You’re not supposed to try and time the market. But March 2020 presented such a unique buying opportunity that I just couldn’t help it.
Not only was the March 2020 drawdown the fastest 30% drop in the history of the stock market, it was also followed by one of the strongest bull markets in recent memory.
Between March 23, 2020 (the absolute bottom) and March 23, 2021, the S&P returned 76%. That date range is obviously cherry picked but those one-year returns are ridiculous.
Through sheer dumb luck, I chose March 2020 to dust off my brokerage account and pick up some shares in a bunch of the hardest hit companies. Airlines, cruiselines, oil companies, banks, you name it.
I was overly optimistic that this “COVID” thing would be over in a month or two and that everyone was blowing it out of proportion. You know how that story ends.
Here are my trade confirms from the last two weeks of March 2020:
Collectively, that represents $12,296.24 of purchases.
I’ve held almost all of those stocks through today and they are now worth $24,515.46.
Almost a 100% return.
The markets return about 8% on average in any given year. This was a once in a lifetime opportunity. I wish I could say I planned it, knew what I was doing, or invested more that month. But I’ve also learned a bunch of lessons over the past year.
Here’s what I’ve learned:
Had I known how serious the pandemic would turn out to be, I would never have invested a dime. The world was practically on fire and I was sitting at home oblivious to the downside potential.
Not a single person would have bet that the market would come roaring back with a vengeance after that month. I definitely would not have. There’s only one guaranteed way to always “buy the dip“.
I bought too many individual stocks. There’s no reason that a couple index funds wouldn’t have been sufficient.
I then proceeded to dollar-cost average throughout the remainder of the year when I would have been better served putting more into play in March. Everything I bought after March has had less than 100% return.
Hindsight is 2020 though and dollar cost averaging might have yielded a better result if the market crashed again later in the year. This is why timing the market almost never works out. Any short-term decision is a coin flip.
I completely overlooked most of the stay-at-home technology names that would come to dominate the 2020 landscape such as Zoom, Teladoc, and Shopify.
I based my predictions of how the market would act based on the only other volatile market environment I had invested in which was the 2008 Global Financial Crisis.
Some might remember that 2008 was an incredibly difficult year with a lot of red but the bottom didn’t even come until 2009. I kept waiting for another selloff and and even deeper drawdown that never came.
A final lesson I learned is to be grateful that my job and life were not upended by COVID, like so many others were. That I could work from home, had money to invest, and have not yet contracted this deadly virus is a complete miracle and I don’t take it for granted.
My best play now will be to hold onto these names. Regardless of what may happen next month or next year, a long term mindset always pays off. In fact, there is no single 20 year period where stocks didn’t return a profit, and many years where they returned a fantastic profit.
Just look at this chart by Morgan Housel from his recent article:
This means the odds of earning a positive return after 10 years is 88%. I’ll take those odds over another year like 2020 any day. Hopefully my 40 year-old self will thank me.
By then, I’ll have likely learned a whole other set of lessons that my current self is happily ignorant of until they slap me in the face. That’s why I love the psychology behind investing. You can never perfect this game.
The best you can do is learn from your successes and mistakes and be humble.
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Hindsight being 20/20, I wish I had invested more obviously (I had an Ally bank account I’ve since closed but didn’t even think to touch in March). I did have some dry powder on hand and threw into VTSAX, but it seems like so many of the “obvious” work-from-home stocks were the ones that experienced outsized returns. By all means, thrilled to have invested more into the index, but that was generational buying opportunity that could have been better seized upon. Again, hindsight–it is never all that fun at the time.
You get it. It was so difficult too when those work-at-home names kept rising in price. I kept feeling like it was too late, but of course it wasn’t. Lesson learned! VTSAX is a great fund since you get the admiral shares – nice choice!
We all wish we invested more during the market drops, but the fact is that you did invest during a correction and it paid off with that 100% return! I really am a fan of the stocks you picked. A lot of blue chip stocks that consistently provide solid returns. Good lessons learned!
FLA approved! Appreciate that kind affirmation my friend.
I’ve wondered what it would have been like to invest more during that crash. Unfortunately, I didn’t have the knowledge that I do know. Have learned a lot about investing since then. I did get lucky too. I bought into Penn National Gaming at $4. Sold out at $40. A few months later it was sitting at $130. Haha timing the markets is hard.
It is very hard! It’s good to know even the professionals can’t do it so it’s a bit of a waste to try. My new solution is just to have enough cash vs. stocks that I can sleep well at night. Everything else takes care of itself. Nice trade on PENN though!! I have only ever had one 10 bagger. Thanks for the comment!
I hear you. I’m starting to see how holding cash is important and of course, sleep is very important.