Let’s reexamine the past year, everything looked pretty dismal with COVID-19 in full force. There was no hint of a vaccine — just the knowledge that the public and private sector are ingenious enough to live up to our track record of defeating public health challenges.
What was on the mind of the average long-term investor?
People were tempted to sell, and then re-enter the market once the storm cleared. That, in theory, sounds like a really good idea. Unfortunately, the value of seeking refuge in a safe harbor is outweighed by the loss of future returns.
It’s counterintuitive because in most areas of life, it does make sense to seek safety from the storm, and go back out when the storm passes. In the world of markets, you’re not really getting pelted when the storm shows up.
That’s why it is so important to have a strong financial plan, rooted in data and science, that you can hold on through a financial storm. It’s a painful experience, and nobody likes it, but that’s the only path to higher returns.
One year later and markets keep climbing. The COVID-19 vaccine was rolled out in the fall, beating everyone’s expectations by four months. Then it was administered sooner rather than later. Again, that was a surprise and moved the markets.
If you have a good long-term plan, which we specialize in, storms are to be expected and managed accordingly. Go with markets. People make money by solving problems.
Every storm that the United States has encountered, so far, has been solved at some point. I would say history is on the side of investing.
Jeff Holland | VIAIV