2020 looks like it could go down in history as the worst intra-year drawdown that finished the year with a positive return. And the fact that those gains are now in double-digit territory is not something many (any?) people saw coming. The S&P 500 Index is now up well over 60% since bottoming in late-March.

Although the 2020 stock market is something of an outlier, it’s not out of the ordinary for stocks to see gains on the year despite large losses on the way to those gains.

Timing the market is hard for a plethora of reasons. Markets are right more often than people give them credit for. The direction of the stock market is impossible to predict in the short term. And, even if you get lucky by getting out at the right time, you still have to get back in at some point. Market timing requires being right more than once.

Three reasons to own bonds:

1. Bonds Tend to Rise When Stocks Fall
2. Bonds Can Provide Added Return Through Rebalancing
3. There Is No Alternative

The stock market has been all over the map this year. And, while 2020 is an outlier in terms of the wild ups and downs, volatility is something every investor is going to have to get used to in the coming years. You simply have to be willing to accept some form of volatility if you would like to earn anything on your capital.Volatility has always been part of the markets, but more so now than at any other time in history because interest rates are on the floor.

There are simply too many unknowns and outside factors that can impact the economy, markets, sectors, and companies to ever give yourself permission to have complete certainty about the future.

Sure, strong opinions are fine, but they better be weakly held because the markets are a humbling place if you’re not willing to look at both sides of an argument.

If you’re not a short-term trader, then you’ll see that all-time highs are nothing to fear. Returns are actually higher 6, 12, and 24 months out. This isn’t a shocking revelation. Rising prices attracts buyers, it’s that simple. All-time highs are not an all-clear signal, no such thing exists. But neither are they a sign that the rug is about to be pulled.

Emerging markets are starting to look more like the S&P 500^® Index over time. Eventually, that should be a good thing for investors in these volatile markets

There are no easy answers, but the only sound advice when dealing with irreducible uncertainty about the future is to focus on what you can control.

There are no easy answers when it comes to finding income in your portfolio these days. While it would be nice if retirees had the option of stashing their cash in a money market earning 5%, we have to invest in the markets as they are, not as we desire them to be. So today you pays your money and you takes your choice.

2020 is teaching investors a lesson that should be apparent to all of us who watch the market closely: it is full of surprises. The best way to plan for surprises is to be ready for a wide range of outcomes.

Everything is working.

Whether you’re an equity investor, hiding out in bonds, or waiting for the dollar to collapse, you’re making money.

The permanent portfolio, which is an equal-weighting of everything from stocks to bonds, gold, and cash, just had its best run in 40 years!

Rates are low for a reason. “Safe” bond yields at these levels are bound to have unintended consequences. Here are some thoughts on what this means for investors:
1. Savers shouldn’t expect much.
2. Borrowers are getting help.
3. Investible assets have to go somewhere.
4. Historical valuation tools will be harder to use.
5. Mini booms and busts may be here to stay.

“It depends” isn’t the advice most people want to hear when it comes to their finances or career or really any big life decision, but the world is rarely black or white when it comes to decision making under uncertainty.

Individual stocks are often more confusing than the market itself and can lead to some contradictory outcomes, depending on your time horizon and which types of stocks you’re looking at.

2020 is unprecedented for the number of times people have called it unprecedented. This year certainly is unique. But stock market volatility is not.

The reasons change but big moves in the stock market are nothing new.

Is the traditional 60%/40% portfolio a thing of the past?

The stock market bottomed three months ago. In the 65 trading days since, the S&P 500 Index gained 41%, the strongest move off a bear market low in the history of the Index.

Not yet but it’s getting close.

This year has 3 of the worst 25 losses and 2 of the 25 biggest gains for the S&P 500 Index since 1928.

We feel losses harder than the we feel joy from an equivalent gain, so in order to protect ourselves from pain, we want to know all the things that can go wrong.

Investing is a game of endurance, with the biggest gains accruing to those who can most withstand the pain.

If you lived under a rock in 2020 and didn’t pay attention to what was going on around you, simply looking at the performance number of the overall market would make you think things have been relatively boring this year.

2020 is a case study in the power of simplicity when it comes to portfolio management and investment decisions.

There have been two massive moves in the stock market this year (and this year is still not even halfway over). Once you start digging into the historical numbers, you begin to realize the stock market is even crazier than advertised. Surprisingly, huge up and down moves happening in the same year is not that out of the ordinary.

It feels like we’ve already lived through 3 different cycles that would normally take place over the course of a number of years and 2020 hasn’t even reached the halfway point yet.

You have to account for luck in the investment process. No one can prepare for good luck, but there are ways to manage bad luck. Diversification is one of the best tools available to avoid allowing bad luck to give you extreme outcomes at the worst times.

Fundamentals are more complex than they seem. One of the simplest, yet most overlooked, stock market fundamentals is the dividend yield. Dividends also happen to be one of the most resilient features of the stock market over the long-term.

