Building the Perfect Thanksgiving Stock Market Feast

Wednesday, November 18, 2020 3:41 PM | Neal Farmer

Nothing says Thanksgiving like stuffing your face with literal stuffing and then passing out from a food coma before the last football game even starts.

It doesn’t even matter that you only had one piece of turkey because that just means more room for dessert.

A typical Thanksgiving meal has many components and they all are great in their own way (depending on the cook). The stock market should be the last thing on people’s mind on November 26 (it will be closed fyi) but that can't stop us from unnecessarily comparing Thanksgiving foods to the components of a well-rounded portfolio.

Behold the perfect portfolio based around your favorite Thanksgiving dishes!

Turkey

The centerpiece. The item which all other ingredients revolve around and theoretically should be most of what you consume. The turkey is probably the healthiest food on the table this holiday and to be honest is probably the most boring as well. Thus, the turkey for your portfolio has gotta be simple index funds!

A fund such as the SPDR S&P 500 ETF Trust (SPY) is a great starting point for investors and even the more advanced portfolio manager should have a significant portion of their investments into index funds like these. An index fund is an easy way to track the market and gain the diversification benefits of having multiple assets that are not directly correlated with each other. It is nearly impossible to consistently outperform the market, and simply achieving returns equal to the major indices is a simple easy way to watch your money grow. The index fund should be the main focus of your portfolio but having your turkey with some sides makes for a more enjoyable meal overall.

Potatoes

The meat AND potatoes. If ETFs are your turkey then what goes with major index funds? How about the actual ingredients that make up the index fund.

Blue chip stocks. These are your Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Walmart (WMT), Visa (V), and Disney (DIS). There are many major stocks to choose from that represent the largest publicly traded companies in the world. Potatoes are a classic ingredient that can be prepared in a large variety of ways and come in many different forms. There are the big tech companies that offer tremendous growth potential or giant automotive manufacturers such as General Motors (GM) that offer high dividends.

Blue-chip stocks are what really drive movement in the major indices such as the S&P 500 and the very biggest disproportionately affect how markets move. These companies are in this position for a reason though, their size and impact on the economy are massive and owning a piece of these companies means you’re profiting from these firms' continued growth. If you think Amazon is going to continue to take over the world, then buy AMZN stock now and profit as it continues to grow.

Stuffing

Many people’s favorite dish. Stuffing is a great mix of multiple ingredients that I'm still not entirely clear on, but it makes for a delicious side. You’ll probably have a little bit of it and realize it fills you up far faster than anything else.

REITs. Much like how some people will swear by stuffing as the best dish, even more people will tell you that real estate is the best investment you can make. Maybe they're right and REITs are a great way of getting invested into real estate while still being diversified across multiple properties. Yes, we know stuffing is essentially bread and REITs are basically just companies that own income-producing real estate across multiple locations. But what is it actually made of? I’m pretty sure there's onions in stuffing and most REITs consist of office buildings, hotels, or shopping centers but let's be honest, the average person who owns a REIT stock doesn't know the exact properties the company owns the same way most don't know exactly what they’re covering their gravy with on Thanksgiving. Even still, stuffing is pretty great and can be the absolute star of the meal sometimes.

Gravy

Speaking of gravy. Gravy is something to probably best use sparingly but you're gonna be tempted to just slather it all over every single item on your plate this holiday season. It makes everything taste better and goes with every item on the table.

Options! You want the ability to essentially trade 100 shares of stock for a fraction of the share price? Well then look no further. Options can make anything more exciting. If the turkey is starting to taste a little too bland, then just top it with some option contracts that add a little more skin to the game. Options are a much more volatile form of investing due to the limited contract time and the leverage that allows you to open a position at a lower cost. However, they can be used in a large variety of ways and actually help reduce overall risk when used for hedging purposes. Option contracts are available for most major ETFs and blue chips stocks. Even many smaller companies have options available. Gravy can be applied to pretty much anything on the table but just because you can do that doesn't mean you should.

Apple Pie

Finally, a good meal must end with a sweet little dessert. You are probably already way beyond full at this point but there is always room for pie. So while a large majority of your stock portfolio should be dedicated to the items above, leave a little extra room for the sweet small guys.

A great way to top off your portfolio is with small companies that you think have a chance to really hit it big and grow at a massive rate. An electric vehicle company such as Nio (NIO) or Nikola (NKLA) are good examples of companies just getting started that may be holding the key for the next major advancement in the automotive industry. Maybe you heard about this increasingly popular fast-food restaurant that let you build your own burritos and decided to invest into Chipotle (CMG) ten years ago. This is a place for speculative bets that may either hit big or flop, but if they represent only a small portion of your portfolio, they can't hurt the entire value that much. Leave a little room for one small slice of pie and remember you’ll probably regret the second piece.

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