Three investment lessons I learnt this year

It is important to remain focused on your long-term strategy and avoid panic selling

The 'Fearless Girl' sculpture at the New York Stock Exchange. For many investors, there are are lessons to be learnt from this year's bear market. AFP

It’s been a year of tough lessons for retail investors, many of whom only started their trading journey at the height of last year’s bull market run.

Those were the days when Bitcoin hit a record high of $68,000, meme stocks were all the rage and Big Tech shares continued their winning streak on the back of accelerated digitalisation plans, as millions of people worked and shopped from home.

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But what a different world it is now.

Global economic uncertainty — compounded by the Russia-Ukraine war, the supply chain crunch, rising inflation and higher interest rates — has increased volatility in financial markets, causing them to fall into bear territory this year and end the 13-year bull run.

That’s right, a 13-year bull run. No wonder we are feeling a bit shell-shocked when we log into our investment accounts these days and find ourselves in a sea of red as the likes of stocks, bonds and cryptocurrencies struggle to find their way back to positive territory.

Even safe-haven stalwarts such as gold are failing to calm our frazzled nerves as we track our falling investment portfolios.

For investment novices — many from Generation Z — it is the first bear market they’ve experienced, having been too young (or not yet born) to remember the 2008 global financial crisis.

While it’s difficult to watch all that hard-earned money you ploughed into your investment portfolio fall in value, it’s also important to remain calm and avoid panic selling.

Remember, you are not alone: millions of retail investors around the world are in the same boat, some more experienced than others.

Here are the top three investment lessons I learnt this year that will, hopefully, help you as well.

Lesson 1: doom scrolling will not make your investments rise

Earlier this year, I fell into the trap of doom scrolling everything I could find about the Bitcoin crash, bear market, the effect of interest rate rises on my finances and general economic uncertainty in a quest to find a spark of positive news, a light at the end of the tunnel, as they say.

Of course, it got worse — the cost of living kept rising, central banks started raising interest rates to rein in inflation and markets and cryptocurrencies continued their trajectory south.

I found myself logging into my investment and crypto accounts numerous times a day to check how much I’d lost.

That is when I realised the negative effect it was having on my mental health, so I forced myself to take a step back and put an end to the doom scrolling and constant checking of my accounts.

The fact is, we cannot control the outside forces that have pushed our investments into negative territory.

But what we can do is control our emotions — and keeping them in check means no longer allowing yourself to fall down numerous rabbit holes because of doom scrolling.

Trust me, you will sleep better at night when you stop.

Lesson 2: what goes up must come down — and rise again

Thirteen years is a long time for stock markets to remain in bull territory and it was only a matter of time before something happened to bring them back to earth again.

We thought that something would be the Covid-19 pandemic. And for a brief period in March 2020, when most of the world went into lockdown, global stock markets did crash.

Stock markets rise and fall all the time, which means that we just have to get used to the highs and lows of investing - and not lose sight of our financial goals

Felicity Glover

But trillions of dollars in government stimulus during movement restrictions meant that cashed-up, bored people had time on their hands and developed an interest in trading, giving stock markets a new lease on life.

As I wrote in a column last week, all good things must come to an end.

But the positive news is that a bear market historically lasts about 289 days, which means there is less than a month to go for this one to run its course. That is, of course, if the experts are correct.

That said, stock markets rise and fall all the time, which means that we just have to get used to the highs and lows of investing — and not lose sight of our financial goals.

Lesson 3: stay focused on the long term and buy the dip

Panic selling when markets crash is one of the worst things you can do as a retail investor.

It’s a lesson I learnt way back in 2008, when Lehman Brothers — the bank once considered too big to fail — failed (rather) spectacularly and triggered the global financial crisis.

“Buy low, sell high” might be a cliche these days, but it remains true.

That’s why financial experts always recommend that you remain calm and focus on your long-term investment strategy during a market crash.

Do not waver from this, because it’s an excellent opportunity to snap up value stocks at lower prices and hold them for a long time.

As famed billionaire investor Warren Buffett once said: “If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes.”