63 Things I Learned About Investing in 2021

Every year, I engage in this exercise of trying to outperform markets. The seemingly impossible, outperforming a market of millions of people, machines, groups, desks, and funds.

My journey of documenting my annual investment insights began in 2016. The process has been immensely important to my growth as an investor. I write down my notes, I follow them, and I try to improve based on them.

2021 was a bizarre year in terms of my sudden outperformance, another year of portfolio all-time highs after my great 2020, but, toward the end, things turned sour. Let’s begin, looking at my most important lessons of the year:

Portfolio Showboating: Excessive sharing of portfolio gains is often a red flag.
Intellectual Humility: Accept that markets will always humble you no matter what so stay humble.
Overconfidence is a red flag: Always step back, analyze the situation in great detail, whenever you sense overconfidence in markets from you or the people around you.
The importance of long-term thinking: You must always maintain a long-term perspective when it comes to both life and financial markets, as short-term fluctuations are almost always misleading or inconsequential no matter how important they feel in the moment.
The value of personal growth: Euphoric markets are less so a time to investing everything, and more-so a time to explore personal career capabilities, searching for the perfect job, growing one’s career path or seizing the moment in work.
The Internet vs. Reality: It’s easy to make anything sound interesting on the internet, bearish or alarmist. Don’t let these things impact your decision-making.
Social Media Balance: My social feed is what catapulted my portfolio in 2020 and early 2021, but it was also my downfall in the second half of 2021. This was a reminder at how important it is hone and curate one’s social feed at all times, removing noise and things that don’t seem right.
Life Balance: I say this every year, but I am working toward it over and over again, and that’s focusing on a better life outside the screen, off the computer, away from markets. I live and grew up in the digital age and as I age I am sensing it more than even.
Morning Routine: As I age, I am realizing the importance of a morning routine. For the first time I can feel the difference in having a big breakfast with a coffee vs. a light breakfast and a small coffee. The mind is sharper when it’s nourished, but not too much. Every trader/investor needs this.
The role of emotions in investing: If emotions ever govern your investing or trading, you will lose. I am still trying to fix this, you would be surprised how long this habit sticks around, many traders are doing this daily and should stop immediately.
Market resilience: Despite the challenges of the year in headlines and a post-Covid world, the S&P 500 and Nasdaq-100 showed remarkable resilience, with both indices posting impressive gains (26% and 25% respectively).
Housing booms: I am always reminded that many bull markets are simply built on people’s house values going up.
Don’t fight the Fed: The Federal Reserve’s projection of the unemployment rate returning to 4.5% in 2021 showcased the potential for economic recovery and job growth following the pandemic.
Don’t fight the Fed part 2: It is simply remarkable to me how much money could have been made the last decade by just reading the Fed Minutes and listening to them.
Don’t fight the Fed part 3: If you’re American, they are on your team. Stop listening to people who try to make them out to be bad.
Small Cap Volatility: Accepting the inherent volatility in small-cap stocks.
Small Cap Bearishness: Accepting the inherent bearishness in small-cap stocks is a matter of fact, especially whereby shorts can pounce on a small cap and crush it much easier than an “Apple” or “Amazon” which have relentless bids.
Small Cap Opportunity: Warren Buffett once said that if he had less money, he would make a fortune in small caps. This is the reality, especially in two points above, that small caps are the most volatile, the hardest to trade, but also offer the largest rewards if done correctly, if “discovered” and followed in the correct fashion. Keep in mind: the odds are against you.
Investment Simplicity: Sometimes, the best strategy is to not overcomplicate things.
Investment Enjoyment: Ensure you find joy and passion in your investment process.
Company Affinity: Investing in companies you admire can make the journey more rewarding. Even better is invest in companies whereby you actually use their products.
Company Knowledge: When you invest in companies you already know or use, you technically get paid each time you use that product. You are paying yourself while researching the company.
Buying companies you don’t know: When you invest in companies you don’t know, you have to do far much research and analysis to understand what they actually are. Oftentimes, this is how you know you actually made a bad investment.
Balancing Fundamentals: Integrating fundamental and technical analysis strengthens investment decisions.
Coordinated Market Moves: Understanding that many market moves are premeditated can inform your strategy.
Scheming Realization: Recognizing that markets are filled with schemes can sharpen your discernment.
