When I was a Junior in college, I had an Etrade account and the market was going hog wild. It was 1998/1999 and the tech boom was on. I had been a value investor since 12 and understood how to buy high quality companies, preferably at a discount and hold them for a long time. This was NOT that. This was something completely different. Just about every day I would log onto an AOL chat room and glean a few ideas from other traders who spent their entire day in front of the computer. Of course, there were the common names such as Lucent, AOL, Broadcom and Yahoo but there were also companies like Pets.com, JDSUniphase and something called UGlobe. Each week it was a different name and on countless days I would buy a stock and head to class, only to return and find that I had made several hundred dollars. For a college kid, this was amazing, and it didn’t take long until my brain began to extrapolate the possibilities.
Let’s face it. This market, this ‘stock’ market, this financial world, was clearly easy. It was the simplest game in town, and I couldn’t understand why everyone wouldn’t just follow suit. As my account grew, my confidence exploded and it was clear, to me, that my intelligence level was obviously superior than most. Fortunately for me, I was still under the tutelage of some very wise and experienced mentors who continued to remind me that it was not intelligence allowing me to make money but rather the simple fact that we were in a bull market. They encouraged me to enjoy it, but not for a second believe I was smarter than the market. I enjoyed the run for several years.
2020 has been nothing short of amazing. This word is often associated with positivity when in reality the dictionary definition of amazing is: causing great surprise or wonder; astonishing
Despite all the economic challenges, Covid uncertainties, or geopolitical concerns, to say the stock market has been amazing, may just be the understatement of the year. As I write, all major averages are at all-time highs with the NASDAQ up over 40% for the year. Take that in for a moment. It has been an amazing year to say the least but let us not forget to take a step back and make sure we breathe, not getting too caught up in the gains. Let’s review a few steps to ensure our sanity as we head into 2021
1.)  Rebalance – Odds are your equity exposure has gotten ahead of your desired allocation. For example, if your risk tolerance has you seeking a 50/50 allocation maybe you now find yourself at 60/40. Should this be the case, consider rebalancing back to a 50/50 allocation, thus removing some of the gains and not inadvertently becoming more risky the higher we go. We’ve been doing this for our clients this month with an eye on tax harvesting as well. If you can kill two birds with one stone, you should.
2.)  Enjoy and Remember – I find myself writing this often because it is one of the most important lessons I’ve learned over nearly three decades of investing personally and professionally. If we don’t learn from this year that would be a tragedy. While we enjoy the gains let us remember the lessons of just how markets can bounce back when you least expect them, governments have more money to spark rebounds than seem humanly possible and it generally doesn’t pay to take a long-term pessimistic approach. This is critical to keep in mind, as we will certainly go through challenges in the future and if 2020 taught us anything, it’s that anything, and I mean ANYTHING is possible.
3.)  Revisit Cash balances – One of my concerns when I meet new folks is their misunderstanding of inflation and the erosion of purchasing power. I am preparing a Zoom call on this very subject (coming in January) and will delve into this deeper. While we’re all for anywhere from 6 – 12 months of emergency cash on hand, anything more must be properly assessed when it comes to your long-term goals and objectives. In my opinion, inflation is coming at us and if you’re not keeping up, you’re losing. It’s worth a discussion with your adviser regardless of your views.
4.)  Professionals are often wrong, be careful who you listen to and read – Holy cow were folks wrong this year. The amount of material I soak in on a daily basis is unfathomable. I often tell young people that, while I may not be the smartest person in finance, you won’t find anyone who will outwork me. My day begins around 4, often not by choice but habit and my consumption of what is happening in the world begins. By 7, I’ve got a good handle on what has happened overnight in Asia and what is transpiring in Europe. I read opinions of some of the so-called ‘smartest’ people in the world and this year, boy were some of those opinions bad. Thankfully, I reviewed all the material myself and came to my own conclusions. I didn’t subscribe to so and so or this or that. I still haven’t met ‘they’ and I’m not really sure who the ‘professionals’ are. I encourage you to be very careful when making life decisions based on someone’s opinion. Take in many opinions, read the facts, then come to your own conclusions. This will help you sleep well at night, which is the only way I can make decisions for the families we help.
5.)  Planning, Planning, Planning – As you go into 2021, if you don’t have a finite financial and retirement plan, now is the time. I am so excited to be working with folks all over the United States and Daniel is spending 8 to 10 hours per day diligently pursuing complex financial and retirement plans. Having a road map helps you to avoid emotional decisions and gives you peace of mind should something tragic happen and you leave loved ones behind. There are many good advisers out there, so if you don’t have one that is helping you in this area, now’s the time to find one. While I’d love your business, the reality is I am more interested in making sure you have a plan. Planning is absolutely key as markets will gyrate, booms will turn into busts and life will certainly throw curve balls.
I’m sure I’ve missed a few pieces of goodness, but this is all I can think of at the moment. It’s been a wonderful year and in the event that I don’t pen a piece before the clock strikes midnight in the next dozen days, may you have a very Merry Christmas and the most Happy New Year!
See ya in 2021!
Oooh, I almost forgot. I’ve challenged our new rock star Logan to begin finding his voice. Check out his first post HERE about his first two weeks at Joule here. I’m excited to see how this young man develops. He wows me daily.