What Did We Learn About Investing in 2021?

2020 was the year of the unprecedented, but 2021 certainly had its fair share of newsworthy events.

As we entered this year, there were still many uncertainties, and it’s hard to believe how different our world looks today than it did 12 months ago. This year we’ve witnessed history through the creation and rollout of vaccines, inauguration of a new president, and even billionaires going to space.

Was the Suez Canal blockage really only in March 2021? No one knows what this year will bring, but there are a few key principles that can help improve the investment experience in the long run.

• Look beyond the headlines. It’s been a big year for acronyms. Between SPACs, NFTs, AMC, and FAANG (now MAANG after Facebook transitioned to Meta), this may have been a confusing time for investors without a solid investment philosophy. Daily market headlines and your cousin’s colorful commentary can lead to increased anxiety, but not necessarily increased performance. Overemphasizing the validity of headlines can entice you into chasing fads or not investing at all. There’s no evidence to suggest that investors can reliably time the market due to skill rather than luck. Missing only a few of the market’s top days can significantly stifle a portfolio’s growth.
• Discipline is key. This year it will likely be the biggest KEY. Discipline simply means remembering that you developed a plan that can weather all seasons. Many investors right now are worrying whether they should bail out of stocks or waiting for their gut feelings to tell them when to buy more. Disciplined investors don’t buy or sell anything which will harm their long-term best interests. Disciplined investors are prepared to rebalance their portfolio if their percentage of stocks falls below a predetermined allocation. Disciplined investors avoid the noise associated with the media and their brother-in-law’s fear. I heard a story that the late global investor Sir John Templeton relocated from New York to the Bahamas where, The Wall Street Journal arrived days late. By reading the news a week later, Templeton stated that he could put it in perspective and prevent himself from over-reacting.
• Control what you can control. As we enter through 2022’s door, there are still uncertainties hanging in the air. This year will surely contain surprises, probably some good and bad. Fortunately, markets are poised to incorporate the new information as it develops.

In the meantime, a financial advisor can help develop a plan that an investor can stick with that meets their objectives and risk tolerances. While you can’t control what direction the market will go, you can hold a globally diversified portfolio tilted towards areas of the market with higher expected returns. You can also be mindful of expenses, turnover, and taxes that can eat away at your growth of wealth.

The wisdom of an experienced professional can help you develop a comprehensive plan that accounts for what is both relevant and manageable.

As you enter this new year, don’t get carried away trying to read a crystal ball. Adopting a long-term perspective supported by evidence, rather than emotion, can provide a better investment experience.

Here’s to a healthy and successful 2022!

Hope you have a great week!

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