What we’ve learned in 2020

It’s no exaggeration to say that 2020 has been one of the strangest years any of us have lived through.

Your liberties have been curtailed for months as we observed strict lockdown and social distancing measures. You may have worked from home, been furloughed, or spent months struggling to keep your business afloat. And, you may have felt the impact of coronavirus personally, or through the ill health of loved ones.

In such an uncertain, unpredictable, and volatile year, we have learned plenty of lessons – particularly when it comes to our finances. Here’s a look back at what we have learned from an unprecedented few months.

Economies have recovered from previous epidemics

Coronavirus plunged global economies into some of the worst recessions on record. Stock markets fell sharply (although many have since recovered), unemployment has risen, and the impact to GDP has been severe.

However, early in 2020, Charles Schwab produced a report looking at the performance of world stock markets during the period of previous disease outbreaks including Avian Flu, Ebola and SARS.

Their conclusion was simple: “While there is always the chance that the next outbreak could have greater consequences, the global economy and markets have been relatively immune to the effects of past viral epidemics – even when the global economy was especially vulnerable to a shock.”

Investors have to tune out the noise

During periods of volatility, doing nothing can seem like the worst choice. Headlines about economic catastrophe are worrying at any time, and it’s only natural you’d be concerned about the performance of your own savings, investments, and pensions.

However, often it’s the investors that can tune out the noise and look beyond the headlines that prosper.

Out of 120 years of UK stock market performance (from 1900 onwards), 103 of those years were positive. In other words, the UK stock market increased 85% of the time. The average Bull period lasted 7.9 years and the average Bear period lasted 1.3 years.

Historically, much of the recovery has come at the front end of the next bull market. Which is why we don’t sell – unless we absolutely have to and why we should buy more – if we can.

Back in April we said: “In this very challenging and uncertain environment, I recommend we hold steady. Tune out the noise, focus on your long-term goals and let the benefits of diversification play out.”

Emotional decisions can harm our long-term plans

Humans feel the pain of losses twice as strongly as the pleasure of gains. We follow the crowd, overestimate our own intellect, and prefer things we can understand easily.

All these psychological traits and emotional biases can lead us to make knee-jerk decisions – often when it comes to our finances – that can damage our long-term goals. We looked at seven such biases earlier this year.

If an unpredictable 2020 has taught us anything, it’s that we need to be aware of our brain chemistry and acknowledge these biases exist. It’s also reinforced the need for a sounding board when it comes to making financial decisions, and the benefits of having a trusted financial planner as a partner.

2020 has given us the opportunity to do many things

While our liberties may have been curtailed during lockdown, 2020 has given many of us the opportunity to do things we’d been wanting to do for years.

Whether you’ve taken up baking or gardening, learned a foreign language or musical instrument, or you’ve simply enjoyed more time with your family, there have been plenty of positives to come out of this unusual year.

From cycling to reconnecting with old friends, 2020 has given us the chance to do things differently. For example, here are 38 things our team got up to during lockdown.

Thinking differently about retirement

What did you miss during lockdown? The chances are that it wasn’t material goods but spending time with loved ones and creating memorable experiences. These are also the things in life that we will regret not being able to do when, through old age, we can no longer do them.

2020 might have got you thinking differently about your retirement. On one hand, you may have had a glimpse into what your life might be like and you’ve decided you’re not ready for that step. Perhaps you haven’t enjoyed having time on your hands, and you want to keep busy by working?

Conversely, lockdown may have accelerated your desire to retire. Indeed, research from Aegon found that one in eight (12%) of those aged 55 and over, who before the coronavirus pandemic hadn’t accessed their pension, have now done so. A further 8% have considered this option.

Whether you are thinking of working longer or retiring earlier, it’s time to speak to us if your plans have changed.

Lockdown and retirement – why it’s time to think differently

Tax changes are on the way

Over the last few months, the government has provided unprecedented support to the economy. Hundreds of billions of pounds has been borrowed to fund everything from the furlough scheme to PPE for key workers.

In time, it’s likely that taxes will have to rise to fill the black hole in the public purse. Earlier this year we looked at the parallels between 2020 and the end of World War Two, and we’ve also highlighted some steps you can take now ahead of any potential tax changes.

2020 at BlueSKY

Along with many millions of others, we’ve also had to work differently in 2020. Working from home and meeting clients by video conferencing has been a change we’ve all adapted to, but we’re proud of the progress we’ve continued to make during 2020.

Earlier in the year, we looked at the BlueSKY investment theory which believes that the best way to achieve investment success is to hold a broadly diversified portfolio of UK and global assets for the long term. We found that our approach works – and we had the figures to prove it!

We also explained why we believe keeping BlueSKY under the control of our management team and not external shareholders is the best thing for our clients.

In 2020 we have also been nominated for a prestigious financial planning award, taken on not one, but two new team members, and spent the year raising money for our chosen charity, MIND.

From a towering sunflower challenge to our famous Christmas Quiz (and here are the answers!), we’ve so far raised 105% of our target. Thanks to everyone that has supported our efforts – and you can still make a donation.

Finally, we asked our clients what their experiences of working with us this year have been. While it’s easy for us to tell you what a great firm we are, hearing it from the people we work with directly highlights the enormous benefits clients get from BlueSKY. Here’s what they told us.

Get in touch

If 2021 is the year when you finally decide to get on top of your finances, we can help. Email info@blueskyifas.co.uk or call us on 01189 876655.