Stocks are Flying High. Why Aren’t Mine? Investors Ask Natalie.

Chart by Microsoft. Msn.com.

Stocks are Flying High. Why Aren’t Mine? Investors Ask Natalie.
 
Dear Natalie: Every day I hear that stocks are hitting new highs. Yet my personal plan isn’t seeing such spectacular gains, and many of my positions are losing money. Why aren’t my stocks performing as well as the stock market is?
Not FOMO – RMO (Really Missing Out)
 
Dear Really Missing Out,
 
Your brokerage statement is showing that your returns were terrible last year, with 26% total gains in 2023 in the S&P500 vs. your 5% gain. FYI: The Dow Jones Industrial Average gains were only 13.9% in 2023. Without the Magnificent 7, the S&P500 gains would have been just 9.94%.

It's also important to put things in perspective. As you can see in the chart above, the superior returns of 2023 didn't even bring the S&P500 back to the highs of 2021. The index finally started ringing in new highs this month -- February of 2024. In addition to having a properly diversified plan that protects our wealth, it's important to rebalance regularly to capture gains. Otherwise, we could be riding a Wall Street rollercoaster (as is exemplified in the performance chart above.)
 
After taking a look at your plan, there are a few problem areas that are causing your portfolio to severely lag the performance of the S&P500. These issues are pretty common in both retirement plans (especially those target date retirement funds) and managed portfolios. So I’m encouraging everybody to take a forensic look at their statements, and see how your plan is performing next to the S&P500. Many plans are performing at half the speed, and some, particularly for people who are closer to retirement, might even be losing money. Here’s why.
 
Five reasons many portfolios are lagging the spectacular 2023 performance of the S&P 500.
 
1.     The Magnificent 7
2.     Long-Term Bonds
3.     Missing Hot Industries
4.     Overweighted in Value
5.     Underweighted in Growth
 
And here is more information on each point.
 
 
1. The Magnificent 7
 
A lot of people aren’t aware that the Magnificent 7 is largely responsible for Wall Street ringing up record highs this month. The Magnificent 7 stocks have doubled over the last year. Nvidia more than tripled. As you can see in the data I listed at the top of this blog, without the support of the Magnificent 7, the stock market would’ve been up 13%-ish rather than 26%.
 
You don’t have any large cap growth in your portfolio (where the Magnificent 7 stocks would be), or a fund that specializes in the Magnificent 7. The few stocks you have are ones that actually lost money. 30% of the Dow Jones Industrial Average companies lost money in 2023. (Click on the blue-highlights to read more.)
 
2. Long-Term Bonds
Long-term bonds lost even more than stocks did in 2022, at -26%. 2023 saw a small recovery, but nowhere enough to make up for the losses in 2022. Since this is on the safe side of our portfolios, it’s very important to know what is safe in the post-pandemic Debt World that we live in. Even the banks, with their Ivy-League C-Suites, are having trouble getting this right, as evidenced in the bank failures. (We’re still underweighting the financials industry, including insurance companies and brokerages.)
 

Everyone is counting on a recovery of bonds if interest rates start getting cut in the latter part of 2024 and in 2025. However, there’s a great deal of duration risk and credit risk that remain even if the interest rate risk has abated. With regard to bonds, it’s a good idea to keep the terms short and the creditworthiness high until the duration and credit risks have been worked out. (That process can be painful to bond investors who have skin in the game.) We spend one full day on What’s Safe in our Financial Freedom Retreat. Commercial real estate is one of the areas of heightened risk in bonds and the economy, with potential ramifications on the banking industry and financial stability.

