5 things the stock market taught me in the last 5 years

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At the end of 2019, stock markets were higher S&P 500 The index continued setting new highs through mid-February 2020. Then Covid-19 hit the world, causing stock prices to collapse.

By March 20, 2020, US and UK markets had fallen by 35% due to growing fears of a global pandemic. Happily, the world bounced back and when effective vaccines were announced in November 2020, stock prices soared.

five years full of ups and downs

Since this may be my last silly article, I'll share what has led to my stock-market success over the past half decade.

1. Sometimes caution pays

In late 2019, my wife asked what to do with our family portfolio. I replied that we should sell everything and invest 100% in cash.

Pundits claim that this 'market timing' is a bad idea. However, my wife put 50% of our assets in cash, thus avoiding the worst of the recession of spring 2020.

2. Market crashes provide great opportunities

On March 20, 2020 – 2020 market low – I was very excited. With stock prices falling, I felt like a kid in a sweet shop surrounded by bargain hunters.

Within days, 100% of our wealth was invested in stocks, which have grown tremendously since then. This is another example of how our market timing works.

3. Madness can be contagious

During the 'meme-stock madness' of early 2021, retail investors rushed to buy shares in otherwise ailing companies, which soon became a mob mentality.

Various beaten-down stocks skyrocketed, company valuations soared to wild levels out of touch with economic reality. When these meme stocks essentially came back down to earth, some wild investors lost everything. Luckily, I escaped this stupidity.

4. Bargaining still works

At the end of 2021, US stocks reached all-time highs, led by mega-cap tech stocks. At the time, I repeatedly argued that they were overvalued and ready to collapse.

Within 10 months, the S&P 500 fell more than 25%, giving back nearly two years of gains. At this point, my wife and I bought six mega-cap US stocks at cheap prices on November 3, 2022.

Year to date, the 'worst' of these bargain US stocks are down more than 50%, while many have almost doubled. This showed me that I could identify and buy growth stocks using value-investing techniques.

5. British bargains abound

FTSE 100 There is a 9.1% increase to 2024, yet I see Footsie offering bargains galore. For example, Legal and General Group (LSE:LGEN) shares, which offer one of the highest dividend yields on the London Stock Exchange.

Founded in 1836, L&G is one of Europe's top asset managers, looking after £1.3trn of assets for 10 million clients. On Friday (May 10), L&G shares closed at 248.6p, valuing the insurance and investment firm at £14.9bn. In one year, the stock has risen 10%, but in five years its value has declined 8.3%.

Over the last year, shares have ranged from a low of 203.1p on October 25, 2023 to a high of 259.6p on January 31. They appear to be somewhat 'ranged', but I have high hopes of a breakout to send them higher.

Meanwhile, my wife and I hold this stock for its passive income, which is currently yielding 8.2% per year. Of course, this payout could fall if stock markets drop again, as they did in 2020. But we are playing a long game!

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