Excerpted with permission from “5 Investment Lessons from the Pandemic” by Steve Watson, Equity Portfolio Manager at Capital Group.
As a 30-year investing professional, the past 16 months stand out in my career as both intensely painful and incredibly instructive. What has this most unusual time in history taught me?
- Market crises are inevitable. The pandemic-driven stock market crisis led me to think of past market traumas I experienced. I counted 21, including the collapse of the Soviet Union, the bursting of the technology bubble, the global financial crisis, and now COVID-19. This list highlights the reality that market disruptions are a fact of life for investors. My list suggests we get one of these events every 18 months or so.
- History doesn’t necessarily repeat itself in ways you might expect. For instance, I lived in Hong Kong through the dark days of the SARS (Severe Acute Respiratory Syndrome) epidemic in 2003. When COVID hit, I was quick to make comparisons between the two. Yet, while SARS was frightening to live through, relatively speaking, it was a fairly minor event. Drawing false conclusions about COVID based on the SARS experience left many investors unprepared for the extent and duration of this pandemic.
- Diversification holds strong. While “growth” and “value” investment labels are overly broad, I’ll use them to make a point. I lean toward value, but I also have long-term growth-oriented investments. Many are tech-related (semiconductors, e-commerce, etc.) and I like to purchase shares when they’re down and out; I also hang on long enough to let the market catch up with what I think is the true value of the company. In hindsight, my selection of growth-oriented tech stocks saved my skin during the worst days of 2020.
Click here for a PDF of Watson’s full article. Investing Lessons Learned from the Pandemic