As we now find ourselves out of the woods (so to speak) I’m considering lessons learned from the 2020 correction. We see once again proves that the tried and true method of disciplined rebalancing and broad diversification is the correct strategy. At the beginning of 2020, nobody had any idea that a global pandemic would hit and shut down economies all around the world. It was not factored into portfolio allocations. Trying to predict and plan for this would have been a fruitless endeavor
In March, as we saw a fourth of the U.S. economy go idle because of the lockdowns and a decade of job gains erased, we all anticipated a devastating and long trek back to market highs of 2019. Factoring into this was the uncertainty of the election and the Georgia Senate race. Markets like a divided govt which allows more free markets.
But time after time the markets defied any analysis and predictions. In fact, a disciplined rebalancing approach had us buying at the lows of the market and gradually selling these last quarters at market highs the environment and news. Additionally, broad diversification allowed us to hold all the assets that benefited from the unique circumstances (growth stocks in 2020 and now value in 2021 for instance).
Looking forward we may have a respite from another correction but regardless, we know the future uncertainty will be well.