In this episode of Left Brain Thinking, host Chuck Jaffe interviews Freddie Garcia, Vice President for Investments at Left Brain Wealth Management, to discuss actionable year‑end financial moves in a strong‑growth market. They cover targeted tax‑loss harvesting—using losing positions like Zoom to offset gains in overweight winners such as Nvidia, Trade Desk, and Shopify—and explain how this “match‑trading” can rebalance portfolios without incurring unnecessary tax hits. The conversation moves to broader rebalancing tactics, recommending scaling back overweight stocks and redirecting capital into under‑weighted sectors like retail and energy to stabilize portfolios amid recent turbulence. Garcia advises on asset location for IRAs and retirement accounts, emphasizing that cash needed for required minimum distributions should be secured first, then replaced with dividend‑ or interest‑producing investments. He also highlights the potential benefits of Roth conversions when markets dip, illustrating how converting shares bought at lower prices can lock in future tax‑free gains for bullish investors. Throughout, the hosts stress a disciplined, growth‑focused approach while acknowledging the need for short‑term stability and careful tax planning as the year closes.
Chapters
Welcome to Left Brain Thinking, where creative investment ideas meet logical analysis. That's the hallmark of Left Brain Investment Research, where the analysts are looking for growth companies with the potential to double in 2 to 3 years and high-yield bonds with the potential for dramatic price appreciation. Today, however, we're talking with Freddie Garcia, Vice President for Investments for Left Brain Wealth Management, about moves you might want to make before the end of the year. You can learn about Left Brain's advisory work at leftbrainwealthmanagement.com. Leftbrainwealthmanagement.com. You can learn about the firm's research and the Jarvis newsletter at leftbrainir.com and about their new mutual fund at leftbrainfunds.com. And Left Brain is on Twitter at Left Brain IR. Freddie Garcia, welcome back to Left Brain Thinking.
Well, Chuck, I'm glad to be on and, uh, talk to our listeners today.
Freddie, we are looking at the home stretch of the year and Yeah, the typical year-end advice is always about make some tax selling moves, but in a market that's been up this strongly, that doesn't always really hold water because you may not have losses and things like that. But of course, with left brain, we're always looking for growth. That's only part of the equation, what you tell people to do at the end of the year. So what's the year-end tax advice in a year that has this much growth? But this much concern about what's going to happen next year and also the growth profile of the things that you guys prefer to be investing in.
End of the year, you know, I like to have the discussions with my clients about, again, tax loss harvesting, reevaluating their positions. And when it comes to tax loss harvesting, you know, when we pick our mix of stocks, we typically like to pick things, again, that have the potential to double in 2 to 3 years. But of course, not everything does. And some of our possibly shorter-term picks do have losses. We still like them for the long term, but one of the things we can do is maybe capitalize this year on that loss and possibly add that position later on. So earlier on when I was on the show, there's different positions we talked about. You know, we had added Zoom to the portfolio. Unfortunately, that one is at a loss. So that's when we can look at possibly taking a tax loss harvest on, especially because other positions have done really well. You know, another position we touted really well was Nvidia, who's had almost like 150% gain through the year. So that may overweight somebody's portfolio. So one of the things we're going to look at is possibly how to scale back the position that was at a gain, and of course a position that's at a loss. So selling off Zoom to offset some of the gain in Nvidia. So those are some of the tax loss harvesting moves we're talking about, right?
That's the interesting side, because people always say you want to harvest your losers, but in this case it's really targeted. Again, if you like Zoom and you didn't have something like Nvidia, you might go, okay, is it worth it? How many dollars and figure it out. But if you have something that's grown like a weed, or something a heck of a lot better than a weed in the case of NVIDIA, you have that ability to say, let's do a little bit of match trading that's going to help me rejigger the portfolio. So from that perspective, do the clients always buy and go, yeah, that makes sense? Because it's not about tax loss harvesting, and it's not even so much about, hey, we love Zoom and we want to buy it back someday. It's about we can get out of a position that hasn't been working yet and we can rejigger the portfolio and avoid the tax hit.
Yeah, one of the things that, that's always a struggle is rebalancing a portfolio, especially when at Left Brain we've worked with our clients for, you know, over 10 years, some people 15 years, so they have massive gains. So when we make adjustments to the portfolio and rebalance, we can't just flip that switch without worrying about tax consequences. So using that tax loss harvesting strategy of taking some of the positions that we've added more recently and looking at some of more long-term positions, we can help rebalance the portfolio that way. So that's the conversation that we're currently having with our clients.
When it comes to the moves that you're making, obviously there are those things that are short-term or they're end-of-year oriented, and there are others where you get to the end of the year, it's a logical time to be looking ahead and kind of rejiggering some planning. Are there specific short- and long-term objectives that you go into as you're getting to this time of year and trying to make sure you do things to reset for the new year?
