When Buying “The Stock Market” May Not Be Optimal

When people talk about “the stock market,” they might actually be thinking of the Dow Jones Industrial Average, or the S&P 500 Index. These lists are what they sound like: averages and indexes of exchange-traded securities.

And one popular school of investing calls for buying index “funds,” collections that offer a slice of what’s happening on one of those lists. The goal is to capture the list’s average return. It’s simple, easy, and relatively inexpensive to seek to replicate those market averages.

But there’s a tradeoff. There have been extended periods when those averages basically went nowhere for many years at a time. The “average” approach means you are by definition going with the crowd. But crowds can become herds, which can turn into stampedes.

This is what happened with the raging Nifty Fifty and again in the Tech Wreck.

Back in 1973, the “Nifty Fifty” stocks were all the rage. Many scrambled to buy and hold these dominating stocks, names like IBM, Xerox, or Coca Cola. One might say there was a stampede into the favored names. Valuations got stretched, the S&P 500 peaked—and proceeded to fall about 50%.

It took until 1982 to regain that 1973 peak, before moving any higher: a decade with essentially no progress.

It happened again from March 2000 to 2013, a time that got the nickname the “Lost Decade.” This time, the mania was internet stocks. Technology and communications companies dominated the S&P 500, and investors got excited. Again, more people stampeded in, valuations got stretched, the S&P 500 peaked—and proceeded to fall about 50%. Not until 2013 did the index begin to make and hold new, higher ground.

So what was problematic about those peaks? The largest companies became a much larger fraction of the total value of the S&P 500. The top companies in 1973 and 2000 had become worth many times the bottom companies combined.

Staying with the crowd—buying indexes and aiming to capture averages—is not the only way to invest. In those episodes from history, some other sectors fared better than the fallen favorites and broad U.S. market averages. There were those smaller companies, value-style investments, and overseas markets that generally went up during the Lost Decade.

At 228 Main, our core investing principles include “avoid the stampede” and “seek the best bargains.” As such, while the largest companies in the S&P 500 are becoming increasingly concentrated at the top—reminiscent of 1973 and 2000—valuations may be getting stretched once again. We are seeking to have more and more of our portfolios invested other places. (Research is a core activity here, a daily discipline, and we invest a lot of time and energy into it.)

That is to say, we’re seeking opportunities outside the averages. We’ve got our eye on value-style companies—those that seem to provide a lot of current profits, or cash flow, or dividends relative to each dollar invested. We’re seeking companies operating in faster-growing economies, the ones that provide food, shelter, transportation, communications, or energy (and are trading at more attractive prices). We want to know what’s happening with smaller companies, the opportunities that don’t fit the profile of those mega-sized names that dominate the market averages today.

There are tradeoffs involved with either approach.

When we follow the averages, we risk following the crowd straight into a stampede.

When we buy the bargains, our particular favorites may get cheaper while the darlings of the market are still climbing higher. Our portfolio performance could generally lag a red-hot market.

To be clear, we are still invested in those large U.S. growth companies we’ve mentioned. But, clients, we’re more diversified now than we’ve been at any time since the early 2000s. Even though we may be on the right track for long-term investors, it can be lonely to be contrarian. So it’s times like these that it helps to check in, take the long view, and make sure the methods suit the goals.

And for us, it’s the pursuit of capturing the potential growth, for the long run. No guarantees, but that’s what we’re working toward.

Clients, please call or email us if you would like to talk about this or anything else.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy assures success or protects against loss.

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Catch-Up > Ketchup

graphic shows a piggy bank looking on curiously at a bottle of ketchup

These two terms may essentially be homonyms, but one is so much greater than the other. Kiddos sometimes choose huge portions of the condiment ketchup. But beyond a sugar-fueled addiction for dipping our fries in that one is a great opportunity to “catch up” on our IRA contributions.

In the world of IRAs—Individual Retirement Accounts—we consider the beginning of January through tax filing day “catch-up season.” Whether Roth or traditional, if we are eligible to make contributions, then we can catch up on last year’s contributions even though the last calendar year is over.

Those just learning about the power of Roth IRAs can use this season to make two years’ worth of contributions at once. Even with the federally-mandated limits, you can contribute thousands of dollars in standard contributions. And for people who turned 50 by year-end, there is an extra “catch-up” contribution option.

Consider even just the standard contribution limits. Imagine if you had $15,000 in a regular account (in which you pay tax on earnings) and were eligible to contribute to a Roth IRA for both this year and next year. If you won’t be spending that money in the next few years, the question comes down to whether you would like to never pay tax on earnings on that money–ever again, for the rest of your life.

