10 Dec 2020 Investing Is Hard. Even With a Crystal Ball.
What a year. After a global pandemic, a recession, unprecedented unemployment and a messy presidential election, most of us are ready to throw in the towel and ring in the new year. In fact, I’ll bet if you’d had a crystal ball and could have seen into the future, you might have stayed in bed on January 1st.
On the bright side, if you’d used your crystal ball to look into the future, perhaps you could have used that information to rearrange your investment portfolio to make a handsome profit or protect it from certain ruin in the coming year. Armed with your newfound “insider” information, I imagine you’d have wanted to sell most of your stock positions and move your money into gold, some ultra-safe, short-term bond fund or cash. Confident in your new asset allocation, you could log out of your investment account and turn your focus towards other tasks at hand.
But here’s the thing: Unless your crystal ball told you specifically how the stock and bond markets were going to react to coming world events, you’d still have been in the dark about how to invest your portfolio. Yes, I suppose if you actually did have a crystal ball it probably would provide those specifics, but let’s assume for now it did not. Sure, you’d have felt pretty good about your decision on March 23rd of this year, after the S&P 500 experienced a 35% sell-off from its high on February 19 – the fastest bear market in history. But, imagine your surprise when you logged in to check your portfolio later that year, maybe in December, to see that the S&P 500 had risen 10.9% in November alone, the twenty-second best month in history and the best November in 92 years. And that the S&P was now up well over 60% since bottoming in late-March.
Even if your crystal ball were the kind that informed you of the details of future stock market fluctuations, I’m not sure
you anyone would have believed what you they saw a year ago: the fastest bear market in history followed by the biggest stock market reversal in history, if we finish the year close to where we are now.
Yes, what a year. Given everything that’s happened, it’s hard to believe that the stock market, as measured by the S&P 500, is still up 15%. If you ignored your crystal ball and stayed invested, you participated in the gain. Investing (well) is hard, even with a crystal ball. It’s best to have a solid plan and stick with it through thick and thin.
Just in case you’re interested, here’s a quick look at how the indices that make up our Beacon model portfolios have performed so far this year:
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1 The chart represents actual index movements, which may be slightly different than portfolio values due to fees and differences between the exchange traded fund values we own and value of the indexes at any given time. Past performance is no guarantee of future results.