Five lessons from 2020

Gold bars in the vault of the Pro Aurum gold trade
Gold bars in the vault of the Pro Aurum gold tradeimago images / photothek

Rarely have the realities gaped as far apart as they did these days: While the busy world around us and the hustle and bustle on the streets have almost come to a standstill due to the new lockdown, the stock exchanges are setting up another big party these days. At least the prices continue to strive upwards and mark new highs again on the penultimate trading day in 2020. And not only in America, where you can currently hear the sigh of relief from everyone involved that the outgoing US President Trump has now signed the law on the new corona aid. If he had stuck to his “no”, the United States would have threatened a so-called government shutdown, ie the shutdown of the entire public sector. The payment of further state funds – including to state employees – would then have been impossible, as would the disbursement of aid funds and support for the unemployed, incidentally. And of course there would have been no new corona aid. Even if they are “only” 600 dollars per capita at first. So the USA got around this worst-case scenario at the last minute. That is exactly what the stock exchanges celebrate there.

But the German leading index Dax is now also doing the year-end rally that was hoped for. He is on the way to the top, mainly because of the beginning of the corona vaccinations and is currently trading at around 13,850 points. In the meantime, he has finally stormed above the level that he had before the start of the corona crisis: in mid-February he was briefly at around 13,750 points before he started diving at 8500 points. What has happened since then has already been adequately reported: He was still bobbing around in the March lockdown, but then started making a big comeback from April – especially from May to July. So now it has exceeded its old high and is leaving this crazy year with a plus of around 3.5 percent. All in all, this is still a conciliatory result.

In addition, there are some exciting lessons that the Corona crisis year 2020 had in store especially for investors and that you should definitely take with you from this turbulent stock market year. A few findings are rather surprising. Others, on the other hand, were more predictable and have been emphasized dozens of times by finance and market experts. Nevertheless, one should take these lessons seriously and write behind the ears for future investments. Because precisely what is said so often and remains valid even in the ultimate crisis years can only be right and important for the future. Here are the five most important lessons from 2020:

# 1 Strength lies in calm

Yes, of course, we all have more peace than usual and for some tastes already too much of it. But especially in the markets this year, the winners were those investors who were NOT trading when the prices crashed. But those who stayed invested and sat out the whole thing until the indices started to recover again. And until they were almost all back where they were before the crisis broke out. In any case, all seven leading indices in Germany and America have lifted themselves above their old level again and thus made up for the big collapse, the Dax, Dow Jones and S&P 500, as well as the TecDax, MDax, Sdax and the Nasdaq. None of them are worse off at the end of this year than they were at the beginning. Which only underlines one guiding principle: In the long term, the stock exchanges will continue to rise because the economy is something like a perpetual motion machine. Sometimes it runs slower and sometimes faster, but it runs, and runs, and runs. Because people always manage to develop new ideas, find new solutions and implement all of this in business models and productivity. In added value. As long as you believe that the economy will keep going and reinvent itself, you can invest in stocks. And above all keep them in the depot in the event of a crash.

The year also proved that: Index fund investors in particular will close the year with a positive balance. The active fund investors were not granted the same degree. After all, many fund and asset managers hectically shifted their portfolios in March to protect themselves from heavy losses. The result has often been: They missed the rapid rebound in the markets from April and many of them lag behind to this day. It was mainly index investors who benefited from the big price comeback. But active fund investors will also benefit from the renewed price increase – if they stick with it long enough.

In line with this, the asset manager Vanguard recently published a study: It compared how active fund managers fared over long periods of time – especially those who clearly outperformed the market. And the result is very exciting: According to this, at least 80 percent of the funds that currently outperform their benchmark index were well behind the market in at least a five-year period. So they were in the bottom quarter of the comparison group. If you looked at any ten-year periods in the past, according to Vanguard, even above-average funds weakened for at least three years. That means: hold on! If you have a broad-based equity investment, be it active or passive, then you give it the chance to work its way out of a phase of weakness. This can often take a few years. But in the end it is most worth it. So buy and hold remains the tried and tested motto.


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