The Market Abides: 2020 Edition ?

Fan’s of “The Big Lebowski”, from award-winning maverick filmmakers the Coen brothers,  would be familiar with the quote “The Dude abides.”  The Dude, in his unflurried state of Dudeness, lives on. Unperturbed by the chaos around, the dude takes it easy.

So did the market in 2020.

When we had just started back in 2017 we found an amazing video, of all but 3 minutes that drove this point beautifully. It charts the growth of Rs 100 invested in the BSE Sensex from 1979 to 2017 through multiple events – good and bad. This is a good year to watch it again to see how resilient the market and by extension the human spirit is.

We were all here, we all know what happened so no point going over it again.  Instead, we will do some quick recap lists ?

1/ Asset allocation driven rebalancing is your only friend. In March it would have asked you to rebalance into equities and today it will ask you to rebalance out of them. Follow that advice.

2/ Consolidate your portfolio during market downturns. That’s when the tax incidence of selling your funds or stocks will be the lowest. More investors are looking to consolidate now when everything is in the money than in March when consolidation would have been virtually tax-free. It also seems we are the only advisors making this point.

3/ Bull markets don’t care about your investment thesis. Everything goes up. Fortunes are actually lost in the last stages of a bull market due to investing hubris and bad decision making. It’s just that the collections happen during the ensuing bear market. Don’t chase, don’t make those mistakes.

4/ If you don’t buy a dip, you are unlikely to buy a correction. The feeling to buy 10-20% lower is highest in deep market corrections. So stop making fun of young investors who are buying the dip. They have got that part right. Let’s hope they continue to do so during market corrections as well.

5/ Harvest your taxes through the year. If you waited till Feb or March of 2020 for tax gain harvesting there would not have been any gains left to harvest.

Now go back and read the list again.

None of the learning is unique to 2020. And that’s how it should be. We have written about them all many times before. It’s just that we never imagined a single year would bring so many of them to fore with such impact.

Zen and the art of investing – simple stories to understand markets and our reaction to them 

Is it a good idea to buy the best performing funds?

Concentration Builds Wealth 

5 Hacks to Avoid Financial Misselling 

Nasdaq – Party Like it is ‘1999’ 

And 2 podcasts featuring us 

Podcast: Is robo-advice right for you

Paisa Vaisa: Investor’s edge special 

Get up. Dress up. Show up. Never give up.