You Can’t Ride Every Coaster

January 11, 2021 | Sam Rook


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The stocks you miss

I’ve been through some pretty wild years in my career. I remember the beginning of the Financial Crisis when one day the TSX was down 11% and then 3 days later it was up 10%. I remember the palpable fear that just kept building as the sheer size of the problem grew almost daily. It was a time I knew I would never forget. What I learned from mid-2007 to early 2009 was formative in my career and how I manage investments for my clients.

 

I hoped to never relive something like that again.

 

Then 2020 happened.

 

I don’t need to rehash it because we all were there, living it. Surviving it. The lessons of the 2007-2009 period stood up well, especially in February and March when stocks went from record highs to down 30% in the blink of an eye. We kept our composure. We kept people invested and sticking to their goals even as they were fearful for their money AND their health.

 

Then something I never would have expected to happen, did happen. In the blink of an eye, the markets recovered. It took until mid-August but the S&P 500 hit new highs while the entire world was still suffering from the raging pandemic. The second wave hadn’t even hit us yet, but less than 5 months after bottoming on March 23rd, the stock market acted as if the pandemic didn’t exist.

 

Central banks across the world went back to cutting interest rates and/or starting more monetary supports. Behind that stood fiscal support (C.R.E.A.M. as the famous song would call it) from governments trying to pour cash into every crack to make things hold steady. If you’re wondering what caused such a sharp stock market turnaround, these two actions are a very good starting point.

 

But there is always something to be learned about ourselves and how we manage money when times of stress and duress happen. Here is the lesson I have taken from this: You don’t need to have every high performing investment to get good results.

 

This is the stock that I learned that lesson with.

If you want the full details, in ONE YEAR, Tesla stock has gained almost 800%. At the bottom of the market in March, it was trading under $80 a share and it’s now $800 per share. In industry terms that’s a 10X and all in less than a year. Tesla isn’t a small company that no one knows about. It’s THE most well-known electric car maker right now. To see this happen to a well-known stock can lead to a lot of calls from people suffering from FOMO.

 

But a funny thing happened while all this was going on. I had zero calls from people asking about Tesla shares. It came up in conversation but it was never serious. Normally, when a stock goes from $80 to $800 people tend to notice and start calling.


You would think that not having Tesla as part of my investment portfolios would have resulted in below-target returns for 2020. That isn’t the case at all. I would have loved to have a position that gained 800% in a year but in the end, the returns in 2020 were above our target levels for nearly everyone without owning a single share of Tesla. So, people didn't call because they were already doing well.

 

Why was that you ask? Because while Tesla had an outstanding year of performance, plenty of other stocks had great years too. It was a reminder that while it’s called the stock market, it’s actually a market of a bunch of different stocks. You don’t need to have the best performers in a given year to reach your goals. You only need to have a few that are doing really well and to avoid as many of the bad ones as possible.

 

Trying to buy the best performing stock every year is an almost impossible task for anyone to do. Think I am wrong? Tell me, would you have bought shares of Tupperware Brands at the end of March? You know, Tupperware Brands, that high-flying exciting stock of the Eighties. Your parents probably even had their friends over to your house to buy the latest in plastic food storage technology and called it a “party”. Hardly a stock that many of you even knew was still trading, and yet Tupperware Brands' stock TRIPLED the returns of Tesla from the market bottom in March. Who saw that coming?

You aren’t lamenting missing out on Tupperware, so don’t bother lamenting missing out on Tesla. If your returns worked to help you meet your planning goals then that’s all that matters. If they didn’t…well, you know how to reach me.

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