The history of the markets shows nothing lasts forever. Investors have been waiting years for the biggest stocks in the stock market to falter and they’ve done just the opposite.

One hard part about investing during such highly volatile periods is you can talk yourself into just about any scenario. Sometimes these huge bounces are the real thing. Other times they’re a mirage. By studying historical downtrends and volatile markets, we learn that they tend to open you up to a wider range of outcomes, both to the downside and the upside.

Which portfolio is right for you? The one that you can stick to. And to find the portfolio that you can stick to, you have to have some idea for the amount of risk you are willing to bear.

Maybe people are over complicating things when it comes to looking for reasons the market has been so resilient during this crisis. What if interest rates are the Occam’s razor here?

If you want to earn higher returns, you have to be willing to accept more volatility and higher losses. And, if you want to see less volatility and shallower losses, you will have to accept lower returns. Risk and rewards are still attached at the hip. Investors just have to get used to the fact that the rewards are going to be lower than they were in the past for a while.

Diversification doesn’t always work perfectly, but the track record suggests it’s pretty hard to beat in terms of both portfolio growth and risk management.

The stock market can be one of the most confusing places on earth. The worst thing you could do in an investing environment like this is assume there is only a singular path forward. The second worst thing you could do is assume you know exactly what that path is. The market is likely to continue confounding investors of all shapes and sizes so it’s best to keep an open mind from here.

Lucky or good, sitting in cash is not a horrible position to be in, but it does present its own set of challenges. The thing you absolutely don’t want to do is become so attached to your cash that you never get back in. Cash is comfortable in a bear market, but if you get stuck there, you will regret it someday. Remember: no one perfectly times these decisions.

The old saying is stocks take the stairs up but the elevator down. In bear markets, however, the elevator seems to go in both directions.

There are no ironclad rules when it comes to investing. Everything has a caveat or exception. But the closest thing to an ironclad rule is that risk and reward are attached at the hip. You can’t expect to earn higher returns without accepting higher risk in one form or another. And, you can’t expect lower risk in one form or another without accepting lower returns.

People in the same investments can have very different experiences.

If you’ve been investing since the '90s, you have now seen your third big market downturn. If you started any time in the last 10 years, you can now say you know what it feels like to be in a bear market, but only sort of.

Buying too early means you could experience some pain if stocks continue to fall further. Buying too late means you could experience some pain if stocks have already bounced.

The stock market is the ultimate place for regret because there is always reason to second-guess your decisions. But this only really matters for people who concern themselves with the short term.

The retirement contributions you make into the stock market during a market crash will invariably be the best purchases you ever make, especially when you are still relatively young.

Making economic or market comparisons to the Great Depression is almost always ridiculous…until now, that is. The daily price swings we’ve seen in the last month were beginning to rival what happened during the 1929-1932 period. The worst 10 daily returns since the late 1920s are dominated by the Great Depression, 1987, the Great Financial Crisis, and this month.

A portfolio rebalance is simply the act of returning to your pre-determined asset allocation. For most people, this involves at least two asset classes, with an infinite way to slice and dice the portfolio.

The stock market can move hard and fast in both a dead cat bounce AND a bear market bottom. The true nature of these bounces will only be known in hindsight.

If you want higher returns, you must accept a higher probability of large losses or other unforeseen risks. And, if you want to dampen large losses, you must accept the prospect of lower returns. There is no stronger relationship in all of investing than risk and reward. And the whole point of asset allocation is calibrating your personal risk profile with your portfolio holdings.

You’ll never buy at the exact bottom. That’s not how these things work. You’ll either be early or late but trying to pick when that bottom will come is a fool’s errand. Perfect is the enemy of good when putting money to work during a sell-off.

Will you invest at the absolute bottom? Not unless you’re ridiculously lucky. But the point remains that the bigger the losses, the higher the expected returns. This feels like an awful time to buy stocks. That’s usually a good sign.

“When is the right time to buy stocks?” Everybody who has ever invested during our darkest days has ultimately been rewarded. There’s no reason to think this time is different.

Every bear market in the history of U.S. stocks has led to new all-time highs at some point in the future. Is it possible this time is different? Sure, anything is possible. I choose to believe things will be better in the future.

Buy low, sell high. Even if you know nothing about investing, you’ve heard this phrase before. With the S&P 500^® Index off its highs, investors have an opportunity to execute on the first half of that statement. As stocks decline, they become more dangerous in the short-run but more attractive over the long-run.

The stock market is in the midst of a correction. Things look bleak and could certainly get worse. But, the stock market will recover eventually. I’m far more worried about the bond market right now than the stock market.

Bear markets are nothing new, but what makes this current edition especially painful is the speed at which it’s taken place.

When stocks go down in a big way, it’s more helpful to seek out the right questions as opposed to trying to find all of the answers. There are no right or wrong answers here because it all depends on your circumstances.

A decline early in your retirement can have a big impact on the value of your nest egg. You’d have to draw down a larger portion of your portfolio to meet your income needs, while a decline that occurs later might be less hazardous to your wealth.