Throughout 2020, news reports emphasized the unprecedented nature of the Coronavirus health crisis, emergency financial actions, and other extraordinary events.
The average investor seemed all too aware of this stream of bad news, at least as interpreted by the cash flows released by Morningstar©, and illustrated in the chart below.
A move to cash in March 2020 may have been a costly decision for anxious investors.
In US dollars. Global equity returns is the MSCI All Country World IMI Index (net div.). MSCI data © MSCI 2021, all rights reserved. Money market fund flows provided by Morningstar. Indices are not available for direct investment. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment.
As global stocks sustained losses (red bars titled -1.3%, -8.2%, -14.4%), spooked investors fled the stock and bond markets for the perceived safety of cash (rising, solid line).
During the month of March, cash-like money-market funds experienced net deposits of $684 billion. Then, with a pile of cash on the sidelines, global stocks (equities) shot the lights out, returning 29.54% over next the six-months from April 1 to September 30. Fixed income returned 3.16% over the same period.
The takeaway? After selling at a loss through March, many investors took a second gut-punch: they remained in cash and missed the advance as prices recovered and made new highs.
2020's positive equity and fixed income returns remind us that with a solid investment approach and a commitment to staying the course, investors don't need to play a guessing game with their life savings. There is a better way to build long-term wealth; an evidence-based path forward, even in uncertain times.
Do you know your investment results?
Clients at Open Window know their exact investment returns from 2020, and their exact results over time. We also track costs with the same diligence. Most important of all, clients know if they're on track financially. If you're a client, access your results here.
If you're not a client, do you know your investment results? Do you know the investment costs you're paying? Do you know if you're on track financially? Find out if you're on track here (free & confidential).
An opportunity for a fresh start?
Many questions remain about the pandemic, new vaccines, business activity, changes in how people work and socialize, the tax and social aspirations of a new federal administration, and the direction of global markets.
We can't predict the future, but we can prepare for it. Let's talk. We would hope to point you in a better direction. We don't want the cash-flow-disaster above to happen to you, or to anyone, ever again.