2020 Mid Year Reflections
Most people do their reflections at the end or the start of the year, but for me, I prefer to do it at the middle of the year.
“Why?”, You may ask.
Because there are 6 more months to go! Why would you continue another 6 months doing the same thing without improvement or correction? If I can reflect daily and adjust daily, it will be perfect but even for me, that can be tiring.
This mid-year reflections was nothing short of spectacular. We have so many major events in 2020 and definitely COVID19 takes centrestage.
As an investor, we saw a 36% drop in US market in March and then an almost miraculous near 60% recovery (and climbing) from April to June. It literally left many people speechless and shell-shocked, most could not believe what had just happened.
INVEST WHEN THERE IS THE MOST PAIN
In March, the US market dropped by a total of 36%. If you are invested in US S&P500, you would have gone back to 2016 levels. Imagining 4 years of gains wiped out in a month?
Indeed, there was a lot of pain in the market and at the same time, there were tons of opportunities. People were painfully selling great stocks at a fraction of their original prices.
The easiest thing to SAY is “Invest when it is cheap” but it is also the hardest thing to DO. There were so much fear in the market, that buying at the moment feels almost gut-wrenching.
This is why investing is so hard. It requires not only your best analysis but also your best mindset when called for.
INVEST IN BUSINESSES RATHER THAN INDEXES
As an investor, I always prefer to invest in businesses because my goal is to achieve market-beating returns.
I write this cautiously because I also know that beating the market is a tough thing to do. Especially for those who do not know how to invest, it is almost suicidal to think that they can beat the market easily.
However, after years of investing and achieving market beating results, my reflections remain that investing in businesses is the BEST way to invest.
For example, despite the crazy run up of the markets, the S&P500 is still about 6-8% below its previous high.
However, Amazon stock price has since reached new all time high (23% higher in fact!), and does not seem to be stopping any time soon.
The interesting fact is that Amazon is a component of the S&P 500, and it takes up around 4% of the whole index!
So why the big difference in outcome? Because it is ONLY 4%. S&P500 has other much weaker companies that continue to drag on the top performing companies in the index.
Both invested in Amazon but very different outcome.
Finally, I hope you are doing well in these markets.
If you managed to profit from it, great job! Continue to stay the course.
If you are affected badly by the recent crash, I want you to know that it is alright. I was also burned in 2008 GFC and lost 55% of the money.
The best thing to do now, is to MOVE FORWARD and INVEST BETTER next time!
I am rooting for you! Go go go!
Let me know how are you doing in the comments! I read every single one of them!
Pete.
