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Green Fisher: “This is what you should learn from 2020” – columns

The contemplative Advent season offers a good opportunity for self-reflection. As an investor, have I managed to reproduce the positive returns on the stock markets in my own portfolio or have I been thwarted by bad emotional decisions?

Is it the market or is it me?

The contemplative Advent season offers a good opportunity for self-reflection. As an investor, have I managed to reproduce the positive returns on the stock markets in my own portfolio or have I been thwarted by bad emotional decisions? What part of the success or failure is “the market” responsible for and what can be attributed to my abilities as an investor?

Think long term

Regardless of your own results, you should first establish that, especially in the long term, it is NEVER the global equity markets themselves if sustainable success does not materialize. In the stock market year 2020 in particular, the stock market changed its cycle extremely quickly. Record values: extremely down and extremely up again. The market has done everything to ensure that investors could not easily get the good bottom line. In volatile and emotional phases, a lot depends on the question: What type of investor am I?

Too much ego is harmful

It is always important to distinguish between chance and strategy. Anyone who puts a lot of risk on a few stocks is quickly subject to selective perception. If a share rises, the company is judged to be good and one’s own abilities as an investor are rated highly. If a share falls, the management is classified as bad – if you don’t put your own ego aside here, the fault is not looked for in yourself. Self-reflection, error analysis, never lose your humility when it comes to investing. An important component here is the ability to always maintain realistic expectations. In times of dot-com euphoria, expectations were partly astronomical. Good quarterly results were ultimately perceived as disappointing even if the company did not announce another stock split – we are far from this level today, but it should always be a warning to successful investors.

With self-control to success

Financial media ensure comprehensive reporting every trading day. Much short-term and hectic hustle and bustle! Granted, it is also a thankless task to find reasons for short-term market turbulence. If a company publishes quarterly figures and the share rises when the stock market opens, the headline reads “Quarterly figures convince investors”. If the share turns negative on the same day, the headline reads “Outlook disappoints investors”. However, these freely interpretable situation descriptions are not particularly helpful for investors.

2020 in review

Why did the stock markets rise in 2020? Because the COVID crisis hit hard, but due to temporary lockdowns, it was unable to maintain itself as a sustainable bear market cause. Surrounded by economic adaptability, low interest rates and political stalemates, the stock markets have managed to surpass lower expectations across the board. The reality is not perfect, but it is far better than expectations about six months ago suggested – a powerful driver for rising markets.

Conclusion

The 2020 stock market year impressively demonstrated that good final results demand a lot from equity investors. With healthy expectations, a moderate ego and the basic understanding that stock markets “deliver” over the long term, you are well armed.

You can request the current capital market outlook from Grüner Fisher Investments free of charge at www.gruener-fisher.de.

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