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Your 2021 Investment Strategy: Risk, Defense, Dividends & Patience

October 07, 2021
As your financial advisor, the goal of this newsletter is to reiterate my unchanged defensive macro-investment strategy for your portfolios with a sense of optimism and opportunity generated by patience and risk as we close 2020 and enter 2021. My strategy is two-fold:

Strategy 1:
Acknowledging Opportunities in Risk

To grow your portfolio wealth by teasing out longer-term value opportunities within the risks, contradictions, and unknowns of COVID, plus delayed U.S. fiscal policy. The risks below should be considered in any investment strategy along with the already discussed “vaccine distribution timeline” risk:

Additional Market Risks as We Enter 2021
  • The S&P 500 Appears Historically Overvalued & Ultra-Sensitive to a Market Correction:

Years ago, Shawn Tully, Senior Editor-At-Large at Fortune, taught me about Yale economist Robert Shiller’s CAPE (Cyclically-Adjusted Price-Earnings ratio), a reliable measure of the S&P 500’s valuation, particularly when extremely overvalued. Shiller’s PE is an inflation-adjusted average for the prior ten years. As of yesterday’s market close, the Shiller PE was approximately 34. which put the S&P 500 earnings-per-share at approximately $109. Learn More

As Shawn wrote in Fortune in November when the Shiller PE was near 32, the PE “matched the peak just before the crash of 1929 and was only significantly exceeded once in the past 90 years, during the tech bubble of 2000.”[5] Historically, over-valued indices are far more likely to fall than rise as they are over-sensitive to disruption. Just consider Newton’s Law of Gravity.

  • COVID & Stimulus Gridlock:

Prolonged lockdowns with delayed economic stimulus is another potential catalyst for market corrections. A new stimulus package should include larger unemployment checks and payroll protection for businesses to keep paying employees. (Georgia’s U.S. Senate runoff voting day won’t occur until January 5). Fiscal stimulus is a stopgap which can help people pay their rent, utilities and grocery bills while waiting for a COVID vaccine. In a healthy economy, consumer spending accounts for almost 70 percent of U.S. GDP.[6]

Strategy 2:
Portfolio Defense, Diversification, Dividends, Patience & Opportunities

Mitigating portfolio downside has meant playing defense by lowering the overall percentage of equity holdings while increasing cash and U.S. Treasury Bond holdings. Defense has also meant partially rotating into beaten down value securities with significant growth opportunities and dividends from currently out of favor sectors (energy, entertainment, finance, sports, travel, etc.) hurt by sheltering in place. We believe that these value securities will thrive in a post-COVID reopening. Let’s call them “Lodgepole Securities.”

Our defensive strategy is an optimistic one tailored to both growth and value investors who are seeking to limit shorter-term losses yet realize that they are limiting their potential upside gains in exchange for potential protection in a dangerous world. They have patience including a longer-term time horizon driven by a desire to position themselves to profit for a “reopening.”

Dividends: Get Paid to Wait

Another goal of this defensive strategy is to generate relatively high portfolio income that can be reinvested or distributed to fund monthly expenses. We believe that purchasing equities with low valuations and high dividends that are reinvested allows an investor to get “paid to wait” for a post-COVID rebound. In a Hartford Funds’ 2020 Insight study entitled The Power of Dividends, Past, Present & Future, Hartford Funds and Morningstar stated that from 1930–2019, reinvesting dividend income contributed on average 42% to the total return of the S&P 500 Index.[7]

Value Vs. Growth: Diversification Still Rules

Value has rarely been so cheap compared with growth based on metrics such as price-to-earnings and price-to-book value ratios. The iShares S&P 500 Growth Exchange-Traded Fund (ticker: IVW), whose top six stocks (Apple, Microsoft, Amazon, Facebook and both Googles) represent almost 40% its holdings, is up approximately 30% year-to-date with a PE of approximately 35 against a just over 1.5% increase for the iShares Russell 1000 Value Exchange-Traded Fund (ticker: IWD) with a PE of approximately 17.[8] My takeaway for future investing is that there are many more beaten up value stocks than growth stocks with lots of room to rise as we get closer to a post-COVID reopening.

