Top investment lessons from 2021

Highlights

• The year 2021 taught investors and traders several lessons.
• The biggest of them all was to stay patient and focused even in the most adverse conditions.
• Investors also learnt how climate change should be a part of everyone's financial plan.

The year 2021 taught investors and traders several lessons. The biggest of them all was to stay patient and focused even in the most adverse conditions. The year showed how things can recover after a steep fall. It was exactly what happened.

After witnessing stock markets falling to record lows in 2020, the ongoing year recorded bright signs of economic recovery. Purchases of several commodities picked up. In addition, people took advantage of brighter prospects to hedge against future upheavals.

Here we discuss top investment lessons from 2021:

Start early

The people were caught unaware when the COVID-19 struck. Most were with inadequate savings and additional income sources. The situation became worse when many even lost their jobs and businesses came to a standstill. The situation was far or less the same in 2021 as well. It is always advised to prepare contingency plans and additional income sources to fend for yourself during dry days.

It is always better to start early as compounding gives the best results to the investors who started their investment journey at a younger age compared to others.

Source: © Icefields  | Megapixl.com

Diversification

In 2021, just as the markets rebounded, many were in the rush to recover their lost investment as soon as possible. However, growing uncertainty in the market provided detrimental to interests of the many and they ended up burning their hands in stock markets. Not only stocks, but even some debt funds also performed on a dismal note.

Many even had to liquidate their essential savings to pay for losses. So, it’s important to diversify your investments optimally into different asset classes keeping in mind likely risks and return expectations.

Long-term strategy

Investing for the long term is one of the key strategies for investors from the year 2021. Instead of trying to time the market, investors should consider spending time in the market by buying stocks and holding on to them irrespective of market fluctuations. It is a buy-and-hold, long-term investing strategy.

Veteran investors always advise to stay the course with long-term stock market investing in volatile periods. History has mostly shown changes in behaviour during a crisis may not last long beyond it. Investors who held their ground during the turbulence of stock markets due to the COVID-19 pandemic reaped rich returns as bourses rebounded.

Meme stocks are not for all

The year 2021 also showed that meme stocks are not for disciplined investors. GameStop "Short Squeeze" made the headlines in January, leaving many confused about how the mass of small investors could send a struggling video game retailer's stock soaring 1,700% in a few weeks.

However, the stock soon fell, resulting in many naïve investors losing their hard-earned savings. Many learned the hard way that meme stocks don't follow the strategic approach to investing.

Climate change has a role to play

The COP26 Summit, the 26th United Nations Climate Change Conference in Glasgow in November, brought together people from all over the world. It had several stories of how climate change is already affecting people’s lives. Other than this, there have been many studies by analysts over the year showing the impact of the changing climate on financial issues from real estate retirement to spending.

Thus, climate change should be a part of everyone's financial plan since the cost of climate change would wight heavily on our finances going ahead.

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