Talking about Investing at the Thanksgiving Table

There will be a lot of empty seats at Thanksgiving tables this year. Staying close to home is in fashion this holiday season, and—because of the pandemic—people are limiting their Thanksgiving celebrations to only their closest family.

Being forced to stay away from the people we love can be devastating. However, I think close-knit Thanksgiving celebrations allow a rare but important opportunity: to talk with your closest family members about the importance of investing (and the strategies behind it).

There can only be one word to describe investing in 2020: rollercoaster. Never before have we seen the stock market fluctuate so wildly. With the single fastest stock market drop in history in March, to the single fastest recovery in the months that followed, investing in 2020 has been anything but normal.

That’s why we have followed the same tried-and-true strategy at Spectrum Business Ventures: Invest in the future and invest for the long-term. With the unprecedented volatility that came in the wake of the COVID-19 pandemic, it’s possible that one or more of your family members may have shifted their investing strategy. Whether it’s your father—who panicked in April and liquidated a majority of assets—or your daughter who discovered Robinhood in June and piled in on overinflated stocks perpetuated by hype rather than value, many of us have engaged first hand with investment over the last eight months.

During this unprecedented moment in our world and in our markets, it’s important to debrief and center yourself—strategically and emotionally—with your family. And here’s how you do it.

Talk about what happened—and why it happened.

On March 16th, the reality of COVID-19 kicked in for the real world. Markets dropped an astonishing 13%, halting trading within the first 15 minutes and sending the Nasdaq to its worst day ever. However, Markets had been on the downward trend since mid-February, even as all seemed normal.

When the reality of the pandemic hit the real world a few weeks later in early April, many were wondering why the stock market wasn’t dropping now. After all, panic was in the air and toilet paper was flying off the shelves. Enter the concept of “pricing in.”

Large-scale investors can’t predict the future, so they “price in” what they think will happen into their real-time decisions. This means that, when a big market event occurs, it likely was already reflected in the price movement weeks or months ago. This is exactly what happened in late March—markets were uncertain of the status of the coronavirus back in late February and many fund managers opted to get out rather than endure the possibility of economic impact.

It is vitally important to understand and talk about these stock market fundamentals with less-informed investors. Those who invest without knowing how the market works are destined to be crushed by the waves of the more informed.

COVID-19: A teaching moment

These concepts are not simple, nor are they instantly intuitive. There’s a chance that someone at your table this year may have gotten caught up in some rash investment decisions that kept their balance a lot lower than it could have been.

Of course, we can’t go in back in time, but if we could, it’s likely that you or your family member would have been much better off continuing their long-term investment strategy and not reflexively taking money out of the market.

That’s exactly why this is the perfect teaching moment for aspiring investors. The last year has made expressly clear the importance of having a comprehensive, long-term investment strategy based in the firms and markets of the future. Now is as good a time as ever to start putting these philosophies into practice.

Finances are one of the most important aspects of our lives, so why shouldn’t we discuss strategies with those closest to us? As you are all seated around the small Thanksgiving table this year (or maybe you’re Zoom-ing in), don’t be afraid to bring up the mistakenly taboo topic of investments.