As we approach the end of an historic year that is 2020, and focus on 2021, most investors have come away from the year with more questions than answers.
Here we explore the top 2020 investment questions we have received from clients recently:
We answer the top 2020 investment questions we have been asked by investors and clients recently.
“Has the Ship Sailed?” – Did I Miss the Market Rally?
Market fluctuations of the calibre we saw back in March are guaranteed to cause some anxiety for investors and traders a like. Nonetheless, history suggests that now may actually be just as good a time as ever to invest. Besides, trying to “time the market” to find the perfect entry point is tricky, and even dangerous.
In March, many investors decided to pull their money out of the markets and move into cash and cash-like securities. But the markets, helped by globally-coordinated monetary policy and fiscal stimulus, turned the corner quite quickly, leading to one of the sharpest market rallies in recent history. By August, global markets marked their fastest recovery from trough to peak on record, with some markets and asset classes even touching all-time-highs. Then by September, the “script had flipped”, and markets entered correction territory, as markets such as the Nasdaq-100 fell 10% in only three days, only to recover most of those losses shortly after.
Market developments such as these are why it’s difficult to time the markets. Markets can have bad days, weeks, months, and even years at a time, but the general direction of the broad market has risen over time. Given this notion, now may be just as good a time as any to come up with a proper investment plan to start putting your excess cash to work for you in the markets.
Given the the current low-rate environment, which is expected to remain so for years to come, holding excess cash may end up costing you in missed investment opportunities, and even prevent you from reaching your financial goals, as inflation will eat into your (low) returns.
With all this mind, now is the time to get started, and to get invested.
“Planning Ahead” – Should I Update My Investment Plan? If So, What Should I Focus on?
Changes to your long-term investment strategy shouldn’t be a knee-jerk reaction to market noise or changing politics. Instead, it should be defined by your personal long-term financial goals, time horizon, risk tolerance, and investment objectives. You should ask yourself: have your financial goals changed in recent years? Or has your time horizon changed where you now can, or need, to push your financial goals a few years back, or move it up sooner? If your plans have in fact changed, and your financial goals are coming sooner than you expect, you should adjust your strategy accordingly.
If you decide to make adjustments to your portfolio, either by increasing or reducing risk in your portfolio, you must be aware of what that could mean for your long-term financial goals. Whether you do decide to make changes to your investment strategy or not, it is highly recommended to check in on your financial goals at least once a year, and ensure everything is up to date.
As we move into the new year, this is your chance to take a step back and think about your financial priorities going forward, and see if there are any new opportunities to save and invest more.
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