Greetings!
Hello from Woodward Financial Advisors!

We hope you are well as we approach Daylight Savings Time, the first tax deadline of the year and signs of spring appear outdoors. It's been a long, arduous year and the simple beauty of a daffodil pushing its way through the earth is a welcome change - as is news of more people getting their covid vaccinations.

Most likely, you've recently read or heard much ado about Gamestop. Our colleague, Joe Marques, CFP®, shares his thoughts on the recent events surrounding Gamestop below. In addition, you can find a summary about the second round of stimulus checks, WFA team members' recommendations of "binge-worthy" shows, recent "Your Money in 20" podcast episodes as well as a recent notable event for a team member at WFA (hint: there's a ring involved!).

One final side note if you're a client: we greatly appreciate you (securely) providing us with your 2020 tax return (or a copy) once it's available. Remember that returns may include full/partial Social Security numbers, so please do not simply email a return to us as an attachment. Best ways to provide it to us: upload it to your vault, send a secure link or drop off a hard copy to our office. Thank you!
Gamestop Redux – Getting you Up to Speed on FOMO, YOLO and Risk Management
As you are likely aware, earlier this year an interesting and somewhat amazing story involving shares of Gamestop (GME) took place in the stock market. This phenomenon was not about investing, it was about speculating. Shares of GME had climbed about 1,700% in three weeks and the stock was making headlines daily. The stock climbed from around $17/share, reached a peak of $483/share, and as of the time of this newsletter is trading around $122/share.
 
The hyperbolic rise of GME has been attributed to two primary factors: 
  1. A massive volume of buying encouraged by a large group of users on a Reddit message board subgroup named Wall Street Bets.
  2. A concurrent “short-squeeze.” To sell a stock short means that you borrow shares from someone else and sell them, anticipating that the price will go down, at which time you buy the shares back at the lower price, return them and pocket the difference. In a short-squeeze, investors who are “short” a stock are forced to buy the skyrocketing stock to cover their losses.
 
A frenzy ensued, boosted by a snowball effect as more and more buyers continued to buy the stock, with some of the cheerleading including the “You Only Live Once” (YOLO) tagline. As select users posted social media updates showing how much they had made on the Gamestop trade, there was some amount of “Fear of Missing Out” (FOMO) on this seemingly easy trade. After the meteoric rise of GME, a dramatic fall in the stock price ensued. To be sure, some participants made (a lot of) money but many participants lost (a lot of) money.
 
There are several lessons from the Gamestop saga – we focus on the lessons and risks of individual stock ownership, especially for those who have concentrated stock positions in their portfolio. The general “textbook” guideline for single stock exposure is that any one stock should not make up more than 5% of one’s portfolio.
 
It is of course possible for an individual stock to generate reasonable or even high returns. But it’s also equally possible for that same stock to produce sub-par or even negative returns. 
 
Let’s review some specific stock and company risks:
  • Legal risk – in today’s litigious society lawsuits from suppliers, customers, and employees are ever possible.
  • Management risk – many of a company’s decisions and strategic plans are set and decided on by a small group of individuals.
  • Innovation risk – companies are continuously at risk of not innovating fast enough and consequently falling behind their competitors.
  • Industry risk – a broader risk that impacts an entire industry; the shift away from fossil fuels and how that impacts old-school energy companies is a prime example.
  • Government and Legislation risk – new laws and governmental policies can have a dramatic impact on companies and industries.
  • “Companies are not the same as their stocks” risk – “Great” companies do not always have great stock returns.
  •  “Out of left field” risks – COVID 19 and the Gamestop scenario would certainly qualify. There are very likely other risks that we haven’t even thought of.
 
The overwhelming majority of people don’t have any control over a publicly traded company, but as shareholders we face specific risks that we may not even be able to predict. So, when it comes to concentrated stock exposure, investors are faced with the problem of risk management. And one of the best ways to mitigate single stock risk is to limit or reduce exposure and invest instead in a large, broadly diversified basket of stocks through low-cost mutual funds or exchange traded funds.
 
Remember that you want to give yourself the best chance for financial success without taking unnecessary risks. This is, after all, your life savings. And you only live once.

If you're interested in reading more about this topic, we recommend you check out this article authored by Althea Trevor, CFA, Head of Equity Portfolio Strategists and Vice President at Dimensional.

Written by Joe Marques, CFP®
A Second Round of Stimulus Checks Are Coming for Americans: The Rundown
Nearly a year into the pandemic, individuals everywhere are experiencing emotional, physical and economic implications. To ease the pandemic’s detrimental effects, the federal government has recently passed a second stimulus package as part of the larger National Defense Authorization Act.

Eligible individuals and families will receive stimulus checks up to $600 per person. As a reminder, here’s what you need to know about your second stimulus check.