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3. Missing Hot Industries
In addition to having large cap growth and proper size/style diversification, we could lean in even more to the Magnificent 7, with a hot slice in our nest egg pie chart. It’s a good idea to invest in hot industries, such as artificial intelligence, cyber security, copper, crypto, gold, or even other countries. A well-diversified portfolio can include up to four slices of hot industries. Regular rebalancing helps us to capture and keep our gains when a particular industry or country shoots the moon, rather than riding the Wall Street rollercoaster. This plan, which we teach at our retreat, also helps us to invest the appropriate amount, rather than bet the farm.
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4. Overweighted in Value
Value funds are very problematic, particularly in the United States. When stocks are at all-time highs with elevated price-earnings ratios, nothing is actually on sale. The other side of the issue is that the companies/funds that are trading for a muted price tend to be market laggards with a great deal of concerns, including massive debt, pension and other post-employment benefit liabilities, and slow growth. Many of the Dow components that lost money in 2023 are stuck in the value funds.
 
For this reason, we’re suggesting value replacement funds in our sample pie charts. We can diversify into other countries and get exposure to industries that are very underweighted in most of the U.S. funds, including materials, utilities, and consumer staples. As I mentioned above, many of these funds offer a higher dividend, and some also come with higher credit quality.
 
5. Underweighted in Growth
 
Growth funds offer much lower dividends than value funds. However, missing out on growth industries in 2023, such as artificial intelligence, cyber security and technology, meant we missed out on the spectacular gains of equities. Knowing what we own, and having the proper mix of value, growth, small, medium and large caps, and hot industries, is a great way to protect our wealth, while also improving performance.

Bottom Line 
Your plan has too many long-term bonds, bond funds and value stocks. This could continue to be a problem even if interest rates get cut. So, now is the time to get properly diversified and protected. 
 
If others reading this blog are worried about their wealth plan, now is the time to really know how to read your brokerage statement properly. The statement should reveal what your portfolio performance is compared to the S&P500 over the last year, and even the five or 10-year period. Knowing why your plan is underperforming might require getting an unbiased 2nd opinion. I have a coaching client who was told that he was earning 5-7% on his “conservative” investments. The real return was under 2%, due to the principal loss in value of his holdings. This was written in plain sight on the statement. He (and many of us, really) just didn’t know where to locate that information, and how to decipher the document. (Click to learn more.)


When we consider how much money we have in our retirement plans and brokerage accounts, it can be more than we make in many years of earned income. So, being the boss of our money and protecting our wealth, while growing the at-risk side safely on par with the S&P 500, can be time and wisdom that is well-spent. Once we learn the life math that we all should’ve received in high school and college, and implement these strategies, all we need to do is to rebalance once, twice, or three times a year. Once we build our solid financial house, we just need to Spring clean once a year.
 
 

(If you’d like an unbiased 2nd opinion on your plan, such as the person sending in this question received, email [email protected] for pricing and information.)
 

Join us at our April 27-29, 2024 Spring Financial Freedom Retreat. Learn how to invest and grow your wealth, green your retirement plan, easy and efficacious nest egg strategies, how to get hot and diversified (including in artificial intelligence), and what's safe in a Debt World. You'll even discover how to save thousands annually with smarter big-ticket choices. Yes, it's a complete money makeover. 
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Email [email protected] to register. Learn the 15+ things you'll master and read testimonials in the flyer on the home page at NataliePace.com. Register by Feb. 29, 2024 to receive the best price. ​

"Ten minutes into the first day I was already much smarter about investing than I ever thought I would be in my life and I knew I was in exactly the right place at this retreat. I am amazed at how EASY and FUN it is to make my money work for me and those I love. I think this kind of information should be compulsory in schools. I wish I'd learned this sooner." CM

Join us for our Online Spring Financial Freedom Retreat. April 27-29, 2024. Email [email protected] or call 310-430-2397 to learn more. Register by Feb. 29, 2024 to receive the best price. Click for testimonials, pricing, hours & details.

Join us for our Restormel Royal Immersive Adventure Retreat. March 7-14, 2025. Email [email protected] to learn more. Register by April 30, 2024 to receive $200 off the regular price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two and three 50-minute private, prosperity coaching sessions!

Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is are the most recent releases of these books. Follow her on Instagram. 
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Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.​

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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.