In 2021, investors in the Singapore market experienced a rather wild roller coaster. Following the rebound from the Low in November of 2020, the STI continues to climb to the peak in February as we ride on the recovery wave during the aggressive vaccine rollout. Next, we had the infamous delta variant which started to threaten the whole idea of recovery as death rates grew around the world for the second time. Thankfully, we realise that a double dose of the vaccine is required to increase our immunity and therefore we regained some level of confidence in the market. At the end of 2021, we saw another new Omicron variant which again threatened the recovery phase. In fact, it held us back by at least 1 to 2 months in our plans to reopen and resume more normative activities. Right now, we are still waiting for further confirmation on the impacts of the new variant in terms of its lethality and rate of transmission. In this week’s post, I will share all important lessons I have learned and how I could have avoided losses as well as slightly better moves that I have learned and executed.
Never assume extreme returns or losses
We lived in a world that is ravaged by the pandemic in 2021 and it has put our emotions on overdrive and so did the market. While it is common to hear advice from experts to not react based on emotions, but when the market moves too much in a short time frame, I can’t deny that it is hard to ignore those movements. That said, never assume the worse or the best whenever the market is overactive. Instead, try your best to execute your strategies and orders based on your price targets. This will not only allow you to stay on track but also accumulate gains over time.
React to sudden spikes and dips differently
As the news exaggerates every possible outcome of a new community outbreak or a new variant, markets also often react violently. This inevitably threatens our stance in the market as we are unsure how low it will go. Conversely, when there is a huge development such as a vaccine or a treatment of sorts, the market would also spike upwards by a few percent. From that, we learn that the market is in fact temperamental. Therefore, we should never take each overreaction as a permanent one, meaning it would be more or less a wise move to sell first or buy more if the market moved a lot faster than expected on a particular day or week.
Separate stocks bought for long and short term
Every now and then, we will face some undesirable outcomes when we invest in the markets. For example, perhaps some sectors of the market were weakened because of the pandemic or some political move. In such a case, try to allocate some of your stocks or assets into different baskets. You can borrow some of your assets for defensive play for example using the sell first and buy back later strategy. As for the rest, park them in the long-term investment pile and prepare for the bullish cycle to come.
Closing Thoughts
My learnings from 2021 provided me with additional knowledge on how markets react in a crisis like a pandemic. Besides that, I also learn that money has become a lot more worthless in 2021 as the US continues to print “free monies” to support its own market. Nevertheless, everything we do must still remain objective and reflexive at the same time. Hopefully, more people will be willing to share your lessons learned in the year 2021 so that the rest of us can learn from your experiences.
