To exit 2020 without having become a smarter investor would be a missed opportunity. 2020 was a microcosm of a 10-year economic cycle packed into 12 months. Investor pitfalls came fast and furious, teaching harsh lessons to those that fell victim to their lure. For those who resisted their primitive survival instincts and instead focused on good investment discipline, 2020 provided at least one bright spot: their portfolio.
Against all odds, 2020 was a good year for investment returns – at least it should have been. Stock and bond markets produced positive returns across the globe, despite economic closures that came in the wake of a horrific coronavirus pandemic. However, emotions, particularly fear, were elevated due to the pandemic, market volatility, and a contentious election. Fear and investing generally do not mix well. Our primitive instincts try to take over in the face of fear and can lead to ill-conceived decisions.
So let us take this opportunity at the end of this unusual year to highlight some important lessons that every investor should take away to ensure they enter 2021 poised for success.
2020 is now in the books and we are optimistic for a return to normality in 2021. This is the point where many financial prognosticators will inject their predictions of the year ahead. Those skilled at the trade will ensure they are suitably vague so that they can claim forecasting success at year-end. At Strategic, we see preparation as more appropriate than prediction. In preparation for 2021, our strategies have been increasingly leaning toward Small-Cap and Value stocks where the pandemic has opened up some relative value. At the same time, the expected economic expansion, as the post-COVID economy emerges, favors the addition of Momentum stocks. On the Protection side of the portfolio, historically low bond yields have made Treasury Inflation Protection Securities (TIPS) more attractive and a larger part of our strategies. These tactical portfolio tilts are not based on speculation, but the facts we see in front of us today. Ours is an evidence-based approach, born out of science, not speculation.
On behalf of the entire Strategic team, I would like to thank all of you who are a part of our community of investors. Our sole purpose is to help each and every one of you live your best life, and we hope that in 2020 that goal was achieved despite the pandemic challenges. Best wishes for continued success in the new year!
Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets over $1.6 billion.Overview
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