Sterling Thoughts Newsletter
STERLING THOUGHTS — October 2020
5 Retirement Lessons from the Return of Sports
by Scot Landborg
As Featured In:
Your retirement game plan could take a lesson from what’s going on in the sports world: Athletes are back in the game, but in a new way.
After a long interruption, the summer has seen the return of sports. From the NBA bubble in Orlando to cardboard fans in the stands of Major League Baseball, sports are back. While not all sports are back at full strength, and while college football continues to debate what back to play might look like, American fans are happy to have live sports back on television.
Bringing back sports has not been easy in this COVID-19 world and keeping them going will continue to be challenging.
Your retirement life has also been upended in this new world. You faced the unknown in the spring, canceled plans and trips. Now as you restart your retirement and financial life, what lessons can be learned from the world of sports? Here are our top five takeaways.
1. Be Adaptable
Professional sports have had to adapt to this COVID-19 world with an adjusted schedule. They have instituted new testing protocols and new competitive rules, like baseball deciding to put a runner on second base during extra innings. They have adjusted to new game venues, like basketball’s bubble in Orlando with virtual fans.
Look at your financial life: Is it adaptable? Before COVID-19, it made sense to own a broad index to get exposure to the market. In this COVID-19 economy, it has been more important than ever to identify winners and losers. Which are the good companies or strong sectors of the market that will do well in this new economy? Which of the changes we have been living with the past few months are long-lasting, and how can you adjust your financial strategy to make the most of them?
As of Aug. 11, 2020, the US Large Cap growth index is up over 15% on the year, while the value index is down over 10% over the same period. Is your financial and wealth management strategy built to be adaptable? What has your adviser done — or what have you done — to make sure it can endure the fast-changing world?
2. Redefine Success and Keep the End in Mind
The return of sports has filled a need for live-action entertainment, but why do the athletes do it? Of course, a paycheck is a major motivating factor, but so is the thrill of competition and the desire to crown a champion.
In managing your money, how are you defining success? Is it beating an index? Is it producing the income necessary for the lifestyle you want?
Market volatility often requires a re-evaluation of strategy. The resurgence of markets over the past quarter provides a test to see how your strategy would have handled different market periods. It might be time to re-evaluate, not just the results of your strategy but the path and the plan to get there. Also consider other financial tools, instruments, or strategies to help you get to your ultimate financial goals.
3. Always Keep Improving
Know that investing is a process of continual improvement. Just like athletes must continue to train and improve, as an investor it is important to keep educating yourself and stay informed. While you might rely on trusted advisers in making important financial decisions, know that the buck ultimately stops with you in keeping those advisers on track and holding them accountable. Are you asking the right questions?
Your advisers should be comfortable and welcome questions. If you manage assets yourself, make sure you are periodically testing your own strategies and market theories.
Some of the top questions to be asking now:
• How will the conservative part of my portfolio bode in the future with lower rates?
• Will international markets continue to lag in the decade ahead?
• What indexes am I using and why?
• Will growth keep outperforming value?
• Does individual stock selection hold more value in this environment?
• Is my portfolio prepared for potential continued volatility?
4. Be Bigger than the Game
While sports have returned, so has the debate over standing for the anthem and how players demonstrate their positions on important social and political topics. It reminds us that while the sport is important, there are important issues outside of the game that we are all dealing with.
With your money, it is important to stay informed and look at the dollars and cents, but what is it all for? What is your greater purpose? What causes do you care most about, and how can those financial assets be marshaled to support those goals?
Re-evaluate your portfolio, but also look closely at your personal priorities and how you can support some of your broader goals. Maybe that means being a more socially conscious investor and being more selective about the companies you invest in. Maybe it means increasing your gifts to charitable causes that support your worldview. Maybe it means volunteering and contributing more time to advance the ideas you believe in. How can your money and your financial plan further support your personal goals for yourself and your community?
5. See the Silver Lining
This can be hard to do. In the NBA, a bubble has meant time away from family and missing the roar of the crowd. However, it is also meant a unique bond with your teammates and the other athletes. Fans too have seen the game from new angles and new perspectives.
Retirees have had their retirement life upended, too. Travel plans, art classes, and social engagements all put on hold thanks to COVID-19. As easy as it can be to get down about the state of the world, do your best to find the positives. Maybe you cannot go on a cruise to Europe, but your grandkids are available for an outdoor movie in the backyard. Maybe you cannot go to a ballgame, but you can try a virtual game night with friends. Maybe you cannot go to yoga, but you can buy an electric bicycle and explore parts of the outdoors you never knew existed.
Life in retirement is going to throw you curveballs. Whether it is the market or something in your personal life. The happiest retirees are finding joy in the little things. They are adapting to that changing world, and they are staying as active as they can, finding creative ways to engage and enjoy the world around them.
The world of sports is figuring it out, and so can you.
Managed Model Update
The third quarter was positive for markets, while September saw a pullback in the technology sector.
We continue to see unprecedented news making activity. The President was diagnosed with COVID-19 and a contentious Presidential debate laid bare the divisions in this country. The election is less than a month away. The reality of the COVID-19 economy is hitting more businesses and individuals as Disney and the airlines announced more layoffs.
Congress and the President have still yet to come to an agreement on the next phase of any additional stimulus. As the additional $300 weekly unemployment benefits are expiring, what comes next becomes even more real for many Americans.
Third-quarter GDP numbers will likely be strong. International trade has been hit hard by the COVID-19 economy. Hopefully, exports will pick up again as a source for growth in the year ahead.
Corporate earnings and profitability continue to be a concern. The recent closure of all Regal Cinemas nationwide highlights the challenges facing many businesses.
There is good news out there. There continues to be more progress toward a COVID-19 vaccine. Therapeutics continue to see improvement. And as more Americans get the virus and recover, fear begins to dissipate.
We have seen a divergence in the market between companies that can thrive in this environment and ones that will struggle to survive. It is becoming more important than ever to be selective on what industries and sectors can be positioned to do well in the economy moving forward.
Regarding our models and market strategies, we continue to have a more conservative tilt but are mindful of opportunities. Our best weapon is to customize strategy and individualize our approach for a client’s risk tolerance and time horizon.
Our Sterling Active Model is 40% in equities. We continue to favor Large Cap Growth and Technology. We have also increased our exposure to Basic Materials. We have been more effective with the conservative portion of the account with a more tactical fixed-income strategy.
Our Beacon and Sterling Stop strategies are 75% conservative. We remain out of energy and financials and have also improved our tactical fixed income allocation.
Flexible Plan continues to be the best performer on the year, although September was challenging. They are currently invested in 3 sectors: semiconductors, basic materials, and consumer services.
Our individual stock models continue to do well, and we are rolling out our Sterling Stock Select model to more clients. The strategy has helped focus on companies we think have upside potential in the month ahead while still managing downside risk.
We continue to meet with clients individually to discuss their portfolio and potential overall strategy adjustments.
To talk more about your individual portfolio, please email the Service Team at firstname.lastname@example.org or you can call our office at 714-592-7705 and press ext. 2
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