2021 Market Recap: How Certain Can You Be?
Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.
— Warren Buffett
Time really does fly by — We are now at the end of the second year of the pandemic and with Omicron and possibly other variants yet to appear, there is still no end in sight of the COVID-19 saga. Many of us have endured some form of pain and suffering during these years, whether it’s forced isolation due to lockdowns or illness, the loss of loved ones, or even enforced changes in the way we interact and go about with our daily lives. Whatever the case may be, we hope that all of us came away with some positive learning lessons.
As we look ahead to 2022, we continue to feel optimistic and happy with the markets. If anything, we have a renewed sense of confidence — our investment beliefs, tenets and philosophy have been tested on numerous occasions during the recent crisis and we are pleased to say that it has all held up well.
Way before the pandemic hit in early 2020, we had been communicating with you — our valued clients — the best ways to invest. In fact, all the snippets, articles, and corresponding information that we had been writing over the years were collated, rewritten and put into an easy-to-read book - Simply Invest, which was published in early 2019 and quickly became a National Bestseller. If you had used pointers derived from the evidence and academia in the book, you may have emerged from the crisis better off.
When the COVID-19 pandemic and market sell-off hit us, timeless lessons such as avoiding making market forecasts, predictions, selling in fear, and missing the best days of the market really rang true. After all, nobody in Jan 2020 would have told you that the “Wuhan virus” would turn out to be much more ominous for the markets than expected. In fact, market forecasts were predicting high returns for 2020 given that we had come off the back of a good run in 2019.
However, as we headed deeper into the pandemic more voices began calling out for an economic recession and market performance that could rival or be worse than 2008. We highlighted then that we could not control nor predict the outcome of the market sell-off, but lessons of the past meant that we should not prematurely adjust portfolios or asset allocation in order not to miss the recovery rally. Of course, we still did our due diligence — we found that market risk indicators did not highlight extreme stress and that past studies of similar bear markets recovered within a year.
Furthermore, with extremely diversified portfolios like the ones that we held, remaining steadfast was our best option to navigate through the uncertainty. Clients and friends who not only stayed that course but in some cases even invested additional capital when the crisis hit were rewarded — since the bottom of the market during the crisis, one of the core equity funds that you hold (United G Strategic Fund) managed by UOBAM together with GYC has risen +77% (shown in the chart below)
The fund essentially represents our investment philosophy. When we have been entrusted with the hard-earned money of our clients and friends, it’s certainly satisfying to see that these choices have led to good outcomes.
As we begin to look toward 2022 and see markets hitting record highs, panic and nervousness may begin to set in again. Market highs make many investors worried as they assume that what goes up, must automatically come down. However, markets hitting highs makes sense — if it always bounced back to the mean after going up or down, then the long-term return should be flat. And if investors didn’t expect a positive expected return from the market, then they would put their money elsewhere.
As we proceed into the new year, expect changes and with it, turbulence and volatility. New businesses will adapt and rise, and some old incumbents may fail or fade away. If you invest in an extremely diversified manner, you need not stress over which ones to buy or sell. We approach each day believing that the market will go up a little but are fully prepared for when it does come down — and we will prepare you for it as well.
It may be hard to follow the timeless lessons from investing and heed the advice of the quote at the beginning of the article, but it will be well worth the effort.
Happy New Year, and may your capital reach new highs!
