What 2020 Taught Me

Enough said about how crazy a year it was. This is what it taught me about money and investing…..that as crazy as it was, many of the same rules applied in 2020 as all the years before it!

  • Cash buffers and income protection insurance are important. It is wise to build a safety net in case your income unexpectedly falls like it did for many people during covid lockdowns. I typically advise my clients to hold between 6 and 12 months of living expenses in cash savings so they have sufficient time to make whatever adjustments that are prudent, including selling assets. This reduces unnecessary stress and anxiety and pressure to sell assets quickly.

  • Buy and hold is still pretty hard to beat. Timing market moves is nearly impossible – don’t try unless you are a seasoned professional…and even then... best not to try! Very few people managed to get out at the share market top in February and get back on board again for the rally from March. Buying and holding in the U.S. stock market would have meant sitting through an excruciating 30%+ peak-to-trough drawdown in a month. It also meant experiencing a 60%+ recovery ever since. The sum total of these two polar-opposite market moves is a year-to-date gain of more than 15%. Could things have gone much worse for those who held their stocks and didn’t panic? Most certainly. But the great thing about a buy and hold strategy is the fact that it is so simple and still very hard to beat.