Three key investment lessons from the past decade

[ssba]

As we unwrap a fresh new decade, we find ourselves looking both backward with appreciation for all the past has taught us and forward with energy and optimism.

This kind of chameleon-eyed vision allows us to gather all we’ve learned, pack it up and take it into the New Year. Here are three lessons this decade offered that we’d all be wise to carry forward:

  1. Bull markets don’t last forever, but they don’t end with every dire prediction either. Like almost anything else in investing (and life!), the key is to analyze data and react based on knowledge and not emotion. All investors want to make money and, with sustained low interest rates, the place to do that right now is in the equity markets. So, the human desire to succeed is a key market driver and that won’t go away because a yield curve briefly inverts.
  2. Track the trends while ignoring the trendy. We live in a fast-changing, noisy world in which today’s Tik Tok video can become tomorrow’s CAN’T MISS INVESTMENT! But not every IPO gains traction and plenty of them fail outright. Patience is the key here, along with studied analysis. Who would have thought Amazon would be a good investment back in 1997 when it launched at $18 per share. Today, it trades at closer to $1,800 a share. For every Amazon, though, there’s a Pet.com, which declared bankruptcy nine months after its IPO. Data drives sound decisions.
  3. Read the headlines, but don’t invest based on them. It’s important to keep up with the daily news but it’s equally important to understand their impact on the markets specifically and the economy as a whole. President Trump’s Impeachment hardly moved the markets at all, though his administration’s trade war with China had nearly a daily impact. Even when geopolitics develop into a headwind, they are just one of several factors impacting the markets.

All three of these lessons carry the common theme of studied restraint. We work hard here at Winch Financial to base our investment decisions on facts, rather than emotions or trends. We like to put the hard work of our daily analysis to good use when we adjust, or sustain, our portfolio choices. While we are cautious in our optimism, we still believe there is life in the old bull market as we enter 2020 and we look forward to all the opportunities the new decade offers.