When we look back on the investment scorecard for 2020, it will tell us little about this extraordinary year. With a few trading days left, 12 months of economic chaos and unprecedented restrictions look set to bring an unremarkable overall result.
This has been one of those years when the headline numbers don’t tell the whole story. It resembles 2003 when we pulled out of the dotcom bust; 2009, when the recovery from the financial crisis began; and even 1987, when the global stock market posted a 14 per cent gain overall that disguised a much more interesting journey along the way. As with all three of those, we are unlikely to forget 2020. A year to remember, certainly. Also, a year in which to learn, or remember, some key investment lessons.
Here are seven that have jumped out at me.
The first is that to make money in the stock market you actually have to do something. Fortune favours the brave. When I got back from a week’s break in Portugal at the end of February, the market was in freefall. In the first two weeks of March I made three investments into a FTSE 100 tracker. I wish I’d chosen the S&P 500, but there you go. The best-timed of the three is up 25 per cent. All I knew was that, after a brutal fall, the odds were improving by the day. A related lesson is that this investment was only possible because I had cash in my portfolio. Always have some dry powder.