actions.

    Deep Dive

    Engineering a Personal Endowment

    As countless modern philosophers (both academic ones and the armchair variety) have pointed out, two of the hardest addictions to overcome are carbohydrates and a steady paycheck.

    The pretzels, frozen waffles, and assorted cookies that we regularly refill at the Kangpan household present no argument against the addictiveness of carbohydrates.

    Let’s talk about the monthly salary.

    I spent almost two decades in the corporate world, the latter half mostly as a C-level executive. I always had a proclivity for investing and financial planning so I was diligent over the years in contributing a fixed percentage of my salary to my family’s portfolio. This allowed me to “retire” from the corporate world before 40.

    However, the strategies that work during accumulation aren’t necessarily the same ones that should be used when switching gears to living off your portfolio.

    Low-cost, broad stock indexes with selective exposure to various factors are a great way to build your portfolio while you’re in accumulation mode. These were a core part of my strategy for building my own asset base and they form the foundation for many of Kangpan & Co.’s growth-focused clients.

    But predictability, stability, and the preservation of assets are what’s important when you are living off investments. 

    A traditional stock and bond portfolio doesn’t check those boxes as the inflationary 1970s, the 2008 GFC, the synchronized drawdown in 2022, and many other events have repeatedly shown. 

    These major shock events are incredible opportunities for buying when you have a steady wage to invest into the market. But they create significant sequence of returns risks for anyone living off their investments.

    Volatility aside, I also knew I didn’t want a strategy that involved steadily selling the assets I had accumulated. When you spend twenty years or more building up a nest egg via a steady paycheck, it is very difficult to suddenly shift into selling the family jewels to support a post W-2 life.

    This means I needed to engineer a portfolio strategy that:

    • Generates a predictable income across economic cycles
    • Grows that income steadily over time
    • Protects the underlying assets against common economic shocks

    Essentially, I developed a portfolio strategy that was modeled after how large universities manage their endowments – a Personal Endowment that provided a synthetic, growing income to replace the one I was stepping away from.

    This Personal Endowment portfolio is primarily made up of the following strategies:

    • Quality-Tilted Equity Income: Companies across a diverse set of industries and geographies that have steadily increasing cashflows, established distributions, and conservative payout and debt ratios.
    • Real Assets: Real estate and infrastructure that generate contractual revenue tied to inflation escalators. 
    • Alternative Credit: Private and senior-secured loans that are primarily floating rate in nature that help smooth the rate sensitivity of the portfolio.
    • Economic Hedges: A mix of uncorrelated assets such as managed futures, cash, gold, etc. that help shield the portfolio against major economic shocks. These form the basis of Kangpan & Co.’s Guardian strategy used across many client portfolios.

    The exact mix of these assets can vary throughout the economic cycle but I generally aim for a balanced mix of yield and yearly growth of that yield. This allows the portfolio to generate a livable, diversified income today and a steadily increasing cashflow that aims to outpace inflation over time.  

    So how’s it going?

    So far this strategy has done exactly what I wanted it to do.

    I designed this Personal Endowment style portfolio because I wanted a stochastic (random) market to support a more deterministic (predictable) life. 

    It was important to me to be able to comfortably and reliably support my family through our investment portfolio when I left Kepler. This wasn’t because I wanted to retire, but because I wanted to be measured and intentional in how I pursued my second act.

    Not needing the income from Kangpan & Co. has allowed me to to focus on working only with clients I enjoy spending time with while supporting them the way I think a full service wealth manager should. I don’t need scramble to build assets and take on clients that aren’t a fit for the firm or compromise Kangpan & Co.’s integrity by accepting commissions for products. 

    I don’t care about being the biggest wealth manager, I want to be the best for the client partners whom have entrusted their family’s future with my firm. My portfolio strategy gives me the absolute independence from outside pressures to focus on that goal.

    If you are interested in looking at the math of supporting a career pivot or retirement with a customized Personal Endowment strategy, let’s sit down and run your specific numbers together. 

    Food for Thought

    A collection of articles or books I’ve read that might be interesting to many of you.

    • The AI Debt Boom Does Not Augur Well for Investors via the FT: A reminder that capital-intensive infrastructure booms have historically had permanent, transformative effects on the broader global economy and human behavior…. but can create short to medium term investment pain if the capital cycle turns. As the FT notes:

    “History rarely rewards lenders who finance capital-intensive growth booms at their peak. In the late 1990s, telecoms companies borrowed heavily to lay fibre-optic cables, confident that data demand would ensure adequate returns. Although the infrastructure transformed the economy, it generated little return on investment for years.”

