Five Things We (Re)Learned as Investors in 2020


John Micklitsch, CFA CAIA, President & Chief Investment Officer

2020 has had it all, including a global health pandemic, a historical stock market decline (and recovery), a recession and an intensely contested Presidential election. Yet despite all of that, the economy appears to be headed for a recovery towards the second half of next year and the stock market is well off its March low. As a result, many asset classes are in positive territory for the full year. So, what can 2020 teach us as investors that we can take into the years and decades to come, that will potentially make us more successful long-term investors? Here is a list of five to start the conversation:

Don’t fight the FED

We’ve all heard it, but not everybody has lived it. If you were an investor in 2020, you’ve now lived it. When the FED exerts its influence on interest rates and capital markets themselves, it pays to go with their flow.

The market is relentlessly forward looking, you should be too

The number one question we got from investors this year is how the stock market could perform well when the current economic environment and with COVID cases appearing so bleak. Simply put, the market is a relentlessly forward-looking entity and when monetary support, fiscal stimulus and vaccine progress all came together, the market began looking past current conditions and onto future recovery conditions, taking stock prices back up with them. As Wayne Gretzky used to say, you skate to where the puck is going, not where it is. This holds true for investing as well.

Never underestimate humankind’s ability to solve even the most complex problems

Financial market history is littered with complex obstacles that seemed unresolvable at the time. Yet a healthy dose of human ingenuity and resolve eventually finds a way. The legacy of these challenging periods is often new technology and business models that become engines of future growth and investment opportunity.

Inaction can be just as powerful an investment step as action

There is a saying in the non-investment world when witnessing something that is stressful, which is, “don’t just stand there, do something.” In investing, when times become stressful, the more impactful approach to your long-term wealth could be, “don’t just do something, stand there.” Knowing the difference between permanent and temporary loss and what you as an investor are facing, can be the difference between successfully managing market volatility and not.

Develop a long-term wealth plan

If 2020 taught us anything, it is the importance of developing a long-term wealth plan. Having a plan focuses your energy on things you can control, like how much risk you take in your portfolio, your savings and spending habits, your priorities for the future, etc. Thinking optimistically and planning for your future, which a long-term wealth plan can help you do, is often a far better use of your time and energy than watching the next tick of the stock market.

In closing, investing is a journey. It is never too early or too late to incorporate lessons like those learned in 2020 into your personal investment journey.

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