2020: Did You Stick or Twist?

Editor's Views: In the toughest market conditions in a decade, did you sell up or stick with stocks? Don't beat yourself up if you didn't buy Tesla - or the fund that went up 132%

Holly Black 23 December, 2020 | 10:55AM
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What a year.

It seems amazing that this time 12 months ago, the UK stock market was still riding high on the euphoria that came with Boris Johnson’s landslide General Election victory, the promise that a Brexit deal was coming and the plan to Build, Build, Build.

No one needs another missive lamenting the woes and many, many mind-boggling U-turns we have all endured this year, so I’ll keep my focus very much on the investment side of things.

For many investors, 2020 will be the first time they have seen a full-blown bear market in action. It ain’t pretty. If you started investing at any point over the past 10 years, the chances are you’ve enjoyed a fairly steady upward trajectory and probably think you’re incredibly skilled at picking funds and stocks. March and April were the real test.
Did you sell, did you stick, or were you brave enough to buy more?

If there’s one thing 2020 was highlighted, it’s that the stock market has very little to do with the economy. While governments around the world have taken on a debt mountain high enough to give Everest a run for its money, some stocks have rocketed up into the stratosphere. While the UK high street looks to be on its last legs and thousands of pubs around the country close, there are just as many businesses absolutely thriving in these most unprecedented of times.

If you made the right calls – whether by luck or by judgment – you’ll have had an incredible year. Tesla shares are up a staggering 750% year to date as I write, Zoom’s (ZM) almost 600% and online marketplace Etsy (ETSY) 425%.

At the other end of the spectrum, BA-owner IAG (IAG), Rolls Royce (RR.) and Royal Dutch Shell (RDSB) are all languishing at about half the level they started the year.

That chasm is evident in the fund world, too. A quick search of the Morningstar Direct database reveals that the best performing UK-domiciled fund is Baillie Gifford American, which has delivered a stonking 132% year to date. The worst performer, meanwhile, is down an eye-watering 81.5%. The two have very different remits, I should point out, but no remit should warrant a gap of 213 percentage points. That’s not so much a gap as an abyss.

Impossible to Predict

It’s tempting to look back with hindsight at what has been and think you should have made different or better decisions. 2020 is the sort of year when that is particularly true. My advice? Don’t look back with regret if you didn’t snap up shares in Amazon (AMZN) or Microsoft (MSFT) or Teladoc (TDOC) at the start of the year – there really was no way to predict how 2020 was going to pan out.

If you stayed in the market through the worst of it, give yourself kudos – it’s not easy. If you panicked and sold, ask yourself why and consider whether you need to reassess your risk appetite when it comes to repopulating your portfolio. If your fund manager underperformed his peers, question why this was the case and whether your money might be better elsewhere.

But above all of that, go and eat a mince pie and enjoy a well-deserved rest. It’s been quite the year and I do hope we’ve helped you in some way to navigate it. Whether it was looking at how long it usually takes the stock market to bounce back to the longer-term lessons we can learn from the Covid-19 pandemic, our aim is always to cut through the noise and help you make the best investment decisions.

For the truly dedicated, the Morningstar elves will be here over the festive period providing you with lots of handy info and tips if you are using the break to rebalance, reassess or catch up on your reading,and we’ll be raring to go in the New Year with lots of ideas for the year ahead. 

But for now, from me and everyone at Morningstar, we wish you a very Merry Christmas and a prosperous New Year.

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Holly Black  is Senior Editor, Morningstar.co.uk