Looking back over a year of substantial market volatility, Trustnet asked seven market commentators what key investment lessons they have taken from 2020.
Darius McDermott, FundCalibre – ‘Take a step back, take a deep breath and reassess’
“The one lesson I think we’ve all relearnt this year is that markets can always surprise you,” said FundCalibre managing director, Darius McDermott. 
“It’s always the unknown that catches you off guard – not the problems you’ve ‘foreseen’ and taken action to mitigate – so you always need to be on your toes.”
He said this was the third serious bear market in his career, after the TMT (technology, media & telecommunications) bubble in 1999-2000 and the global financial crisis of 2008.
“This bear market took just four weeks and was driven by a global health crisis which was a completely new experience,” McDermott (pictured) added. “Both the speed and depth of the bear market took your breath away frankly.
“But you had to take a step back, take a deep breath, and calmly re-evaluate each holding: in particular, [ask] was the balance sheet going to be strong enough to see the company through the period of lockdown?”
Austen Robilliard, Murdoch Asset Management – ‘Be aware of what you don’t own’
“My key investment lesson this year is be aware of not only what you do own within your portfolios, but what you don’t own,” said Austen Robilliard, head of investments at Murdoch Asset Management.
“It is easy to look at a portfolio and see areas that are performing well or badly, but risks can arise in unexpected places or in unintentional ways.”
He added: “The first quarter of 2020 was a rather unpleasant experience. We sold out of all open-ended property in September 2019 and invested the proceeds in real assets and fixed interest.”
Robilliard said even though it increased its investment-grade credit exposure still it still underperformed during the sell-off.
“We didn’t protect as well as others because, in hindsight, we weren’t holding enough of the right assets,” he said. “Thankfully, our long-term investment horizon meant we were not under any pressure to make knee-jerk changes and retained our positions - which subsequently recovered.
“However, that quarter was a sobering period and we now have the task of implementing our learned lessons without throwing the proverbial baby out with the bathwater.”
Andy Parsons, The Share Centre – ‘Own different assets’
The Share Centre’s head of investments, Andy Parsons believes the main lesson of from 2020 is the great benefit of owning a well-diversified portfolio.
“It’s important to remember that diversification doesn’t just mean ensuring that your portfolio is not too heavily concentrated in one region or sector, it also means getting exposure to different asset types, such as bonds and property,” he said.
He said the ongoing economic challenges caused by the pandemic and the uncertainty around the UK’s future trading relationship with the EU are more reasons for investors to maintain a good spread of investments.
“That should help to smooth out the bumps along the way, and for those looking to invest now it’s worth drip-feeding into the market over time as that provides the extra benefit of compounding,” said Parsons.
Andrew Johnston, Square Mile – ‘Don’t put all your eggs in one basket’
Andrew Johnson, portfolio manager at Square Mile Investment Consulting and Research, shares a similar view and explained that it remains as important as ever for investment portfolios to be broadly diversified.
“Although stock markets in November surged higher on the wave of euphoria, at the forefront were markets and sectors that had hitherto been neglected and deemed particularly vulnerable in a Covid-afflicted world,” he said. 
Johnson (pictured) noted that while the emergence of effective vaccines offers hope, the crisis is not yet over, and its legacy is a structural and possibly permanent shift in how we live our lives.
“The clear lesson from 2020 is that investors should never have all their eggs in one basket, with exposure to multiple investment styles and themes at all times,” he added. “There is nothing wrong with riding a trend but don’t completely forget other sectors and companies whose fortunes are set to rise again in the future."
Chris Wise, Whinchat Financial Planning – ‘Trust in your convictions’
“If you have belief in your investment process and it is robust, have the discipline to stay with your convictions,” said Chris Wise, managing director at Whinchat Financial Planning.
“The markets will always provide opportunities, and while during this pandemic, many of the textbook and traditional investment theories may seem to have not quite worked, other opportunities will present themselves,” he said.
Wise stressed the importance of sticking to a long-term strategy despite possible short-term losses.
“Be active to the opportunities and ensure that all your investments are performing as you expect, in all conditions,” he said. “This will work for investors over the long-term, alongside a robust investment process.”
Laith Khalaf, AJ Bell – ‘Don’t fight the Fed’
“Despite the pandemic and the extreme economic trauma inflicted across the world, the global stock market reached a record high in 2020, fuelled by the liquidity injections of central banks,” said AJ Bell financial analyst Laith Khalaf.
“‘Don’t fight the Fed’ continues to be the mantra for our times and that liquidity looks set to stay in the system well into next year and monetary policy will be accommodative for some time to come,” he said.
Laith added that in the absence of an inflationary shock, there will be no tightening of monetary policy until the pandemic is clearly under control.
“However, there will come a time when the Fed, and other central banks, will pivot, and start moving in the other direction,” he said. “At which point we should be watchful for a reversal of the market trends that have been in place for the last decade.”
This could extend to growth stocks which may see falling valuations and the equity markets may find money flowing back to bonds, if the rates of return become more attractive.
He finished: “That said, the last 10 years have taught us that before such a scenario starts takes root, another unexpected economic shock can always send central banks racing back to the QE [quantitative easing] cookie jar, resetting markets for more of the same.”
Jason Hollands, Tilney Investment Management Services – ‘Avoid chasing last year’s story’
“The year past has been one of extremes, and from an investment perspective that includes one of the most rapid bear markets in history but also one of the most impressive equity rallies too,” remarked Tilney Investment Management Services’ managing director, Jason Hollands.
He said as investors piled into beneficiaries of the lockdown – such as tech and online retailers – and shunned economically sensitive companies, unsustainable differences in valuations have emerged. 
“My message to investors as we head into 2021 is that they should avoid chasing last year’s story,” said Hollands (pictured). “While the crisis is not year over and economic outlook is challenging, few can doubt the year ahead won’t be better than 2020 which saw the biggest economic shock in 300 years, especially with vaccinations programmes on the horizon.
“Now is the time to position for recovery and that may mean backing very different funds to the ones that triumphed this year.
“In particular, the unloved UK market, the real laggard of 2020 could turn out to be a surprising bright spot in 2021.”