2020 has seen dramatic market fluctuations in retail and tech, and in the value of bonds and crypto. These personal investment tips are worth keeping in mind – especially in times of uncertainty.
By now, you don’t need to be told that the coronavirus pandemic and the economic consequences it brought about have made for turbulent markets in 2020. All around the world, across different industries and concerning different assets, there have been ups and downs, making it difficult for personal investors to find sustained success. This has led some to take losses, others to explore new markets, and others still to pull back entirely.
As we approach the end of this strange and difficult year though, it’s worthwhile to look into what – if any – long-term investment tips can be drawn from the markets in 2020. A handful of things come to mind.
Establish and Maintain a Long-Term Plan
One is that there has never been a stronger case for sticking to a plan. We’ve mentioned this previously in our article on tips for first-time investors — that you should make a game plan and stick to it. And it’s something that has served successful investors well, for the most part, in 2020.
Those who reacted emotionally to wild swings, particularly earlier in the year, or those who panicked and withdrew money despite losses, are likely to be in worse shape than those who stayed the course or carefully adjusted their portfolios according to a broad, long-term strategy. This does not mean that there’s never a time to shift strategy. But if 2020 has taught any lesson for personal investors, it’s that a rational, long-term plan yields better decision-making than emotional or spur-of-the-moment investing.
Be Wary of Short-Term Trends
On a somewhat related note, another important lesson personal investors can learn from 2020 is that in uncertain times, or when major events are taking place, it is inadvisable to trust short-term, market-wide shifts as evidence of broader trends. This is made plain when you look back at how markets have moved over the course of the year.
As an example, recent trends observed by investors trading on the HSI clearly indicate that the top Hong Kong-listed shares are collectively experiencing an uptick that began near the end of September. But the HSI charts also show that similar upticks occurred in late March and the middle of August, and that there was a fairly dramatic jump forward in late May.
In any of these instances, it might have been tempting for investors to pour money back into their portfolios in the hopes that the broader economy was getting back on track. But so far, these jumps have been followed by drop-offs. This is one example, but it’s indicative of one lesson from the year, which is that until a crisis is fully contained, markets can have ups and downs without experiencing full recoveries.
Diversify Your Portfolio via Alternative Investments
Looking past the stock markets, 2020 has also taught us that there can be real value in alternative investments as well — particularly those viewed as having safe-haven potential. To be as clear, this doesn’t mean that there is such a thing as a guaranteed safe investment. But the year to date has made a fairly strong case for a few of them.
First, there was gold. People have regarded this particular commodity as a safe hedge against market turmoil for decades, and during the coronavirus pandemic, gold hit record highs, making the case once again that it could be counted on when not much else could.
Then, somewhat more surprisingly, there was cryptocurrency. In this space, the early word was somewhat negative. The viral outbreak disrupted crypto conferences and initially caused prices to plummet. But since the middle of spring, we’ve seen prominent cryptocurrencies performing much like gold, and establishing a safe-haven reputation of their own. There are still no guarantees, but the prevailing lesson here is that it can pay off to seek shelter in alternative assets.
Beyond these points, there are of course additional investment tips when it comes to specific markets or methods of investment. Broadly though, these are the takeaways we’d encourage personal investors to draw from this year so far. Rational long-term planning, a focus on broad recovery over short upticks, and an open eye toward strong alternative markets look to represent clear strategies for handling economic crises.