What did 2020 teach us about savings and financial markets?

What did 2020 teach us about savings and financial markets?

What did 2020 teach us about savings and financial markets?

2020, although it is not yet over, has brought us many lessons that it is right to remember now, when it seems that the most dramatic moments of the markets related to the pandemic have passed.

Very interesting stock index investment opportunities were created in March, as well as recently there was a violent sector rotation, led by the possibility of the anti Covid vaccine, which has moved up all sectors linked to the economic cycle to the detriment of big tech.

In fact, we’ve seen how U.S. tech stocks are fueling this year’s recovery, but the prospect of a vaccine has pushed flows to other sectors, such as cyclical, that still have a way to go to recover pre-Covid valuations.

Probably at the end of 2020 we will have many investors who divested everything in March on the lows because’ scared as well as others who entered only in June after an unexpected recovery.

Even today Covid 19 constitutes a strong element of uncertainty regarding 2021. This uncertainty is bound to persist in the coming months, on a path that will necessarily remain bumpy.

As in previous articles, we remember that these movements, among other things now increasingly fast and violent, are possible to grasp and exploit in the perspective of the professional who follows the markets every day, but not of the private investor who does something else in life and is not every day on the market.

This is an important element to reflect on since the point of view of the Saver is different and should not replace that of the professional who follows the markets as a job.

The right time to invest or divest, in fact, interests the professional and less the saver in person.

2020 has reminded us for the umpteenth time this fundamental aspect to invest your savings: trying to do market timing, divesting out of fear or waiting for the good moment to enter the stock market is not a strategy to be pursued because if you are not a professional, nine times out of ten you make mistakes.

Instead, it is important for the saver to focus on another aspect that is very relevant to him and his savings: the main objective of his investment.

Identifying your goal means having in mind, therefore, the time horizon of your investment and your personal risk profile.

What 2020 has reminded us and taught us is that investors should never change their risk profile due to events affecting the markets, because this is what  portfolio manager does, optimizing management results.

Different is what the investor has to do.

When an investor profiles to access our services, they indicate their objectives, risk profile and time horizon.

The recommended portfolio emerges, which becomes a tailored suit and allows you to achieve the objectives indicated and there is no reason to change the profiling, unless there has been an event in professional and personal life that has changed the financial situation or income of the investor.

If, for example, a component of income that could have come from a rental of a store fails due to the crisis, the portfolio must be modified by increasing the bond part. Or if a job promotion has increased income, you can increase the growth component linked to the stock market as interest or capital gains from investments are not affected. Only in these or similar cases does it make sense to change the risk profile of the portfolio. https://www.edulane.ng/

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