Last Updated on December 2, 2024
Overview – Past, Major Investment Events Are Invaluable
There’s a saying that goes, “History does not repeat itself, but it rhymes”. Time and again this has been observed in all kinds of domains.
Some military conflicts are eerily similar to how they started and are being carried out to ones from before, the hype and subsequent obsolescence of certain trends follow a similar pattern to those in the past, and the rise of certain businesses or industries emulate similar ascensions from long ago.
It’s easy to look at past events with nothing more than a sense of awe, but it would be unwise to disregard them as just memories. Past major investment events, just like past investment mistakes, contain an abundance of lessons. These lessons become even more profound when investors understand how these events personally affected them.
By keeping track of major investment investments and including personal accounts of how they were affected and reacted to them, investors can better prepare for and respond to similar events in the future and potentially anticipate similar events in the future.
What Is Classified as a “Major Investment Event”?
Before continuing our discussion, there’s something we must first clarify, and that is: what is considered a “major investment event”?
An all-encompassing definition is hard to produce because every investor will have a different interpretation of what “major” constitutes. Additionally, the events that investors will want to document may extend beyond the realm of finance/investing.
Some investors may view a one-day dip in market indices as a major event, while others may think nothing of it. An election in an emerging market may seem inconsequential for some investors, but very significant for others. With these competing criteria in mind, what should investors document?
For our purposes, we will define a major investment event as “Any recent development that has affected, in either a beneficial or detrimental manner, an investor’s portfolio or strategies, or at least had the potential to do so”. Because of this broad definition, events don’t need to be strictly financial. Political, geopolitical, societal, and cultural events may also satisfy this definition and may be worth recording.
This definition is by no means comprehensive, and judgement of what is to be recorded is still up to the discretion of investors, but for our discussion, it will be suitable enough.
Some examples of what to record may be the worldwide market crashes brought on by the COVID pandemic and subsequent lockdowns, the sharp rise of inflation following the Russia-Ukraine conflict, the constant news articles throughout 2022 and 2023 predicting impending recessions, and how financial markets around the world reacted following the 2024 US election (notable because it was Donald Trump’s re-election) to name a few.
Learning About Events From Others vs. Living Through Them Yourself
Investors at any given point in history enjoy a significant advantage that their predecessors didn’t have, and that is they can look back at how previous investors reacted to certain events and study the mistakes that they made, minimizing the chances of those same errors being repeated.
While it’s easy to study past stumbles made by other investors, learning about something through other people’s experiences vs. learning something based on your first-hand experience are two very different things. Why? Because the lessons you learn from first-hand experience will be tailored specifically to your unique circumstances and will be understood in a way that works just for you.
As you may already know from your own life, hearing or learning about something that has happened doesn’t have nearly the same impact as experiencing it and learning about it yourself.
Years from now, countless investors will look back at the COVID pandemic and carefully study how it ravaged financial markets around the world. While a plethora of important lessons will certainly be learned by future investors, they aren’t personalized to individual investors’ circumstances and learning styles. On the other hand, investors who lived through the pandemic will more or less learn the same lessons but will have done so in a way that’s specific to them and will be understood in a way that only they understand.
Lessons that apply to a general audience are important, yes, but lessons that are tailored just for one individual are invaluable because these insights cannot be replicated or taught by anyone else.
Therefore, when tracking major investment events, it’s imperative that investors note how these events personally affected them (or, at least, how they could have affected them) to ensure that the lessons they learn are tailored specifically to their individual needs and circumstances.
Some Major Investment Events Will Reoccur During an Investor’s Career
Assuming an investor decides to pursue their career for many years, if not decades, to come, then it’s likely that some of the major investment events they’ve previously encountered will reappear in the future.
As we mentioned at the start of this article, “History does not repeat, but it certainly rhymes”. In other words, past events could manifest in slightly different, yet fundamentally similar, ways in the future. Fortunately, we’ve already discussed the solution to this problem.
By keeping track of major investment events they’ve lived through and extracting personalized lessons and insights from them, investors can better prepare for and respond to similar events in the future and tailor those contingencies in a way that works best for them. Better yet, because some events show up repeatedly, investors can constantly refine and fine-tune their responses.
Something that will always happen in financial markets is sudden, seemingly unexpected “mini” crashes, whereby major indices post steep losses in a single day (or over a few days), but return to normal soon after. These can happen for all sorts of reasons such as a U.S. Treasury yield curve inversion, worse-than-expected economic data, or fears of an economic slowdown, to cite a few examples.
Notice how all of these events, though different, are fundamentally similar in that bad news led to a sudden, steep drop in financial markets. Additionally, all of them happened relatively close to one another. Because of their similarity, investors can better prepare for and anticipate future mini crashes they’ll inevitably have to go through.
Of course, some major investment events have a low probability of happening repeatedly during an investor’s career (e.g., repeated worldwide pandemics and widespread lockdowns), but that doesn’t mean these black swan events can be forgotten about – there’s always a chance that something similar will appear again.
Keeping a Detailed Record of Past Events Can Reveal Potential Trends and Connections
It’s very difficult, if not outright impossible, to say with absolute certainty what the future holds. There are so many variables, with varying degrees of predictability, from all kinds of sources, that can shape the future. Because of this, trying to make any sort of detailed investment-related predictions is usually futile.
That said, the future isn’t entirely a black box. Not all future events are entirely random: some historical events may give rise to future events, both in the near and distant future, because of an underlying trend or connection. Because of this, some major investment events can be predicted or anticipated to a certain extent.
Additionally, these future events aren’t all going to be detrimental. Investors with a keen eye can potentially pick up on hugely beneficial developments in the future based on their record of historical events.
Repeated news about weaker-than-expected economic data for the past couple of years in a certain country may be a precursor to a recession. On the other hand, recent news about business-friendly policies being implemented in another country, paired with consistently strong economic data over the past few years, may be worth looking into further to uncover potential investment opportunities.
Nobody can say for certain what the future holds, but by keeping a detailed record of historical events and spotting certain trends or patterns, some reasonably educated assumptions about what could happen next can be made.
Wrapping Up
Throughout their careers, investors will live through all kinds of events that will affect their investment activities for better or for worse. Instead of simply brushing them off, investors stand to benefit by recording these events and how they were affected.
The major investment events that investors experience can provide a multitude of important, highly personalized lessons that can’t be taught or learned anywhere else. Learning about major events from others versus living through major events and seeing things for yourself offer two vastly different learning experiences.
Additionally, by keeping a record of major investment events, investors can better prepare themselves for similar events that appear again in the future, as well as potentially anticipate future developments based on what’s happened already.
What some people view as one-off occurrences may contain an abundance of lessons and clues for what lies ahead. Therefore, it would be foolish for investors to disregard the major developments that constantly take place around them.