If that value were to double over the years and double again, as sometimes happens with long-term investments, there might be $60,000 available later with zero tax. After five years your contributions can be withdrawn without tax. At the later of five years or age 59½, the earnings may be withdrawn without tax too. And if you didn’t withdraw it, your beneficiaries would receive it, free of income tax.

No guarantees, of course: the markets go up and down.

There is a maximum earnings limit on Roth contribution eligibility, and there is a whole world of other lifetime tax reduction strategies related to Roth conversions. We’d be happy to visit with you about your eligibility. Simply email us or call if you have an interest in learning more.

For now, happy catch-up season, one and all!

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.

This information is not intended to be a substitute for specific individualized tax or legal advice. Neither LPL Financial, nor its registered representatives, offer tax or legal advice. We recommend you discuss your specific situation with a qualified tax or legal advisor.

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Money Grows (But Not on Trees)

photo shows a green tree along a country lane, surrounded by green fields

Over the past few years, more of us have found the joy of raising backyard chickens or container gardens or fruit trees. It’s an opportunity to see the fruits of our labor—literally!—grow.

It may take a few years for a new apple tree to produce. But with care and attention, that same tree may over time provide bushels of fruit for you, your family, or your community.

Growing your wealth isn’t that much different.

For example, if you put $10,000 into a savings vehicle that paid 2% annual interest, how long would it take you to double your money? The intuitive answer would be 50 years: 50 x 2% equals 100% return.

But due to the effects of compound interest, you’d actually get there in 36 years—not 50.

You don’t just get interest on the money you originally put in: you’d be getting interest on the interest you’ve already earned, too.

Doubling your money in 36 years is not terribly impressive. But then, 2% is not a terribly impressive rate of return. At 4%, as you might expect, you can double in half the time: a mere 18 years. So in 36 years, you’ll have doubled twice, quadrupling your original money. In 54 years, it would be eight times what it originally was!

That may sound like a long time, but if a person started saving in their 20s, they could reasonably expect to have 50+ years for their earliest savings to compound.

And that’s at a relatively conservative 4% annual return. As your rate of return increases, your compounded returns increase exponentially. At 5%, your money would increase tenfold in 50 years. At 6.5%, your money would increase twentyfold in the same time: a mere 1.5% increase in returns doubles the money over 50 years!

All of this to say, it doesn’t take very many doublings to turn modest savings into a sizeable pile of money.

Of course, sometimes this is easier said than done. Just as some growing seasons are rougher than others, returns are never guaranteed, and pursuing higher returns generally means accepting more volatility and risk.

Potential growth takes preparation, patience, and a little guidance along the way. Even modest investments can multiply. We’re here to keep an eye on the math together. Don’t worry: no quizzes.

If you’d like help planning, planting, or tending your financial orchard, we’re here to work alongside you as it tries to grow.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal.

This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.

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Embracing the Loops, Swoops, and Squiggles

Sometimes life’s big milestones arrive in a neat, straight line. And sometimes that’s just not what happens—or what we want to happen. How do we plan for a swoopy life?

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Resolved: I Will Do Away with Resolutions

Spruce branches surrounded by a clothes clip holding a note with New year, New chances, New goals, New Start, New results all crossed out with red marker

by Mark Leibman, President

With serious planning and determination, many of us are gearing up for the next round of New Year’s resolutions. The change in the year will be the time we finally lose weight, or drink less, or exercise more, or wake up at 4 a.m. like those social media productivity thought-leading rockstars do!

As for me, I will not have a New Year’s resolution. I won’t be hustling to be the oldest participant in the hardest 5k in the state in 2026. I will not be striving to achieve or maintain a specific weight. I will not be avoiding or including certain foods in my diet. No resolutions. Not one.

Many of you have heard me say that I’m planning to work to age 92. Will any New Year’s resolution make that happen? There’s nothing magical about December 31 (except perhaps some fireworks at midnight!). I don’t measure my health by a calendar.

Instead, I measure my efforts every single day.

When you really think about it, doesn’t wealth work the same way? Even though we measure markets on an annual basis, that’s really just a long-held standard for consistency. You may have heard that in 2025, the stock market (as measured by the S&P 500) was up 12% for the year, January to December. But we have the tools to calculate the return for whatever 365 consecutive days you’re interested in. We can look at the results birthday to birthday, or any other range we’d like.

The process of becoming financially independent—of gaining the option to live on your wealth instead of your labor—uses essentially the same process as my health goals. Steady decisions, over time.

And we’re here to help anybody navigate the process. We try to offer guidance in your journey through the economic ups and downs, the noise of market pundits both on business channels and at the café. To focus on your financial health overall, instead of some calendar-year resolution.

