Dave Johnson is known for this call, “And down the stretch they come!” Mr. Johnson has been calling horse races since the early 1970s, including the Kentucky Derby, Preakness, and Belmont Stakes. There are few things more exciting in sports than watching horses make the final turn towards the finish line – the stretch run.
We’re entering the fourth quarter, and 2021 is less than 100 days away – thankfully. We are in the stretch run. When horses enter the starting gate, the optimism is high; each horse has a chance to win. As the race progresses, the fastest horse separates itself from the field, and jockeys need to adjust their strategy to catch the leader. This year started with much hope, especially after a stellar 2019. The Dow Jones was up 3% through February before the world imploded with the Coronavirus. As the pandemic spread, the market fell 37%. For the past six months, we had to adapt to a new normal – masks, social distancing, self-quarantines, Zoom Calls, hand sanitizer, and a shortage of toilet paper. Hopefully, we finish the year on a positive note with strong momentum for 2021.
As we approach the end of the year, what can you do to enhance your investment portfolio for 2021 and beyond? Here are a few suggestions.
- Let your winners run. A jockey who is riding a winning horse needs to hold on to finish the race as Ronney Turcotte did when he rode Secretariat during the home stretch of the Belmont Stakes in 1973. If you’re sitting on winning stocks, hold them until next year before realizing your gains.
- Sell your losers. If you own a stable of losing stocks, sell them to realize your losses for this year. You can offset your gains dollar for dollar, and if you don’t have any profits, you can carry your losses forward forever. Hall of Fame pitcher Don Drysdale sold his racehorses because he said the slow ones eat as much as the fast ones.
- Diversify your holdings. Owners and trainers race several horses during a season – some win, some lose. A globally diversified portfolio of stocks, bonds, and cash will allow you to finish in the money more often than not. Spread your bets across several sectors.
- Review your accounts. What worked and what didn’t? Analyzing your results is vital for investment success. Are you still on pace to achieve your financial goals? If you’re not sure, give us a call. We can help.
- Adjust. What changes do you need to make for 2021? Is your portfolio sturdy enough to weather all types of market conditions? What changes can you make today to better position your investments for a profitable run next year?
- Look for long shots. The technology sector will likely lead wire to wire this year, but sectors like energy and financials were left stuck in the mud. Look for investments that may rebound next year.
- Celebrate your success. Are your investments on pace to finish the year in positive territory? Will you be in the winner’s circle at the end of the year? If you were financially successful, consider sharing your winnings with those in need. Donating money to a non-profit will benefit others and help you reduce your taxes – a win, win.
This year has been brutal, and it can’t end fast enough. We are in the stretch run, so use these next few months to get your house (barn) in order. I know you can do it. I’m betting on you to win big next year.
Do you give the horse its strength or clothe its neck with a flowing mane? Do you make it leap like a locust, striking terror with its proud snorting? It paws fiercely, rejoicing in its strength, and charges into the fray. It laughs at fear, afraid of nothing; it does not shy away from the sword. The quiver rattles against its side, along with the flashing spear and lance. In frenzied excitement it eats up the ground; it cannot stand still when the trumpet sounds. At the blast of the trumpet it snorts, ‘Aha!’ It catches the scent of battle from afar, the shout of commanders and the battle cry. ~ Job 39:19-25
September 23, 2020
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.