    • The Ultimate Dividend Playbook by Josh Peters: For anyone interested in learning more about income-centric investing (a least in terms of equities). This is a solid primer on assessing the quality and sustainability of payments from publicly traded firms. The appendix also provides a great series of briefings on investing in various industries like utilities, REITs, and more. I don’t agree with all the valuation methods but the book provides a strong foundation from which to expand.

    Thank you for the continued partnership and for the opportunity to help steer your family’s capital toward what matters most.

    Nathan
    Founder & Lead Advisor

    Not a client yet? 

    Subscribe to this bi-monthly client update for free to see all the engineered tax, investing, and planning strategies we run for high-earning and high net worth investors like you.

    Or reach out to us to get a complimentary, 30-minute Diagnostic to see what tax, investing, and planning opportunities your current strategy or advisor is overlooking.

    Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. The Personal Endowment is a conceptual investment framework customized to each client and does not represent a specific fund or guaranteed outcome. Asset allocation and yield targets are subject to market volatility. We do not receive any direct payments or commissions for securities discussed in our posts. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

  • Client Letter #3: Leaving a C-Level Corporate Career

    Optimizing after-tax cash yields, the $5m nightmare, stock market concentration, The Pathless Path

    Dear Friends and Client Partners,

    A number of you have expressed a desire in our financial planning discussions to leave the corporate world and pursue a second act within the next few years so I figured I’d make that the topic of today’s Deep Dive.

    But first, a quick update on some optimizations we’ve made to your wealth strategies.

    Systematic Upgrades

    Focus: After-Tax Cash Yield Optimization

    We have updated our cash algorithms to maximize your individual after-tax yield across more than a dozen ultra-short-term vehicles—ranging from state-exempt Treasuries to Municipal MMFs. For clients who have granted us discretionary authority, we have already executed the shift to the highest-yielding instrument based on your specific tax bracket.

    If you aren’t a client, check your cash yield today; your advisor may be leaving your capital idle. Our algorithms found no instance where a default ‘sweep’ or standard money market position outperformed our client-recommended solutions.

    Deep Dive

    Leaving a C-Level Corporate Career

    I was having a conversation with a good friend (who is also a client) recently about the corporate climb and how the desire to continue up that ladder has become inversely proportional to net worth.

    Like me, my friend is a former C-level executive who has transitioned out of the corporate world. We laughed about the scene in Succession when Connor and Tom are advising Cousin Greg on the perils of a $5m net worth:

    “You can’t do anything with five, Greg. Five is a nightmare. Can’t retire. Not worth it to work. Poorest rich person person in America… The weakest strong man at the circus.”

    We put aside the question of whether five million is enough to retire on. It really depends on your lifestyle.

    The “Not worth it to work” part is what we talked about. This mid-million net worth is when many people suddenly have enough saved up to viably walk away from a corporate salary.

    And when you have enough to walk away from the corporate climb you start asking yourself a lot of questions once the kids are down and you’ve caught up on Slow Horses.

    It’s not just about running the numbers again and again to see if you have enough to step away and start that boutique consultancy or live your dream of running your own coffee shop plus wine bar.

    The biggest questions that confront you are those relating to your identity.

    If you’ve spent nearly two decades climbing a specific career ladder, it will look like an awfully long way back down when you’re ready get off. Whether you have $5m or $50m, you’ve merged a massive part of your identity with your career.

    Questions like, Who am I if I’m not the “Global Chief Information Officer” of a respected advertising agency? What if I become the person important people used to call, but no longer do? What if these are the golden years of my career and I regret stepping away when I was at the top?

    It’s these questions that prevent many people from making that much anticipated jump off the ladder.

    Instead of confronting these questions head on, you delay by telling yourself “just one more year” or “just another $200k” to be extra sure I have what I need to support my post-corporate lifestyle.

    I encountered all of these questions when I left my C-level position.

    Running the numbers over and over again was really just a proxy for the bigger questions that face anyone leaving the corporate track to start a second act.

