⚡ LIGHTNING ROUND

📊 70% of short-term returns come from the market—not your stock picks

🏭 20% is driven by sector trends—follow the flow of capital

🏢 Only 10% comes from the individual company—fundamentals matter, but later

🔁 Over 10+ years, that equation flips —stock selection becomes king

🎯 Use 70/20/10 to filter faster, invest smarter, and stay aligned with momentum

🦊 Stay on the Right Side of the Market

One major asset class just flipped. Another is quietly breaking out.

Inside this $4.99 report:

✅ Trend signals across 12 major markets

✅ Tactical ETF ideas and allocation notes

✅ Updated as of August 14—based on real momentum, not media noise

📥 Download the PDF in 30 seconds.

Put it to work in 10 minutes.

WEEKLY WISDOM

FINANCIAL PLANNING HACKS

You’re Focused on the Wrong 10% of Your Portfolio

The 70/20/10 Rule Shows Why Market and Sector Trends Matter More Than Company Fundamentals—At Least in the Short Term

I want to show you a simple model that could change how you think about your portfolio—especially if you’re putting a lot of time into researching stocks.

It’s called the 70/20/10 rule.

And it explains why so many “smart” investment decisions don’t deliver the results people expect—at least not in the short term.

Where Returns Actually Come From (Short-Term)

Over a 1-year time horizon:

• 70% of your portfolio return is driven by the overall market (S&P, Nasdaq, macro trends).

• 20% comes from the sector or industry (tech, energy, healthcare, etc.).

• Just 10% is based on individual company factors—like management, valuation, or earnings.

In other words: the tide matters more than the boat.

This was backed by a 2013 paper from Edelman, Evans, and Kadlec, and it’s been widely confirmed by both academic research and real-world portfolio analysis.

So if you’re putting 90% of your effort into analyzing companies, but ignoring where the market or sector is heading—you’re misallocating energy.

Over Time, the Math Flips

Zoom out to 10 years and the picture changes:

• Company fundamentals start to matter more—a lot more.

• Market direction becomes less important.

• The edge comes from holding businesses that grow, manage risk well, and reinvest intelligently.

But if you’re trying to navigate 1-3 year windows? Direction matters more than detail.

How to Use This Framework

The 70/20/10 rule isn’t about picking winners—it’s about filtering your attention.

Here’s how I’d apply it:

1. Start with the Market (70%)

Is the market expanding or contracting?

Use:

• Index trendlines (moving averages, market breadth)

• Fed policy direction

• Credit spreads and inflation signals

When markets are rising, it makes sense to stay exposed. When they’re contracting, even good stocks underperform.

2. Narrow to Sectors (20%)

Which sectors are attracting capital?

• Look at sector ETF performance (XLE, XLV, XLF, etc.)

• Check relative strength vs. the S&P

• Use momentum screens or fund flow data

In every bull run, certain sectors pull ahead—think energy in 2022, AI in 2024.

3. Then Pick the Companies (10%)

Only after you’ve identified strong sectors do you look at individual names.

What to filter for:

• Consistent revenue and earnings growth

• Strong free cash flow

• High return on invested capital (ROIC)

• Positive price momentum

You want names that already have the wind at their back.

Why This Helps

This approach reduces noise.

It saves you from spending time analyzing companies that are stuck in lagging sectors or swimming against a bear market.

It also helps you:

• Time capital deployment more strategically

• Avoid false confidence in stock picks during market downturns

• Reallocate faster when leadership changes

It’s not about trading—it’s about aligning with momentum until fundamentals take over.

Actionable Next Steps

1. Check if your portfolio is exposed to sectors that are rising—or fading.

2. Evaluate if you're overweighting bottom-up analysis during a top-down market.

3. Start building a habit of watching where capital is flowing—that’s where outperformance usually begins.

This isn’t magic. It’s just clarity.

Markets move first. Then sectors. Then stocks.

If you get the first two right, the third becomes much easier.

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The content provided in this newsletter is for informational purposes only and should not be considered as specific advice for any specific individual. The information is prepared by knowledgeable individuals and is not written by certified tax professionals or investment advisors. For personalized advice tailored to your unique financial situation, consult with a qualified tax professional, financial advisor, or attorney.