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Senior Vanguard Strategist: These Were the Smartest Moves American Investors Made in 2020

Nicole Spector
·5 min read
Stock, shares, NASDAQ, S&P 500, money, Business man portrait.
Stock, shares, NASDAQ, S&P 500, money, Business man portrait.

When the COVID-19 pandemic struck and the stock market buckled, financial advisors urged Americans to stay the course and not make any rash moves around their investments. Taking a page out of the Warren Buffet playbook, money experts generally espoused a “keep calm and carry on” mentality. “Times like these stress test not just the market, but individuals too. Try not to be swayed by your emotions. Unless you have an immediate need for cash, do not sell your assets out of panic,” Dhruv Arora, CEO of the digital wealth manager Syfe told CNBC on March 15.

See: Why You Shouldn’t Worry When the Stock Market Tanks Your 401k
Find: The Most Surprising Stock Market Trends of 2020

Did Americans heed this advice? According to “How America Invests,” new research from Vanguard, they mostly did. The analysis of more than five million Vanguard retail households from 2015 through the first half of 2020 found that during the first half of 2020, “portfolio risk allocations remained mostly unchanged.”

“Vanguard investors stayed the course during the volatile first half of 2020,” Tom De Luca, senior investment strategist at Vanguard and research lead for the study told GOBankingRates. “Only 22% of households traded, and, of those who did trade, 62% moved assets into equities. During this time of market volatility, less than 1% of households abandoned equities completely, illustrating the benefits of something we have continued to espouse to clients: time in the markets beats market timing.”

Vanguard found that the average asset-weighted portfolio comprises 65% equities, 22% fixed income and 13% cash — a venerable strategy, De Luca suggests.

See: A Beginner’s Guide to the Markets
Find: 10 Times Warren Buffett Predicted the Stock Market Accurately

“Vanguard’s guidance for investors is centered on four core principles: Define clear goals, invest with balance and diversification, minimize cost, and stay disciplined over the long term,” De Luca said. “In short, we tell investors to focus on those things within your control. As demonstrated in How America Invests, Vanguard investors are ‘walking the talk’ of these critical investment principles and, in particular, have demonstrated sustained discipline, discretion, and long-term orientation through this year’s toughest market volatility.”

Investors have stayed the course with a diversified portfolio over the past five and a half years, but their appetites have changed some: they’ve become increasingly keen on ETFs.

“As shared in the report, the number of Vanguard households using ETFs has doubled since 2015. ETFs, like mutual funds, can provide broadly diversified, low-cost access to a variety of markets and specific market segments, and can serve as the foundations of long-term portfolios,” De Luca said. “And notably, ETFs have lower minimum investment requirements–the cost of a single share–which could contribute to their popularity with younger investors. While most of Vanguard’s ETF investors are ‘diversifiers,’ allocating less than a quarter of their total assets to ETF investments, there is a small but growing group of ETF ‘enthusiasts,’ comprised primarily of younger investors, who build complete portfolios from ETFs.”