The Year in Review
Sebastien Chevrier - Jan 06, 2021
A final look into the stormy year of 2020.
This time last year, who would have predicted that we would be where we are today and that we would have had to weather the storm that was 2020. Last year brought so many challenges; be it in terms of health, isolation, financial stressors, or a combination of all three. For physicians, not only were many of these concerns magnified, but the extra burdens placed upon them and other frontline workers only added to the difficulties of the year.
With this in mind, we’d like to use this post to focus on the financial volatility of the last nine months, while taking a look at both what we were saying in March, and what we can look ahead to as we head into 2021.
While it may seem a very long time ago, at the time that the markets were plunging back in March, we published Market volatility is high … learn about the simple investment strategies that can help in turbulent times. This piece explained that uncertainty is a given, even at the best of times, and discussed the market’s overall, longer-term resilience, even after large drawdowns over short periods of time. Since then, not only have markets recovered (with some help from governments and central bank support), but they’ve also reached all-time highs, something you would have been hard-pressed to predict when we published that post. Staying the course has proven to be the best way through, as has been the case historically. However, even the most steadfast of investors had the urge to retreat. The psychological/behavioral aspects of investing were never as apparent as during this past year and having an objective perspective and a steadying message was key to keeping our clients invested.
Below, we’d like to revisit our three main points from our March 2020 post, doing so from the lens of perspective that we’ve gained almost a year later.
Resilience: Market recovery follows market setbacks
At the time, we mentioned the long-term progress of markets, specifically in relation to disease outbreaks over the last 50 years. The data clearly demonstrates that historically, markets continued higher, regardless of the specific disease or its effects. It also showed how even when downturns were large, they also proved to be short-lived. While no one could have predicted what this latest pandemic would bring, it was reassuring to see that positive historical trends continued. While much credit is due to both government and central bank responses, this latest recovery did seem to follow a very similar pattern to those of the past.
Long-term gains: The case for staying the course
In this section, we explained that volatility is a given for investors, but also mentioned the risks of being out of the market, even for a few days. Many people panicked and were tempted to pull out as they watched their portfolios shrink and life savings disappear. Those that did withdraw during those lows would later find that they also missed out on some of the biggest gains in history, which would have had a significant impact on the recovery of their portfolio.
Staying power: Strategies to help you stay invested
Here, we discussed investing according to your personal risk tolerances, and the importance of asset allocation and diversification in making the large downturns and upswings less distressing. Owning a well-diversified portfolio during the recovery would have, for example, allowed investors to participate in the outsize run seen in various tech stocks without the risk of holding all of their eggs in one basket were things to falter.
It has been truly impressive to watch markets brush away the majority of negative concerns and move higher over the last nine months. While most investors have celebrated this, we also think it’s important to not lose sight of reality; namely, that markets move both up and down. When directly experiencing such strong moves as we’ve been seeing, it can become difficult to remain objective as an investor, believing that the good times will continue for the foreseeable future.
Yet while it’s very much possible that this proves to be the case, particularly with vaccines beginning to roll out across the world, it also helps to remind ourselves that things can just as quickly move the other way in the short and medium-term. Ensuring that we remain aware of this possibility can prove quite helpful to us as long-term investors; it allows us to manage our emotions while never losing sight of what our plan was built for – the long run.
This past year has taught us a lot. We’ve learned about what truly matters to us, the importance of connection, and how to simplify. It has also served as a very valuable opportunity to learn more about our investing personalities and to evaluate whether we are appropriately set up to weather the storms.
Thinking about whether you are properly diversified and have the appropriate asset allocation for your stage of life and retirement plan would be a great way to start 2021.
Just as we did in March, we wish continued strength and resilience to all, but in particular the physicians and other healthcare professionals who have been leading us in this lengthy battle.
If you have questions or need more information, feel free to contact us.
We regularly share financial posts on both our blog and Twitter, so continue to check back regularly!