Last week I marveled at my daughter Savannah’s dancing and how competitive dancing has a lot in common with tax planning. If you’re catching up, the bottom line was that while competitive dancing and wealth building can tolerate some mistakes in getting the job done, both benefit from finesse.
My son Hudson, like Savannah, is an action guy, but instead of dancing, he plays soccer for Chargers Soccer at Lakewood Ranch. Soccer is an elaborate game dressed in frenzied movement. The game often comes down to a few powerful and well-directed shots that can happen at any moment. Most shots on goal miss the net and some result in offsides and turnovers. The game is not over until the final whistle blows. The suspense keeps the game exciting.
This lesson should not be lost on stock investors. The S&P 500 is a tale of two markets as it has almost always been since the beginning of the stock market. As of June 11, the index is up 12.69% year-to-date, excluding dividends, which is well above its historical 20-year annual growth rate of over 10% per year. But that doesn’t tell the whole story. When I looked at how the individual stocks in the index were performing, what struck me was that only 134 of the 503 stocks were beating the market by outperforming the index. The other 369 stocks are, at least from a price performance perspective alone, worthless.
As tempting as it may be to ditch stocks and jump on what’s hot right now, keep in mind that many of today’s hot stocks were yesterday’s stocks. If you compare the S&P 500 sector performance in 2022 and 2023, you will see that Information Technology went from the second worst performing sector in 2022 to the best performing in 2023. Likewise, the hottest sector in 2022, Energy became the second worst performer the following year.
By now you’re probably realizing that if most of your stocks aren’t doing the same as the story stocks dominating the headlines, you have too many companies. More than two out of three S&P stocks have not underperformed the index so far this year, but the index level is a form of average, and that is often the nature of averages. If you are frustrated, take heart because, like an exciting game of football, your score can turn on a dime. Likewise, if you’re one of the few invested heavily in some of the superstar stock, don’t count your chickens prematurely (and this might be a good time to remind you that defense wins championships).
The most important lesson, however, is that obsessing over losing positions and bragging too much about winners is a fool’s errand, or at least a recipe for a cauldron of stress. Just play the game and remember that the result is most important only at the end.
Evan R. Guido is the founder of Aksala Wealth Advisors LLC, a member of the 2018 Forbes Next Generation Advisors list and Financial Professional at Avantax Investment ServicesSM. Evan leads a team of retirement transition strategists for clients who consider themselves The Millionaire Next Door. He can be reached at 941-500-5122 or eguido@aksalawealth.com. Read more of his insights at heraldtribune.com/business. Securities offered through Avantax Investment ServicesSM, member FINRA, SIPC. Investment advisory services provided through Avantax Advisory ServicesSM, insurance services provided through an insurance agency affiliated with Avantax. 6260 Lake Osprey Drive, Lakewood Ranch, FL 34240.
#result #stock #market #investors #turn #shock
Image Source : www.heraldtribune.com