    At the end of the day, the numbers in a spreadsheet are just a part of the decision to leave a corporate career. The real fears tie to who you are without the title. It’s the fear of the silence. It’s the realization that when you aren’t the one holding the multi-million dollar budget, the phone might stop ringing. That’s a structural shock most advisors aren’t equipped to help you navigate since they’ve never done it.

    Here were a few things that I found helpful in giving me the confidence to finally make that leap:

    • Something to run towards: If you’ve been entertaining notions of leaving the corporate world for a while, there’s a high probability you’re burnt out. You’ve likely spent years thinking about what you’re running away from—the back-to-back meetings on topics that no longer spark curiosity, the client that always seems to have urgent firedrills, etc. But if you don’t have a clear vision of what you’re running towards, then you’re just jumping into a black abyss.
    • Someone to talk to: I found it helpful to talk to other people who had made this decision. Very few people know what it’s like walking away from a C-level title and a yearly salary multiples higher than the average retiree’s nest egg. At Kangpan & Co. we’re not just building your wealth, we’re creating a close-knit community. If you’d like to talk to other former executives and senior leaders who have left the corporate world we can easily arrange that.
    • An income-centric financial strategy: When I gave my notice, I didn’t want to rely on spending down a generic 60/40 portfolio that was subject to the whims of the market. I built a specific income-centric strategy designed to replace a steady paycheck. It turned my portfolio from a static number on a screen into a functional cashflow to support my next chapter. Some of you have asked about this income strategy in various conversations so I’ll write more about this in future posts. It is, of course, available to any clients of the firm.

    I’m always happy to talk to any of you about the emotional as well as the financial side of making this kind of decision. Most advisors want to talk to you about your ‘Risk Tolerance’ for the stock market. I’d rather talk about your ‘Risk Tolerance’ for staying in a career that no longer fits the person you’ve become.

    Food for Thought

    A collection of articles or books I’ve read that might be interesting to many of you.

    • This Christmas, Raise a Glass to Concentrated Market Returns via the Economist: A reminder that it’s not that unusual for a handful of firms to drive the bulk of the returns in each stock market cycle. That doesn’t mean we shouldn’t be wary of a crash when the concentration increases in each cycle. It’s just about realizing that this has and will always be a feature, not a bug, of capitalism-led stock markets. As the Economist notes:

    “Hendrik Bessembinder of Arizona State University notes that among listed American firms from 1925 to 2023, most have negative returns. Less than 3% of stocks account for all the increase in shareholder wealth in that time.”

    • The Pathless Path by Paul Millerd: One of the more influential books I read while I was thinking about whether to leave my corporate career. Mostly about the tradeoffs between the predictability of a corporate career vs. the freedom of working in a more independent role. Here’s a great quote:

    “We like to think that once we ‘make it’ we can finally be ourselves, but… it was clear that the longer people stay at a company, the higher odds that they become what the company wanted. I realized I didn’t want that to happen to me”

    Thank you for the continued partnership and for the opportunity to help steer your family’s capital toward what matters most.

    Nathan
    Founder & Lead Advisor

    Not a client yet? 

    Subscribe to this bi-monthly client update for free to see all the engineered tax, investing, and planning strategies we run for high-earning and high net worth investors like you.

    Or reach out to us to get a complimentary, 30-minute Diagnostic to see what tax, investing, and planning opportunities your current strategy or advisor is overlooking.

    Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. We do not receive any direct payments or commissions for securities discussed in our posts. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

  • Client Letter #2: Locking in $3,334 in Tax Optimizations for a High-Earning NY-Based Couple

    Welcome to 2026, a tax optimization case study, inflation and 60/40 portfolios, The View from Ninety

    Dear Friends and Client Partners,

    I hope your year is off to a great start and that you got to unplug a bit during the holidays. We spent a week visiting Sheila’s family in Wisconsin enjoying the change of pace and scenery while dipping many dairy-based foods into other dairy-based condiments.

    One of the reasons I got into wealth management was the desire to have a direct and measurable impact on the financial lives of the clients I serve. I’ll be highlighting case studies in some of these notes to showcase the impact we’re having on our growing client base and to help spark additional planning and investing ideas outside of our regularly scheduled meetings.

    Tax Optimization for High Earners – A Case Study

    Today’s case study is an example of how Kangpan & Co.’s growing proprietary capabilities helped uncover core tax optimizations that our clients’ previous advisor was overlooking. There is nothing more rewarding than providing immediate, tangible results within the first few conversations with a new partner. As the clients in this case mentioned in our latest review session:

    “It’s hilarious just how much better your approach is compared to our old advisor… He never talked to us about any of this.”

