Now that 2020 is over, my guess is in 5 years everyone will look back at 2020 and realize how irrational the markets were. It is always in those time of panic that there is most money to be made. Unless you are ready to retire, selling during a panic is usually the worse thing to do. Write a plan ahead of time and work out all the possible scenarios (what if a 30%/50%/70% decline happens). For me, I simply play with the ratio cash/bond/stock. Currently, I'm sitting around 90% stock since ~April. As the economy gradually improves I am planning to sell of my gains, but there is still a long way to go. I have another post about how inflation and how to protect from it.
Yes the corona virus is really bad. Yes the lockdown affects a lot of people and the economic devastation for small busineses is unfathomable. But 2020 also proved that innovation and resilience do pay off and betting for the end of world is never a good idea.
Unlocking the vaccine technology:
For example, we now have a vaccine. This vaccine is based off the mRNA. This is undoubtly a new era for vaccine and for humanity. In summary, as opposed to traditional vaccine where we need to grow and weaken the virus, the mRNA approach simply "prints" the right genetic sequence in a lipid carrier, to bring it to your cells. The traditional method of growing vaccine is very cost prohibitive and time consuming. One thing people don't seem to appreciate is how fast it took to make the vaccine. About a few days.. A FEW DAY!!! It was conceived on January 13th
The implication of mRNA means that it is pretty much game over for any type of CoronaViruses. Even if the virus mutates, we can just print a newer version. Approval process could be sped up since we know and understand the current vaccine. Also in a few years, we will have a very good understanding of the impact, side effects and production techniques of mRNA vaccine at scale. Of course, the media loves (and desperatly need) good stories about how bad a mutated virus might cause more wreck in our societies, but this point is definitely overlooked.
Another thing to remember is that we had this technology for more than 15 years and it never got approved by the FDA. I am extremely grateful for Moderna and others to have spent the last 15 years of their life pursuing a technology that didn't have any commercial applications even though originally if was targetted for cancer therapies. It only took an big event to force regulator to allow new innovations to get quick approval.
Innovation is exponential
The other concept we need to keep in mind is that innovation is exponential and spreads exponentially. It's similar to all of us playing a video game and every time we unlock a new weapon, we get to share with all other players (that is the other 7 billions players out there).
We have also spent enormous amout of money on the covid response. Similar to an Apollo program or a WW2 mobilization. Obviously, all this technology and know-how will stay with us long after the virus is gone. Therefore, we will benefit for 20-40 years for all those investment in infectious disease.
Unlocking gene sequencing/editing
Another technology that is still in it's infancy is gene editing and sequencing. The mRNA vaccine is only the tip of the iceberg of what is possible. What is unique now is that we have the computing power to really understand/simulate and reduce the cost drastically on this technology. The impact of this technology should be greater than "ad tech" which was dominated by Google and Facebook. This is not for tomorrow, but eventually this might happen.
How does this have any impact on your money? Well plain in simple this year showed you that if you followed your plan and didn't panic, you probably made a very good decent return. If you panicked and left your emotions play with your investments you missed out on one of the greatest bull run.
Also in terms of economic growth, innovation is what drives economic growth. Better technology allows for cheaper products to be used more broadly (think about cars, iPhones, etc...).
Investing is a major part of successful financial independence and I hope this post helps you understand that investing in innovation pays off over long period of time.
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