Well, it's officially been one year since the bottom of the coronavirus-induced market crash that defined investing in 2020. This time last year, the markets were in freefall over fears of a global economic wipeout. It was a day of panic, to say the least. We saw shares drop to unthinkable lows. Of course, that was before the US Federal Reserve came to the rescue and promised 'whatever it took' to get the financial markets moving again. That came in the form of massive, unprecedented quantitative easing (QE) programs which, surprise surprise, worked to allay investors' fears. The S&P/ASX 200 Index (ASX: XJO) is today (at the time of writing) up 48.97% over the past 12 months.
So in the 12 months since, what have we learned? That a market crash is usually never the time to sell an ASX share, that's what.
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Lessons from an ASX 200 crash
This morning, we looked at some of the best performing ASX shares over the past year. All of them found dramatically low bottoms on 23 March 2020. And all of them have recovered and gone on to reach new all-time highs.
Fear is a powerful and insidious emotion we investors have to constantly battle. At no time was this more evident than it was a year ago. I'm sure there are still investors out there who sold everything in mid-March 2020 and are still waiting for the second dip to come along so they can rectify their mistake.
But selling your shares just because others are panic selling almost never works out well. When you buy a slice of a business, you should be buying for the long-term. Part of every investment decision should be assessing your company's ability to weather a black swan event. Now no one could have foreseen a global pandemic – a bonafide black swan if there ever was one. But the best companies fix their roofs when the sun is shining. That was evident in March of last year.
The bottom line is that most investors who sold out of their shares in March had a terrible 2020. Most of those who held on, or as Warren Buffett would say, were greedy when others were fearful, did magnificently.
At the end of the day, the ASX share market has been through a lot. Two world wars, the great depression, a couple of other wars, the dot-com crash, the global financial crisis, and now a global pandemic. It has always pulled through and gone on to make new all-time highs. And ASX shares go up far more than they go down. This lesson isn't new, but on this anniversary, it is worth keeping in mind.
