Motley Fool Money Happy New Year!
Jan 1, 2021
A New Year review of 2020’s market crash and furious recovery. Discussion of why markets outpaced the economy and lessons investors can take forward. Tips on building household balance sheets, finding long-term compounding ideas, and avoiding market timing. A look back at past stock picks, portfolio construction, ETF trade-offs, and where to find useful market data.
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Build A Household Balance Sheet First
- Fortify your household balance sheet before splurging; keep emergency cash and an offset account.
- Scott urges saving some of the pandemic-era surplus and automating regular investments when paid.
Price Stocks By Normalised Earnings Power
- Value stocks on underlying normalised earnings power, not 2020 COVID distortions.
- Scott warns to avoid paying up for firms with one-off COVID bumps like chest-freezer sellers or couch booms.
Economic Downturns Amplify Quality Companies
- Recessions tend to weed out weaker firms and amplify winners' long-term growth.
- Scott notes tougher times favour high-quality businesses that can gain share and compound faster afterward.