The recent pull back in stocks has changed how I view investing in brokerage accounts. For the longest time I thought I was picking great positions in blue chip companies. I was but not consistently. Well, one thing I never really paid attention to was my YTD return versus the major indices. I always noticed I underperform the greater indices (on the Fidelity home page) and figured it was just a mistake with how it’s calculated. That or I was close and always one catalyst away from making a 10 bagger. At this point it’s clear neither I nor my financial advisor can consistently beat the S&P. After deciding I was going to move 90% of our brokerage assets to VOO and QQQM I’m realizing I’m in a pretty complicated tax situation that will take a while to navigate through. I picked winners over time for sure. But, now I have to decide on if I believe these winners will outpace the greater averages or if I should be taking capital gains across a couple million. This year we’re going to be deep in the highest tax bracket and any short term gains are going to get pounded by taxes. Getting to the point - very few people and advisors (plus their fees) consistently beat the S&P. Single stocks go in and out of favor and in the long term there will be points where you will want to exit and will incur capital gains. Moving forward I’m going to only retain or make investments in ultra high conviction stocks and keep the large majority of our money in the major averages. I say this because there’s a lot of people who will resonate with this situation whether they admit it or not. Not only does investing in something like VOO (only an example fyi) simplify things but you’re able to more appropriately access your money when you want to spend it. I always had to choose what I wanted to slim down and I hated it. Selling an index brings less emotion into play. This post is largely addressing the reality of beating the major indices consistently but also avoiding complicated tax situations. Retirement accounts obviously don’t have the tax situation but refer back to beating the averages which is hard to consistently do. 10 years ago I was just a kid and now I have to spend a bunch of time figuring out how to best navigate Uncle Sam. TLDR: invest in the averages. If you can’t beat em, join em. A couple % per year under performing stacks up over time and there’s less volatility in the greater averages versus single stocks. Not financial advice. Take what I say with a grain of salt.
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