Yeah, as we go into next year, we want to look at the positions that are in the portfolio. Now again, we're very mindful of the stocks that we buy, but we also realize that markets change, and we label certain positions, hey, what do we need for short-term moves and what do we need for long-term? Recently we've had a lot of market turbulence, so we need certain positions that will provide a little more stability to offset some of the positions that, again, we do like them, but they do offer a lot of that turbulence. We saw a lot of that this last week. So in our decision-making capability, we looked at a position that we do like, but we realize it's providing a little bit too much turbulence in the portfolio right now, and it's time to let it go. Other positions we realize, nope, we like it for the long term, we're going to hold on to it. If we offset other positions, that'll help stabilize the portfolio. And, you know, unfortunately, one of the decisions we had to make was DocuSign. It was a position that we did like. We believe it's going to be, you know, growing in the long term, but in the short term, it provides a little bit too much turbulence in our portfolio. So that was one that we realized we had to offset.
In terms of your long-term outlook and playing into that, obviously anybody who's rebalancing or making some of these moves is doing it with a longer-term lens, but most people don't expect that 2022 from a market standpoint is going to look much like 2021. So how are you helping to frame expectations and, and how does that translate into action?
When we rebalance the portfolio, we want to make sure that we definitely look at overweight positions, like in the example of NVIDIA. If it's an overweight position, that's one that we scale back on. We've had a lot of great gain on it. Another position could be Trade Desk or Shopify, two positions that we've had good gain on, but perhaps we don't want to have as much exposure, so we cut back on those positions because we realize long-term we like them, but in the short term they're going to ride a little bit of turbulence. So we want to stabilize them. We start looking at other sectors that we are possibly low on, you know, and that could be retail. That's an area that we're looking at a lot at to increase our exposure, and energy. Those are two areas that we don't have a big exposure on, so we can now take those overweights on stocks that we've done really well on and put those into those other areas that we're low in. So that's again one of our year-end focuses, and we've put that out to our clients, letting them know that those are the types of moves we're going to be making here shortly.
You're also not just looking at investments. I mean, here on Left Brain Thinking We mostly are talking investments, but it's not just to you guys about asset allocation. It's about asset location. So what's the year-end advice you're giving when it comes to IRAs and retirement savings?
Well, when it comes to those particular accounts, we've had, again, a lot of market volatility. So if you have an income need on those accounts, again, which many people do, especially if they're having to take minimum distribution requirements or they're getting close to having to take a minimum distribution requirement, you want to make sure the income need is covered on there. So you want to evaluate and possibly— a lot of times what we like to do is we want to make sure if your cash need is, say, a certain dollar amount, whether it be $50,000 or $40,000 or $100,000, that that need is already met before you start doing any other investment. So make sure that's covered in cash because that money is going to be taken out next year. And then look at investments that will help replace that cash, whether it be through dividend or an interest payment. And again, with the interesting environment that we're in right now, we've had to look at adding, again, dividend along with interest-paying vehicles to cover that cash need. So that's something that we definitely look at. And again, if you know that the need is coming, we highly recommend that you make sure that cash is covered for that withdrawal for next year, because we don't know what the market's going to be like when you need to take that money out.
Also, since we've been talking all things tax-related, I know you strongly advise folks to at least take a look and run the math on Roth conversions at this time of year, correct?
Yeah, that's very true, especially with this recent dip in the market that we've had. About a year ago when, when I was on the show and we were talking to our, our listeners, I had talked about the benefits of the Roth conversion and when they make sense. Now, when markets go down, if you are again bullish on the market, remember, if you are taking a stock that's gone down from $50 grand to $30 grand and you buy those same shares into the Roth conversion, you have the benefit of having all that market rebound be tax-free. So that's something you definitely want to look at, again, especially if you feel you are bullish on the market. Now, that may take some time because, again, remember, it may not recover all within one year. But if you are willing to accept that risk and you have the time frame and the risk tolerance for it, then it may make sense to do a conversion while shares are a bit lower.
Freddy, great stuff as always. So at this point, all we have to do for the rest of the year is wish each other a happy holidays and the audience too. And we'll talk to you again soon.
Yes. Thanks so much, Chuck, and happy holidays to all our listeners.
Left Brain Thinking is a joint production of Left Brain Investment Research and MoneyLife with Chuck Jaffe. Our conversations are not personalized investment recommendations, but are designed to engage your brain. Please do your diligence before making any financial transaction. I'm your host, Chuck Jaffe, and you can learn more about my hour-long weekday podcast at moneylifeshow.com. Thanks to my guest, Freddie Garcia, Vice President of Investments for Left Brain Wealth Management. Learn more about the firm and its services at leftbrainwealthmanagement.com. But if you want to know about their picks on stocks and bonds, go to leftbrainir.com for Left Brain Investment Research. They're on Twitter @LeftBrainIR. Left Brain Thinking is available every other Wednesday. Follow us on your favorite podcast app to make sure you don't miss a single chance to wear your Left Brain Thinking cap. Until next time, happy investing, everybody.
