Home / Brand Stories / 4 Lessons the Current Economic Landscape is Teaching Investors

The past year has been rough for investors. Experienced veterans have had their fair share of tough times, but newer investors were hit the hardest, with many taking the market downturn on the chin.

Here are a few lessons that the current economic landscape has quickly and efficiently taught those navigating the turbulent, unpredictable, 21st-century, post-pandemic markets.

1. The Past Doesn’t Predict the Future

The only certainty in investing is the fact that nothing is certain. The CEO of BankBazaar, Adhil Shetty, says in a Times Now News article “The past performance of an investment does not guarantee its future performance. The last two years were unprecedented for investors and the outcomes in the future may also not be the way you would predict."

The financial CEO goes on to offer advice on how investors can navigate this perpetual uncertainty, “You must assess an investment product in the context of the ongoing scenario and invest with a long-term view of your financial goals." This ability to assess investment opportunities in context is critical. It’s also something that new investors, in particular, shouldn’t try to do purely through gut instinct — which leads us to our second lesson.

2. Coaching Is Critical

The investing world is far too big to grasp all at once. You can’t take a Finance 101 class or experiment with your IRA, learn a few things from the experience, and then expect to find success. Good investing habits come through time and experience.

The good news is that investors don’t need to go through the whipsaw patterns of the last two years to learn these lessons firsthand. They can also enlist the advice and knowledge of a mentor to help guide them.

LifestyleInvestor, Justin Donald, points out that you can’t treat a mentor like a kindergarten teacher. You want to learn the basics first. “Begin with books and podcasts," says Donald, “Listen. Build up your health, mind, and skillsets. Change the things in your life that have to be changed to move forward."

The lifestyle finance expert points out that once you have these basics down, it’s time to get a coach, “When you come for coaching sessions for financial help — there is a deep dive into all of your finances and financial decisions. You will need to know and understand your net worth and your passive cash flow. You absolutely must be clear on what you’re looking for and what you want."

The lesson is clear. New investors (and really anyone who hasn’t experienced the current market conditions before) should be willing to flesh out their own knowledge and then seek input from others that they trust.

3. Diversity Isn’t Overhyped

The past few years created quite a few success stories of individuals who “risked it all." These seat-of-the-pants financiers found success by heavily (at times even solely) investing substantial amounts of capital in things like NFTs, Bitcoin, or even Dogecoin.

While alternative investing has its place, the all-or-nothing attitude that many investors have had toward riskier investments of late has been alarming. The lack of diversification is a lesson that many have had to learn the hard way in recent months, as well. 

Yore Oyster founder, Jordan Bishop, reiterated the need for diversity in investing over the summer, saying, “Diversification is by far one of the best ways to shield any investment from economic downturns such as a stock market crash."

Bishop reminds readers of why diversification matters, “The idea behind diversifying your portfolio is that you’re not too reliant on one type of investment but instead spread the risk across several types. That way, if one asset or even an entire asset class performs poorly or even crashes, the rest of the assets are likely to dampen the blow." 

If you’re overly invested in certain areas of the market, it’s important to reassess and readjust regularly to keep your risk spread out.

4. Anyone Can Say Anything

There’s no end to the number of investment options with sky-high potential. And yet, the turbulent economic landscape of the present has revealed how many of these potential investments are so lofty, they’re pie in the sky.

The team at Schwab used the inconsistent nature of S&P 500 valuations late in the summer as an example of this misleading potential. The investment firm added that “Given these measures, it's hard to say stocks are either overvalued or attractively priced." 

The group went on to highlight the uncomfortable truth behind this reading of the data, “The reality is that at any point in the market cycle, bullish and bearish investors can find metrics that suit their outlook on the market." It’s a lesson that many investors are learning the hard way. 

Anyone can make an investment sound both good and bad at any given moment. What’s important is taking a measured, systematic approach to each investment decision that doesn’t allow room for emotional reasoning.

The current economic landscape is riddled with dangers for investors. Despite the uniqueness of the circumstances, though, this isn’t the first time that markets have been unpredictable and dangerous. Nor will it be the last. 

The best thing for investors, both new and experienced, is to learn from each lesson and focus on making the most of each opportunity that arises.

Disclaimer: This article is a paid publication and does not have journalistic/ editorial involvement of Hindustan Times. Hindustan Times does not endorse/ subscribe to the contents of the article/advertisement and/or views expressed herein.

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