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 takeaway was that while both competitive dancing and building wealth can tolerate a few mistakes while getting the job done, both benefit from finesse.
My son Hudson, like Savannah, is a boy of action, but instead of dancing, he plays soccer for Chargers Soccer in Lakewood Ranch. Soccer is a game of subtlety cloaked in frenetic motion. The game often boils down to a few powerful and well-aimed kicks that can happen at any moment. Most shots on goal don’t hit the net and some result in offsides and turnovers. The game isn’t over until the last whistle is blown. The suspense keeps the game exciting.
That lesson shouldn’t be lost on stock investors. The S&P 500 is a tale of two markets as it almost always has been since the stock market began. As of June 11, the index was up by 12.69% year to date, excluding dividends, which is well above its 20-year historical annual growth rate of a smidge 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 actually beating the market by performing better than the index. The other 369 stocks are, at least from the standpoint of price performance alone, duds.
As tempting as it might be to ditch the fuddy-duddy stocks and jump on what’s red hot at the moment, keep in mind that many of today’s hot stocks were yesterday’s duds. If you compare the S&P 500 sector performances of 2022 and 2023, you’ll see that Information Technology went from being the second-worst performing sector in 2022 to the top performer in 2023. Likewise, the hottest sector in 2022, Energy, morphed into the second-worst performer the following year.
By now you are probably figuring out that if most of your stocks aren’t doing as well as the story stocks that dominate the headlines, you’ve got plenty of company. More than two out of three of the S&P stocks are underperforming the index so far this year, but the index level is a form of an average, and that’s often the nature of averages. If you’re frustrated, take heart, because, like an exciting soccer game, your score can turn around on a dime. Likewise, if you’re one of the few that are heavily invested in some of the superstar stocks, don’t count your chickens prematurely (and this might be a good time to remind you that defenses win championships).
The most important lesson, however, is that obsessing over losing positions and gloating too much over winners is a fool’s errand, or at least a recipe for a stress casserole. Just play the game and remember the score only matters most at the end.
Evan R. Guido is the founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads 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 offered through Avantax Advisory ServicesSM, insurance services offered through an Avantax-affiliated insurance agency. 6260 Lake Osprey Drive, Lakewood Ranch, FL 34240.
