Q1 2021 Commentary…
2020 was a year full of alarming statistics. One you maybe didn’t hear was that over 10 million new brokerage accounts were opened by first-time investors in just the United States alone! This influx was the result of three things: stimulus checks, a pandemic-induced market selloff, and the elimination of trading commissions at brokerage firms such as Schwab, TD Ameritrade, and Robinhood.

2020 created a perfect storm to attract more individuals to invest, which is a great thing for market efficiency and liquidity. The dangerous part of this perfect storm is that many younger, new investors have not yet experienced a significant market crash, as most of this new money came into the stock market during its recovery. Significant gains were created by and for investors who were willing to take on the risk of buying assets some maybe didn’t even fully understand. New money was piling into SPACs, Bitcoin, LIDAR stocks, to name a few. (If these terms don’t ring a bell, it’s okay. We got you covered.)

In client accounts that could afford to take the risk, we benefited from the irrational exuberance of many of these first-time investors. In fact, we rode some of the waves they created. However, we know the tide can go out just as fast as it comes in, and as asset managers, we have to have a game plan in place for when markets aren’t turning up all roses. Discipline is often what marks the difference between casual, DIY investors and those of us who do this for a living in times like these.