Just like my health goals don’t change when I buy a new calendar, my wealth goals don’t need to either.

Clients, don’t think we are against all New Year’s resolutions. There’s actually one I highly recommend: in 2026, help someone learn what’s going on here at 228 Main in beautiful downtown Louisville. I know I’ll try to stick to that one too.

Thank you all, for everything.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

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Resolved: I Will Do Away with Resolutions

by Mark Leibman, President

Instead, I measure my efforts every single day.

Just like my health goals don’t change when I buy a new calendar, my wealth goals don’t need to either.

Thank you all, for everything.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

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How Many Hats at a Time?

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Every once in a while, the schedule gets really and truly full. We might have places to be throughout the day, for many days in a row. Weeks might go on like this, in an exciting blur.

It’s not a bad problem to have, but sometimes, it can feel like we’re being pulled in more than one direction.

Some of you may experience this sensation too, as you also wear multiple hats in life. You may have commitments as a parent, an employee or an owner, a teacher, a partner, a community member, and more.

Here’s an idea that might provide some relief: we may have many hats, but we only wear one hat at a time. It’s okay to allow ourselves to focus on one at a time, even if we must switch hats often.

The same general principle is true about our financial goals: it may seem prudent to save for retirement, and a house, and a child’s education, and all the other things one may want in a lifetime… but the secret is that you don’t pay for these things on the same day, or week, or month, probably.

Having many hats doesn’t mean we can’t focus—and strategize. Time is finite, of course. But we take things one hat at a time.

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Friendly Faces and Important Roles

Clients, it’s Caitie here. I’m so thrilled to introduce you to our newest teammate, Allison Bauers! In a small business, we tend to wear many hats, so this week, we’re chatting about how our roles and duties will change in the coming months.

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Avoid the Stampede: It’s a Classic for a Reason

It’s one of our core principles for a reason: “avoid the stampede.” We live in uncertain times, and it is understandable to get spooked by the day’s headlines. But we do not believe that safety is found following the herd.

Omaha is famous for its stockyards and slaughterhouses; we know that when the cattle are all getting steered together, it rarely ends well for the cattle.

Consider some lessons from history in this classic message.

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Your Money Never Retires

For many people we know, money represents work. It’s the sweat and the time and everything else that goes into one’s livelihood.

It may have started decades ago, perhaps with a job for a local farmer, walking beans or baling hay. (Does that reference date us?) It’s all the jobs that followed, too. No matter where those paychecks came from, the work behind them can become a source of pride—one that can also fund our retirement years.

We’re fortunate to know many people who end their careers with resources beyond their needs. It’s a nice problem to have: what happens when the excess outlives us? What’s the next “life” for what you’ve earned and accumulated?

We’ve been hearing from some of you about these big financial legacy questions, and there are many possible answers. In no particular order, here are a few ideas that you have been sharing with us.

Spend it on shared memories. For many, the pace of retirement includes more travel and experiences that weren’t possible during the working years. And while you’re at it, you might think about including those closest to you. Some might take their children or grandchildren with them on the big adventures. If you don’t want to leave behind wealth well beyond your beneficiaries’ needs, spend well now, with them: create the memories while you have the opportunity to do so. Bonus? They have another shared memory to enjoy, long after the experience is over.

Consider making gifts where they would make a difference now. There’s no rule saying you have to wait until you’re gone to get the excess to your beneficiaries. An inheritance can be life-changing, but who’s to say that a well-timed gift couldn’t make a big impact? It could be that splashing around a little cash now might make more difference in the long run. Maybe a loved is working toward a down payment on their first house, or some seed funding for their business expansion, or some other worthwhile project that you’d like to support. Why not now?

Direct it to the causes you care about. You can turn some of your charitable intentions into plans now, too. Your legacy planning may already involve leaving behind some assets to charity, and there are other strategies that might fit your goals. For example, a Donor Advised Fund (DAF) can be set up to benefit organizations of your choice after you’re gone, but it can also be left to a successor: a person you trust to direct charitable distributions of your gifts. They could carry on the work you start now.

Making these kinds of choices truly is a great problem to have. Generational wealth is a powerful tool and privilege. It also highlights the tensions we feel around money: what is the utility of money in our lives—and beyond? We don’t have to know all the answers, but there might be a chance to unlock some exciting opportunities for the generations ahead, if only we get a little more intentional or organized now.

Clients, may your wealth bring you only the best of dilemmas. We’ll be here to try to help you along your way.

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News and Views from 228 Main

When Buying “The Stock Market” May Not Be Optimal