The number 2020 resonates instantly with the culture of immediacy that we normally associate with T20 cricket. Investing in 2020 amply symbolised that culture. While the successes of 2020 were clear, the rewards of bravery induced risk-taking can’t sustain when time horizons extend. As we move towards an extended time horizon, we may need to adapt, evolve and attempt some serious metamorphosis in our investing.
These extraordinary times call for such a deep change in our investing approaches. We must implement a carefully constructed balance in our overall investment picture and exercise caution. The use of the word caution almost always evokes mixed reactions. The fearful lot associate caution with panic, while the fearless associate it with stupidity, or worse still cowardice. But, caution is a far more powerful instrument in investing than both the fearful and fearless realise. It derives its power from how it is created, how it is applied, and how it is grown. Growing caution is almost always the best way to protect capital, returns, and sanity.
The biggest challenge of 2021 will be how investors create their caution, how they apply it, and how they grow it to play its protective part in their wealth creation. Investors must play this right to ensure this decade is no less productive as the superlative last one.