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Investment Lessons from 2020 by Karen Elise Kilbride

Jan 9, 2021

Who could have predicted 2020 would bring a worldwide health crisis, an economic downturn, a bear market crash, historic government stimulus, civil unrest, falling interest rates, a heated presidential election, disputed election results, Covid-19 vaccine approvals and deliveries? The answer is of course; no one.

There are no two ways about it, 2020 was a difficult year of forced change to every aspect of our lives which required patience, adaptation and resilience.  With financial markets ending 2020 in historic gain territory after a recovery from a bear market, there are some investment lessons to be learned which will help us better ourselves as we move forward.

Those who remained invested in the market this past year reaped the rewards of their resilience and discipline. The market recovery was swift after the rapid market decline in March with investors focused on more positive news of declining pandemic infection rates and reopening of some business sectors. Market prices can adjust in a hurry to new information and if we react to market declines and sell investments, we may find ourselves realizing losses and also missing out on the market recovery. Remaining invested throughout periods of heightened market volatility rewards investors!

Investing in a broadly diversified portfolio is important with the economic events of 2020 impacting some businesses and sectors more significantly than others. Hospitality, travel and some retail industries were impacted negatively however, technology, communications and online business thrived. There is no way to predict which industries will be winners or losers in any given year.  Owning a diverse investment portfolio helps to smooth out our experience of market volatility and allows us to benefit from a mix of asset classes. Diversification helps to reduce our exposure to business risk and allows us to benefit from a mix of investments!

Having a sound financial plan in place can help to make it easier to remain invested when markets are reactionary in the short term. Using a financial planning-based investment strategy as a road map and applying a consistent and disciplined approach to investing during times of heightened volatility helps us remain on track to build wealth and achieve our financial goals. Remain patient and be disciplined with your investment strategy to help you build wealth and meet your financial goals!

The new year begins much like 2020 with a spiking pandemic, an economy in recovery mode and continued political upheavals.  We are asked to carry the same lessons learned in 2020 of patience, resilience, and discipline into 2021 as the world hopefully heals from the pandemic, political power transitions in the U.S. and economies are allowed to recover.

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