    Our clients are a high-earning, married couple in their 30’s living in New York. They have a combined income in the high six figures. They came to us because they were unhappy with the advisor they were working with at the time, sensing (correctly) that their old advisor was overlooking many strategies that could help them put thousands more a year towards their financial goals.

    We started the relationship by building a comprehensive, dynamic financial plan that would help us fully understood the couple’s financial situation as well as their short, medium, and long-term goals.

    Once we had a holistic picture, we were able to focus our detailed series of diagnostics on the critical tax, planning, and investment optimizations that would help them put thousands more per year towards their goals.

    We went through our full suite of tax, investment, and planning diagnostics during the onboarding process. While we delivered value across all three of those categories, we want to use this case study just to highlight the key tax opportunities we identified:

    • Saving for College Before the Stork Arrives: The couple are planning to but do not yet have children. Like many of us, they prioritize college savings in their long-term financial goals and were planning on opening a 529 Plan once they had children. Many couples are unaware that you can open 529 Plans before your kids are born to a) get a head start on saving but also b) start taking advantage of the tax benefits now. We modeled out the tax and long-term savings impact of our clients starting their 529 this year and also helped them set up and fund their account to begin taking advantage of all the tax benefits.
    • Health, Wealth, and a Triple-Tax Advantage: One of the clients has had an HSA for years into which their employer has been contributing $1,000 a year. However, the client had not been adding any additional funds since they felt they were young and healthy and had no need for putting funds into the HSA. We walked through the triple-tax advantages of HSAs and discussed how HSAs can function like an additional retirement account once they turned 65… when the funds could be tapped penalty-free for non-healthcare spending.
    • Maximizing Charitable Giving By Waiting for the New Year: Our clients donate to several charities each year. While the amounts are generous, they are not high enough for our clients to itemize. However, in 2026, the OBBBA tax changes will allow couples filing jointly to deduct up to $2,000 in qualified charitable cash donations, even if they take the standard deduction. Based on this change, we advised our clients to wait until at least Jan 1, 2026 to make some of their planned donations to take advantage of this new deduction policy.
    • Continuous Tax-Loss Harvesting: We identified and realized multiple tax-loss harvesting opportunities as we migrated the clients’ portfolios towards our recommended allocations. While many advisors only look at tax-loss harvesting once a year (if that), we implement it year round to continuously capture opportunities as they present themselves.

    These four optimizations alone added up to more than $3,334 in additional after-tax income that our clients will be able to build year after year. Note: this couple has graciously offered to serve as a reference for any of you reading this who are not yet clients.

    Food for Thought

    A collection of articles or books I’ve read since the last post that might be interesting to many of you.

    “Indeed, half of the worst drawdowns for traditional stock-bond portfolios occurred during inflationary episodes that triggered central bank rate hikes in the 1970s and 1980s — and most recently in 2022.”This is one of the reasons we advocate diversifying beyond stocks and bonds in your portfolios into alternative asset strategies like managed futures.”

    • The View from Ninety by Charles Handy: Handy spent his career writing and talking about organizational behavior and work-life balance. This is his final book and is mostly a quick, light philosophical musing for busy professionals running through the corporate grind. A key nugget in here for those of you questioning what else is out there:

    “… it’s very tempting to opt for ‘freedom from’ by pursuing a career that offers a fair guarantee of work and money for the rest of your working life. But then, like me, you will feel frustrated because really, secretly, you will want the ‘freedom to’ – the freedom to do what suits you better.”

    • One of Handy’s other books, the Elephant and the Flea, had a significant influence on me leaving the corporate world to start Kangpan & Co.

    Thank you for the continued partnership and for the opportunity to help steer your family’s capital toward what matters most.

    Nathan
    Founder & Lead Advisor

    Not a client yet? Subscribe to this bi-monthly client newsletter for free to see all the engineered tax, investing, and planning strategies we run for investors like you.

    Disclosures:

    This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. We do not receive any direct payments or commissions for securities discussed in our posts. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

    The case discussed in this post is a real-life client case study. The clients in this case study have agreed to be featured in Kangpan & Co.’s materials without any form of direct or indirect compensation. All results are specific to each individual client’s unique circumstances and may not be representative of results other clients would achieve.