The Rundown on Stimulus Checks: Your Questions Answered

Just as before, taxpayers who qualify will receive a direct deposit of up to $600, and couples will receive $1,200. In addition, families will receive $600 per child under the age of 17. The payment will begin to phase out for individuals with a 2018 or 2019 adjusted gross income of $75,000, couples with a $150,000 income and head of households with a $112,500 income.1

Important to note is that the initial amount paid will be based on either a taxpayer’s 2018 or 2019 income tax return (whichever is the latest return that the IRS has on file), but it will ultimately be ‘trued up’ if a taxpayer is owed money based on their actual 2020 income. In other words, taxpayers will be given an estimated amount based on their 2019 incomes but could end up getting even more (albeit later) if their 2020 return shows they made less money than they made in the previous year.

How Does the Phase-Out Work?
Individuals who make under $75,000 and couples who make under $150,000 are eligible for the full stimulus check.
For taxpayers with higher income, the amount is reduced by $5 for each $100 above $75,000, or $150,000 for couples - up to $87,000 or $174,000. This means that individuals with an income higher than $87,000 are not eligible to receive a stimulus check and neither are joint filers with an income over $174,000.1

Are Noncitizens Eligible?

Back in March, the CARES Act did not allow families of mixed-status to receive a stimulus check. This refers to households in which a U.S. citizen is married to a noncitizen. In the new package, however, both the U.S. citizen and their noncitizen spouse are eligible to receive a stimulus check.2

How Will I Receive My Payment?

The IRS will use information from 2019 tax returns to calculate your payment amount and will send the payment to the bank account listed on the return.2 

What if the IRS Does Not Have My Direct Deposit Information?

The IRS has created an online portal, called Get My Payment, where individuals can check the status of their stimulus check and learn what information the government may still need in order to issue a check. According to the IRS, this portal will provide important information including your payment status, payment type and whether additional information (including bank account information) is required.

If I Usually Do Not File a Tax Return, How Can I Receive a Check? 

Those who usually do not file a tax return, including low-income taxpayers, senior citizens and Social Security recipients, will need to file a simple tax return (but still will not owe tax) in order to receive their check. The IRS has created a special page dedicated to the Coronavirus and will be updating it with next steps on how to do this soon. 

What Is the Difference Between a Stimulus Check and a Tax Credit?

The stimulus check is the same as a tax credit, and it is specifically an advanced refundable tax credit, meaning it is a refund allotted to you and is also sent in advance of the 2020 tax return.3 A refundable tax credit differs from a nonrefundable credit, which only applies to the amount of taxes you owe and is not available as a refund to you otherwise.3

Is the Stimulus Check Taxable?

Since the stimulus check is a tax credit, it is not income and therefore is not taxable.

If you received a stimulus check following the initial CARES Act last March, it’s likely you can expect to receive another stimulus check in the coming weeks. And for some families, changes made to this round of stimulus payments will offer more inclusion than before. As with anything related to the current pandemic, do not hesitate to reach out if you have a question regarding your stimulus check or what to do with it.
"Binge-Worthy" Show Recommendations from Team Members at WFA
If you're like many of us, over the past year you've spent extra hours binge-watching a new show (or rewatching a standby). Our team compiled a list of favorites in three distinct categories in case you're looking for something to watch next. If you've seen all of them or notice we've missed one of the best, we welcome your recommendations!

New(ish) & Noteworthy
  • Your Honor
  • The Flight Attendant
  • The Queen's Gambit
  • Dead to Me
  • Ozark

Oldies, But Goodies...
  • This Is Us
  • The Good Place
  • Schitt's Creek
  • Poldark
  • Parenthood
  • The West Wing

Reality + "Trash-TV"
  • The Bachelor/Bachelorette
  • Shark Tank
Recent WFA "Your Money in 20" Podcast Episodes Below!
For those of you who haven’t yet listened, “Your Money in 20” is a podcast produced by our team here at Woodward Financial Advisors. Our goal is to provide useful and applicable advice about topics that are timely and important to your financial lives. Each episode is delivered in a “snackable” format that you can listen to in 20 minutes or less.

We’ve listed our 3 most recent available episodes below as links, so if any topic strikes your fancy, simply click on it to go right to the episode. Of course, you can find all of our episodes here on our website.


If you’re brand new to podcasts, this article is a great resource for how to listen and subscribe, so that you always know when new episodes are available.
Congratulations to Our Colleague, Megan!
Please join us in congratulating our colleague, Megan McManus, CFP® (pictured above), on her recent engagement! Megan and her fiancé, Kyle, plan to marry in spring 2022.
Thank you for reading our March newsletter! Please reach out if there is anything we can do for you.

Sincerely,
Your Friends at Woodward Financial Advisors
Woodward Financial Advisors
1504 East Franklin Street, Suite 105, Chapel Hill, NC 27514.
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