As I look again on 2020, it was undoubtedly one of the crucial shocking, unpredictable, and unstable years we’ve confronted in current reminiscence.
As a reminder, from Feb nineteenth, 2020, to March 23, 2020, the S&P 500 fell 31.93%
When you held a $5M S&P 500 ETF, that worth went to $3,403,500 within the blink of a watch, a lack of $1,596,500. Not a straightforward factor to abdomen.
But amidst the uncertainty, I’m happy with some key calls and recommendation that proved correct throughout such a turbulent time. So, I’d wish to take a second to mirror on what we at Monument bought proper and the way these classes benefited our purchasers and will function steering for anybody looking for stable wealth administration recommendation in 2025 (or at any time for that matter).
1- Concern and Panic will Sink You: Keep Invested Throughout Market Volatility
When the markets crashed early in 2020 because of the pandemic, concern and panic have been all over the place.
However we urged purchasers to remain the course. In posts like “I Instructed You This Was Gonna Occur” and “How To not Freak Out“, I emphasised the significance of sustaining a long-term perspective and resisting the urge to promote in periods of volatility.
Because the markets rebounded sharply later within the 12 months, those that adopted this recommendation have been rewarded. Staying invested throughout downturns is at all times simpler stated than performed, however 2020 was a strong reminder of why it’s so essential.
2 – Don’t Attempt to “Time” the Market: Take a Lengthy-Time period Perspective
All through 2020, we persistently highlighted the hazards of market timing.
Posts like “It’s Not About Discovering the Backside” and “Right here’s the Actual Price of Timing the Market” harassed that trying to completely time entries and exits typically leads to missed alternatives. The speedy restoration in 2020 was proof of this precept.
Buyers who have been consumed with ready for the “backside” or who hesitated to reenter the market doubtless missed out on substantial positive aspects. This expertise solely strengthened our perception {that a} disciplined, long-term method is the important thing to monetary success.
3 – Perceive & Keep away from Your Personal Behavioral Traps
Investor psychology performed an enormous function in 2020. The emotional rollercoaster of the pandemic led many to make rash selections. In “Why Present Sentiment Can Injury Your Plan” and “Traits of Brief-Time period Buyers“, I warned towards letting concern and market sentiment drive funding selections.
Those that averted these behavioral traps and caught to their plans have been higher positioned to profit from the eventual restoration. Emotional investing stays one of many greatest challenges for most individuals, and 2020 was a textbook case of why it’s crucial to remain disciplined.
4 – Money is King: Financial Stimulus as a Market Driver
Within the publish “Hope From China, Fact About Stimulus, and Why Money Is the Final Hedge“, I mentioned the function of financial stimulus in stabilizing the markets. As governments and central banks worldwide launched unprecedented fiscal and financial interventions, it grew to become clear how crucial these measures have been in fueling the market’s restoration. This perception proved invaluable for these making an attempt to make sense of the speedy rebound amidst ongoing financial challenges.
5 – Be Ready: Deal with Planning + Diversification
2020 additionally strengthened the significance of being ready for uncertainty.
In “Getting ready Your Funding Portfolio for the Presidential Election“, I emphasised the necessity for a well-thought-out plan and a diversified portfolio. I additionally emphasised that an financial enlargement poised to final for a number of years was doubtless underway, positioning equities as a stronger asset class in comparison with shares and bonds. Since that article was written, the S&P 500 is up 79.6% and the iShares Core US Mixture Bond ETF (AGG) is down 17.23%.
This recommendation was notably related as purchasers confronted each the pandemic and the uncertainties surrounding the U.S. presidential election. Diversification and planning proved to be a powerful basis throughout a 12 months when a lot felt unpredictable.
6 -Recession and Bear Markets Are Not All the time Linked
One of many extra attention-grabbing insights from 2020 was that bear markets don’t at all times result in extended recessions.
In “Bear Markets Don’t All the time Imply a Recession“, I defined why market declines don’t essentially sign prolonged financial downturns.
This perception was validated because the economic system rebounded a lot quicker than many anticipated, regardless of the severity of the market crash earlier within the 12 months.
Why This Nonetheless Issues in 2025
Quick ahead to 2025, and whereas the main points have modified, all of the rules stay the identical.
One of the best technique continues to be this: keep calm throughout volatility, give attention to the long run, keep away from emotional decision-making, forecast money wants, and be ready for uncertainty. Your intestine is just not a very good barometer.
Right here’s how I do know…
Because the market low on March 23, 2020, the S&P 500 has returned 191%. Now examine that to the purpose I made above in #5 stating the S&P 500 was up 79.6% from Oct sixth, 2020. When you have been “ready for the market to recuperate” or “ready for issues to cool down”, you missed the unfold between a 191% return and a 79.6% return.
Learn that once more as a result of it must be a no-nonsense reminder that making an attempt to time the market is a dropping recreation.
Buyers who panicked and bought in 2020 missed one of many best rebounds in market historical past, the S&P 500 is up 195% from that March 23, 2020 low. So once more, have a correct money administration plan the place you pull money from portfolios when markets are up, not down, and keep away from making reactionary strikes primarily based on short-term concern.
The identical classes that labored in 2020 are simply as related at this time—they usually’ll nonetheless maintain true for the following decade. In actual fact, I believe for my subsequent weblog I’ll revisit the 2022 blogs and write an identical set of reflections.
Maintain trying ahead.