  • Client Letter #1: Supporting Financial Literacy and Three Year-End Tax Optimizations

    Thank you for a wonderful 2025; why we donate to support financial literacy; three tax optimizations you should complete before the end of the year.

    To Our Friends and Valued Client Partners,

    I hope you get the chance to slow down and enjoy the holiday season with your loved ones as the year winds down.

    The close of the year is as good a time as any to kick off an official client newsletter. Moving forward, I’ll send these letters to keep you up to date on strategies and capabilities we’re developing between our planning sessions. I also hope these help serve as a valuable knowledge repository for future clients to learn about how we approach the financial world.

    This inaugural letter contains just two main topics:

    1. We Will Donate 5% of 2025 Profits to Philadelphia Financial Scholars
    2. Three Pre-End of Year Tax Optimizations to Keep In Mind

    I’ve loved working with each of you this year as we identify, optimize, and implement strategies aligned to your unique financial goals. Thank you for the wonderful partnership this year and I look forward to many more together.

    Happy Holidays from our family to yours,

    Nathan

    Topic #1: We Will Donate 5% of 2025 Profits to Philadelphia Financial Scholars

    Like many of you, I value education and want to support fair and equal access to quality programs. I have decided to focus specifically on supporting Financial Literacy because:

    • A basic understanding of personal financial management early on can change the entire course of someone’s life
    • Financial literacy is not part of the national education curriculum so it’s a topic that is widely misunderstood, particularly among underserved communities
    • As a wealth manager, financial literacy is a personal passion of mine (as any of you who have seen me excitedly pull up a chart or diagram in the middle of a meeting probably know all too well)

    Kangpan & Co. will donate 5% of 2025 profits to Philadelphia Financial Scholars, a “charitable organization that partners with schools to give students and families knowledge and confidence to achieve lasting financial empowerment.” Note, we do not have any formal affiliation with PFS at this time, we just like their mission.

    Topic #2: Three Pre-End-of-Year Tax Optimizations

    We’ve covered these strategies with most of you in your recent planning reviews, but just as a reminder, here are a few key tax planning strategies to be aware of as the year comes to a close:

    • 529 Plan Contributions: Most of you have until December 31 to make any tax-deductible contributions to your plans for calendar year 2025. We’ve discussed the tax benefits each of you qualifies for and have worked with many of you to complete your contributions for the year already. Reach out to us if you want to make any last minute updates or changes to your strategy.
    • Charitable Giving: OBBBA changes to the tax code next year allow for up to $2,000 in qualified charitable cash donations in 2026 to be deducted from your taxes, even if you are taking the standard deduction. That means it could be tax-beneficial for some of you to wait until Jan 1st for your holiday season cash donations. I’m sure many of you agree with us that Charitable Giving shouldn’t just be about the tax savings, but taking advantage of this tax benefit means you will be increasing your giving power to the causes you care about.
      • We also wrote a piece earlier in the year on our blog about advanced charitable giving via donating appreciated stock that you can check out here
    • Tax-Loss Harvesting: We continuously manage, and then report on tax-loss harvesting throughout the year for any accounts we directly manage for you. This is just a reminder for those of you with any accounts we don’t directly oversee to complete your tax-loss harvesting before the end of the year. Reach out to us if you want help or guidance with this.

    If You’re Not a Client Partner Yet…

    Kangpan & Co. is a comprehensive wealth manager using proprietary technology and analytics to identify and implement high value tax, planning, and investment strategies that other advisors and approaches overlook. We partner with high-earning and high net worth professionals that want their finances functioning at peak efficiency.

    Not a client yet? Subscribe to our bi-monthly client newsletter for free to see all the engineered tax, investing, and planning strategies we run for investors like you.

    Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. We do not receive any direct payments or commissions for securities discussed in our posts. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.

Kangpan & Company LLC is a Registered Investment Advisor with the state of Pennsylvania. All content on this site is for educational purposes only and should not be considered financial advice. Past performance is not indicative of future returns and all investing involves risk including the loss of capital. Individualized responses to persons in a particular state will only be made after complying with all regulatory requirements of that state. Kangpan & Company LLC is not responsible for the content of external websites linked from this site. For a full description of our services, fees, and other important information, please read our Form ADV Part 2A, which are available on the SEC’s website here.