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Personal Takeaways from Investing in 2020

So here we are, mid October. Somehow the crazy roller coaster ride that has been 2020 is actually approaching its final months. Can you believe it? (Worry not… you will be able to get off soon, I promise!)

Investors experienced an equally eventful year in the stock market: a catastrophic-plunge in March that soon melted away like a bad dream and became a FED-buoyed recovery that seemed to occur in a completely different universe than the overall economy.

2020 is the first year that truly tested my (and millions of other investors’) investing mettle. As luck (or the psychic intervention of the Gods) would have it, late last year I decided to dial the risk-taking down just a bit and buy more bonds. This may have not been objectively necessary for my investing success, but at the time I was a bit concerned about how I would react in a market downturn, which I had never experienced as an investor.

Thankfully, my own skepticism of being overly confident soon paid off. The adjustments I made helped cushion the blow of the crash this past March. What’s more, I found myself taking advantage of lower prices as much as I could, even as a part of me was screaming like Chicken Little that the sky was falling!

It was satisfying seeing myself weather the crash so well. At the same time, over the past year I let things get a bit complicated in my Roth IRA. Instead of owning a couple of mutual funds, I added my first ETFs, including REITs, bonds (as mentioned), and small-caps (I even made an uncharacteristically opportunistic gamble and bought a couple of shares of a much beleaguered Energy ETF). This experience, while interesting, ultimately made me want a simpler approach (Ie, I’m thinking of favoring mutual funds over ETFs, which at least on the Vanguard platform are easier to set up automatic contributions to).

In summary, these are my main takeaways from investing in 2020:

  • I now know that I am capable of handling a market crash and staying the course, which convinces me…
  • I have a rather high risk tolerance, and though I don’t revel in my portfolio going down (or the accompanying psychological drama), I can handle it. In fact…
  • I actually get excited by the thought of the opportunities brought about by market drama (ie lower prices) 🙂 Apparently, the contrarian investor in me is alive and well! (Thank you, Sir John Templeton).
  • I am glad I have allowed myself to explore and experiment with different investments, yet now I think I have a better appreciation of keeping things simple.

So the theme of 2021 investing will be automated, elegant simplicity, buoyed by greater confidence that I can handle market risk.

Here’s to the wisdom that comes with experience and maturity!*

Or as the saying go, “What doesn’t kill you only makes you stronger!” 🙁

*Despite my optimism, I would never claim to be immune to the psychological traps of fear and greed which routinely ruin investors’s success. Though I am more confident in myself now as an investor, I like to think that I maintain a healthy amount of skepticism of my own brain. I don’t say this lightly: I believe my long-term investing success depends upon it.

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