Technological Appreciation: Embrace and leverage technology for its vast potential to inform and empower.
Time Reflections: Contemplating time’s influence can provide unique perspectives on investing and life.
Informational Renaissance: Recognize and utilize the unprecedented access to information we have today.
Trust’s Value: Building and maintaining trust is foundational in all aspects of life, including investing.
Effort and Passion: Your dedication and enthusiasm can be more valuable than titles or accolades.
Mental Athleticism: Embrace the mental strategies from sports to enhance your trading discipline.
Philosophical Exploration: Integrating philosophy into your approach can enrich your investment perspective.
Historical Wisdom: Draw on historical insights, like those from Thucydides, to inform your worldview.
Email Insights: Cherish wisdom shared through communications, like insightful emails from mentors.
Diversified Learning: Broaden your knowledge base beyond finance to enhance your cognitive flexibility.
Market Dynamics: Recognize and adapt to the ever-changing dynamics of the financial markets.
Emotional Resilience: Developing resilience against market ups and downs is crucial.
Strategic Adaptation: Be ready to adapt your strategies in response to market shifts.
Continuous Education: Commit to lifelong learning to stay ahead in the evolving market landscape.
Networking Value: Cultivate a network of trusted advisors and peers for diverse perspectives.
Decision-making Calm: Strive to maintain emotional composure in all trading decisions.
Guru Skepticism: Be wary of following “guru” advice blindly, especially regarding market shorts.
The rise of new trends and opportunities: If you’re going to follow trends, you need to get on them early. NFTs in 2021 were exactly this. If you were early, you did great. If you were late, you lost.
New technology cycles: Crypto, NFTs, the metaverse, and Web 3.0 all boomed in 2021, and while that may have been a bubble in hindsight, it is generally still the precursor that such events lead to something larger a decade from now.
Don’t ignore new tech: New tech is often exciting and goes viral, but keep in mind that most people don’t understand the tech. Inherently, it excites people, like NFTs, but the excitement is almost always years before the actual fundamental value.
The role of humor and irony in life: Markets are generally very ironic.
The importance of staying informed: You want to know what people are talking about most so that you know what to avoid and not get caught in the middle of.
The role of government assistance: I’ve come to realize that the last decade of bull markets has been greatly supported by government backstops.
Tilt Awareness: Recognizing when you’re on ’tilt’—an emotional state affecting decision-making—is vital.
Avoid FOMO Trading: Trading based on the fear of missing out can lead to poor decisions.
Understanding Tilt: Acknowledge that going on tilt can significantly impair your trading performance.
Gamblers vs. Traders: Recognizing the fine line between gambling and trading is crucial for risk management.
Risk Management Primacy: Prioritizing risk management protects against catastrophic losses.
Wash Trade Awareness: Understanding wash sales can prevent unintended tax consequences.
Tax Education: Grasping the nuances of trading taxes can save you money and headaches.
Capital Loss Carryovers: Utilizing capital loss carryovers can mitigate future tax liabilities.
Short vs. Long Term Gains: Know the tax implications of short-term vs. long-term capital gains.
Market Humility: Even in successful years, the market can humble you quickly.
Day Trading Dangers: The allure of day trading can be deceptive and perilous.
Market Bravado Warnings: Skepticism is warranted when everyone flaunts their gains.
Market Influence Misconceptions: Social media alone doesn’t drive market movements.
Market Timing Skepticism: Be cautious of attempting to time the market perfectly.
Long-Term Perspective: Focus on long-term goals to navigate through market volatility.
Ethical Investing: Consider the ethical implications of your investment choices.
Market Research: Dedicate time to thorough market research to inform your strategies.
Trend Awareness: Stay informed of broader market trends and how they may impact your portfolio.
Investor Identity: Understand your unique investor profile to tailor your approach effectively.
Market Preparedness: Always be prepared for unexpected market movements or corrections.
Portfolio Review: Regularly review and adjust your portfolio to align with your investment goals.
Risk Tolerance Understanding: Clearly define your risk tolerance to guide your investment decisions.
The power of the crowd: The GameStop saga demonstrated the power of collective action and the potential impact of retail investors on the stock market. Don’t underestimate them ever again.
The power of the crowd is bearish and bullish: I would say that it’s usually a contrarian signal to be on the side of retail investors, especially you sense that they are pumping something across social media. However, when they are bullish and right, it is explosive, like GameStop.

I hope you enjoyed these lessons! More to come.