Growth: Add Positions at Lower Prices on Correction

We also view potential corrections as opportunities to add to existing and purchase new growth securities in equipment, green energy, online gaming and shopping, pharma, and robotics at lower valuations. This also means seeking to invest in new sectors and innovators arising out of COVID.

Cash is Queen

Many portfolios have a significant cash position. Cash allows the patient investor to buy securities on dips and take advantage of corrections sparked by the risks cited above.

Meanwhile, we believe the best way to understand the opportunities around us is to observe the changes in our own lives. Remembering our Lodgepole analogy, all things must evolve, and sometimes it takes a fire storm to coax new growth. Our objectives are first to withstand the flames and then to nurture the new seedlings that will become giant, stately trees.


Copyright 2020 Robert Lovenheim and Aaron D. Schindler CFP, All Rights Reserved | Not for reproduction without permission and consent by Lovenheim and Schindler

1Vicky McKeever, “Goldman Sachs predicts How Quickly Coronavirus Vaccine Will be Rolled Out Worldwide,” CNBC Health and Science, Nov. 30, 2020,

2Eric Schwartzel and P.R. Venkat, “Disney Plans More Layoffs as Covid-19 Pandemic Hits Businesses,” Wall Street Journal, Nov. 26, 2020,

3Irina Slav, “Oil Prices Hold Steady Despite Rising Fuel Stocks,”, Dec. 2, 2020,

4Christopher M. Matthews, “Exxon Documents Reveal More Pessimistic Outlook for Oil Prices,”, Nov. 27, 2020,,by%20The%20Wall%20Street%20Journal.&text=The%20sizable%20reduction%20suggests%20the,much%20of%20the%20next%20decade

5Shawn Tully, “Is gridlock really ‘nirvana’ for stocks? Investors should be wary of these four potential perils,”, Nov. 5, 2020,

“An In-Depth Look at COVID-19’s Early Effects on Consumer Spending and GDP,”, April 29, 2020,

7 “The Power of Dividends Past, Present, and Future”,, accessed Dec. 2, 2020,, accessed Dec. 2, 2020,

S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market.
NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Each company’s security affects the index proportion to its market value.
Indices are unmanaged, and one cannot invest directly in an index. Past performance is not a guarantee of future returns.
All investments contain risks and may lose value.
Investing in the bond market is subject to certain risks including market, interest rate, issuer, credit and inflation risk. 2020-108471 Exp 09/21

The above may contain general information about investment products. The information or opinions contained herein should not be construed as an offer to sell or the solicitation of an offer to buy any particular investment product. The opinions are solely of the representative/financial advisor and not of Guardian/Park Avenue Securities/Wealth Advisory Group or its affiliates, subsidiaries or other representatives/advisors. Such information is directed solely to individuals who reside in jurisdictions in which a representative is registered. Any subsequent direct communication with a consumer and/or prospective client shall only be conducted by a representative that is registered in the state where the consumer and/or prospective client resides.

Mutual funds/ETFs and other securities are not backed or guaranteed by any bank, nor are they insured by the FDIC and involve investment risk, including possible loss of principal. Past performance is not a guarantee of future results.

GLIC, PAS, WAG, its affiliates/subsidiaries/advisors do not render tax/legal advice. Consult your independent tax adviser/attorney.

Aaron D. Schindler is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 355 Lexington Ave, 9th Floor, New York, NY 10017, (212) 541-8800. Securities products/services and advisory services are offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is a wholly-owned subsidiary of Guardian. Wealth Advisory Group LLC and Robert Lovenheim are not affiliates or subsidiaries of PAS or Guardian. 2020-113154 Exp 12/22.
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