Get Started Here!

3 Important Investing Lessons You Need to Learn from the Corona Bull Market

It’s official. We are now in a bull market. On August 21, 2020, the S&P 500 finished at a new high, beating its previous high in February 2020. So if our bear market was the Corona Bear, I guess we are now experiencing the Corona Bull market.

Less than six months ago, panic was rampant that the market would never recover. Senators were selling their stocks along with millions others. Talking heads weren’t sure that the market would ever recover.

corona bear corona bull market
Don’t let the bear scare you

COVID is still very much a part of our daily lives. That much has not changed. Sure, businesses have slowly reopened, but to nowhere near a normal pre-COVID level. But here we are, with the stock market back at an all time high.

This was my first bear market. Actually, I invested directly into the first bear market with my investments after I began my financial education. I certainly learned a lot from it.

Corona Bull Market Lesson #1: Do not try to time the market

Let me say it again.

Do NOT try to time the market.

What happened to all of those people and senators who sold their stocks once the market started going down. Well, they sold low.

And what happened when they tried to buy back in once the market started going up. You guessed it…they bought high.

The goal of investing is to buy low and sell high. They managed to do the exact opposite of that. Foolhardedly, they thought they could predict when the market would hit rock bottom and start going back up. They thought they could time the market.

They could not.

That’s why when everyone was mad at the politicians allegedly using inside information to get out of the market, I was laughing at them. They were breaking investment rule #1.

Those of us who stood steady, weathered the storm, and continued to approximate the market average with index funds once again came out on top. If there was ever a reminder that timing the market is impossible, this was it.

Create a written investment plan with an asset allocation titrated to your risk tolerance. Buy low-cost, broadly diversified index funds according to that asset allocation. Rebalance once a year. And do nothing else.

It’s that simple.

Cornona Bull Market Lesson #2: Buy stocks when they are on sale

I learned this one surreptitiously.

My financial enlightenment came right about at the beginning of COVID. A few weeks after I started reading The White Coat Investor, New York City went on lock down and the market plunged. Most people were pulling their money out of the stock market and into their bank accounts or money market funds.

I, on the other hand, had been keeping any savings (that I was smart enough not to spend) in a low yield savings account. I knew that I would not need this money for at least 20 years. Even though it was not a lot, I wanted to invest it better. Plus, if I’m being honest, I was really excited about putting all my newfound knowledge into action.

So, I put all not immediately needed savings into a Roth IRA with Vanguard. All of my kids’ savings were put in 529 investment accounts instead of a high-yield savings account with Ally Bank. My asset allocation called for 80% stocks. So I bought at least 80% stocks.

I knew that stocks were down. I knew that I could not predict if they would go further down. Also, I knew that in the long-run, the smart money was on them going up. So I ignored the outside noise and bought according to my plan.

What happened?

The stock market went down a bit more. But then it went up. And now it is at an all time high – we are in the Corona Bull market. Those stocks that I bought at the nadir of the market are now worth a lot more. My investments increased by more than 50% (keep in mind, they were not huge investments to begin with).

I had bought stocks when the prices were low, when they were on sale because everyone else was selling. I didn’t try to predict the future with my crystal ball. Instead, I just stuck to my plan.

Lesson learned. Don’t be afraid to buy in a down market. A bear market is actually where you will make the most money.

Corona Bull Market Lesson #3: Ignorance is bliss (in this one, very specific circumstance)

For the first week after I made my new investments in the stock market, I couldn’t help but check the market all the time. Even though I knew that index fund prices don’t close until 4 PM EST, I would check throughout the day. But I still checked.

When things were up, I had a bit of a bounce in my step. When things were down, I was a bit bummed. Even though I knew that I wasn’t going to change my plan or do anything. Even though I knew I was investing for the long term, which was a good bet with low risk.

I think this is just human nature. We want anything that we are involved in to be successful at all times. Even a small temporary set back bums us out despite knowing that long-term success is what we are after.

Once I became aware of these feelings, I weaned myself. First, I just checked once a day after market closing at 4 PM. Then I stopped checking at all. To be honest, I didn’t even realize the market had hit a new high until I heard it from someone else.

I became a lot more happy when I stopped checking. I also felt less anxious about my investments and my money. My plan was always in place but I was micro dissecting things nonetheless.

When you are investing the right way – with low cost, broadly diversified index funds according to your written plan – ignorance is actually bliss. Just remember to rebalance at least once a year.

Another feather in the cap of John Bogle

For the uninitiated, John Bogle founded Vanguard. He was the father of index fund investing. He championed staying the course and approximately the market instead of trying to time and outsmart it.

He is widely revered and respected by investors. Yet there is still a whole industry on Wall Street trying to convince people that they are smarter than the markets. That they should be paid for their expertise. And then they fail to beat the market 80% of the time. But people continue to pay them.

COVID has shattered a lot of previously held truths. We found that physicians’ salaries are not as secure as we thought they were. We learned that for all of our modern medicine, masks may be our greatest defense against an enemy we cannot see.

But one thing that COVID has proved to be constant is that the market is a safe bet over the long-term, that the market cannot be timed, and that downturns -and, yes, (Corona)bear markets – are a normal part of the cycle.

Don’t be like people.

Be like John Bogle.

What do you think? Did you sell during the CoronaBear? Did you buy stocks when they were down? Has your investing strategy changed as a result of the recent bear and bull markets? Let me know in the comments below!

P.S. If you liked what you read, don’t forget to sign up for the mailing list below (under the comments)!

Learn more about my flagship course!

Love the blog? We have a bunch of ways for you to customize how you follow us!

Join the Prudent Plastic Surgeon Network

And accelerate your path to financial freedom with my free FIRE calculator!

    We won't send you spam. Unsubscribe at any time.

    Join The Prudent Plastic Surgeon Facebook group to interact with like-minded professional seeking financial well-being


    The Prudent Plastic Surgeon

    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected]

    3 thoughts on “3 Important Investing Lessons You Need to Learn from the Corona Bull Market”

    1. dude, I actually taught myself to get pissed when the market goes up! I’ve been very pissed off lately!!! Just like gas prices, when I see them go up, it’s frustrating for me. I was listening to the Money Guy podcast and they call this being a “financial mutuant.” 🙂

      Like Bill Bernstein says, I am praying to the investing gods for a bad bear again. Though I guess it would not be so nice for soon to be and recent retirees.

      Reply
      • Haha the retirees may not be happy if they still have a significant asset allocation in stocks, rather than bonds or other fixed income. But hopefully their financial plan calls for decreasing stocks as they reach retirement age.

        TPPS

        Reply

    Leave a Comment