The true test of investing skill: how much you have left when the bull market is over

You will never be as smart about money as you are now.

Virtually any financial asset that involves some risk of losing money has been on fire in the past 12 months. You bought bitcoin? You’re a star. Speculative junior stocks on the TSX Venture Exchange? Home run. Dividend-paying bank stocks? Aces. Stuck your neck out to buy a house at the beginning of the pandemic? Well played.

We’ve moved out of the breathless “can you believe this is happening” phase to a point where making tons of money on everything seems normal. But it’s not. We are living through a blip of epic money-making that will be studied for ages to come. A three-part strategy for surviving the end of the boom with your new wealth intact:


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  • Stay humble about your investing acumen.
  • Be selective in whom you take investing advice from.
  • Think about how much of your current wealth you’ll still have when the bull market in everything ends.

We should acknowledge that the huge wealth gains of the past year are built on egregious unfairness. Economic lockdowns have left a lot of people, notably young adults, women and people who work in service-related industries, poorer because of job and income interruptions. The economic lockdowns that hurt the prosperity of some have hugely benefited others by allowing them to save money and focus attention on investing.

And yet, there’s an unusually democratic aspect to the wealth-building that has gone on among those fortunate enough to have jobs and savings. For once, it’s not just boomers and seniors adding layers of wealth to their stock portfolios. Enabled by technology and social media, young adults have been big players, too.

Mock these rookie investors if you like for their impulsive trading habits, but acknowledge their killer instincts in taking advantage of the mega-rally of the past year. Same goes for the young home buyers who looked at their condo walls last spring and ventured out to buy houses in the suburbs and communities beyond. If you judge strictly by the rising value of the assets they bought, they’ve done remarkably well.

Nationally, the average resale house price jumped almost 32 per cent in March, or $172,000, to $716,828 on a year-over-year basis. The TSX Venture Exchange was up about 82 per cent for the 12 months to midweek, while the S&P/TSX 60 index of big blue chips was up about 27 per cent. Bank of Montreal, the best-performing big bank, was up more than 70 per cent.

All credit to the investors who recognized the bargains lying around in plain sight in the past 12 months and bought them. But keep some perspective. This buying opportunity existed because interest rates were chopped to the roots to keep the economy going during the pandemic while governments poured support money to individuals and corporations. The rising tide raised almost all boats, something that rarely happens in investing.

Success in the markets has created a new class of investing experts active on social media, blogs and so forth. Watch out for the ones who act like they’ve got this investing thing figured out – that investing is easy if you just buy this or that stock, fund or asset. The test of credibility on investing is being around and accountable through bear markets as well as the good times.

Watch interest rates for signs of the end for the bull market in everything. Higher rates will weigh on stocks, and it’s worth remembering how cryptocurrency returns closely tracked stocks during the crash of March, 2020. Higher rates will also make the affordability problem in the housing market more acute.

Timing the inevitable peak and downturn for financial assets is basically impossible, so don’t try. Instead, think about your strategy for preserving as much of your current pandemic wealth as you can. Differentiate between what you plan to hold for the long term, riding up and down cycles over the years, and what you might want to sell to lock in gains of the past 12 months. Don’t give up on quality stocks or funds that have lagged flashier investments.

The mark of investing skill isn’t how much you’ve made in the pandemic investing hothouse. It’s how much of your gains you have left when the bull market for everything comes apart.

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