Investing: A Game of Probabilities

One of the hardest things for many to understand about investing is the fact there are no certainties.  Investing is a probabilities game, and we must continuously attempt to allocate capital in a way that gives us the highest probability of success over the short, near, and long term.  There are various techniques used to shift probabilities in one’s favor. Still, all investing strategies generally revolve around diversification, fundamental metrics, valuations, rebalancing strategies, and understanding economic trends and themes.  As we enter 2021, is your portfolio positioned in a way that gives you the highest probability of success?  Below are a few significant issues to think about to help answer this question!

Growth vs. Value (Rebalance):

If your portfolio was overweight in technology and certain consumer discretionary companies in 2020, then congratulations, as you probably had a good investment year.  Covid-19 created the perfect environment for these companies to thrive, and their stock prices reflected as such.  The question moving into 2021 is not whether these more growth-oriented/technology-heavy companies are still good, but whether their stock prices moved too far too fast.  With price multiples at multi-year highs, optimism surrounding vaccines, and a more normal economic environment on the back end of 2021, it may be time to trim some of these positions and reallocate capital towards sectors like financials, industrials, and energy that offer better risk/reward opportunities.


One of the major themes, as we enter 2021, is inflation.  With unprecedented monetary and fiscal stimulus in 2020 due to Covid-19, we could potentially see inflation in goods and services, which has not been seen in some time.  So how should you guard against potential inflation?  The key is to ensure the companies you own provide goods and services with price inelasticity, which means they can raise prices and not have a tremendous drop off in demand for their products.  While there are many other ways to hedge against the negative effects of inflation i.e. precious metals, bitcoin, etc., these strategies are more speculative and can involve tremendous volatility not suited for most investors.  My recommendation would be to stick with solid companies that have pricing power.

Note: With all investment strategies mentioned above, it is important to consult your financial advisor, or tax professional, before executing. Everyone’s situation is different.

Happy New Year, everyone!


Follow The Welch Group every Tuesday morning on WBRC Fox 6 for the Money Tuesday segment.

Fox 6 Talking Points:

  • No guarantees in Investing
  • Rebalance / Take Profits from Winners
  • Guard Against Inflation


certified financial planner Marshall Clay wears a gray jacket and white shirt while posing for professional photo in office

Marshall Clay CFP, JD, is a Partner and Senior Advisor at The Welch Group, LLC, which specializes in providing Fee-Only investment management and financial advice to families throughout the United States. Marshall is a graduate of the United States Military Academy in West Point, New York, the Cumberland School of Law in Birmingham, Alabama, and is a CERTIFIED FINANCIAL PLANNER™.  In addition, Marshall is a frequent guest on local television stations as an expert on various financial planning matters.




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