High-flying growth stocks are down big in 2021 — what comes next?

2021 hasn’t been kind to the high-flying growth stocks of 2020. Many are down 50% plus but when we look at a longer time frame (since the start of 2020), the story is very different…

• If you only look at 2021 returns, many stocks are down big — Compound Advisor’s Charlie Bilello showed some of 2020’s high-flying stocks down 30-80% from their highs.
• But if we look from a longer time frame starting 2020, many are still up 50% plus — with several having triple-digit returns — even after their recent drops.

The S&P 500 is up 27% in 2021 — higher than many of these high-flying growth stocks — but it’s also only up 45% since 2020.

Pick your game: Stock selection is difficult — which is why many investors prefer the low-effort way of investing — investing in index funds:

• By investing in a diversified S&P 500 ETF, like the SPDR S&P 500 ETF Trust (NYSE:SPY), your portfolio would be easily up 27% in 2021.
• The past week showed exactly how random the market can be — as investors rotated back to value stocks.

For those wanting to go the hard way, while we can’t control external factors, here are the things we can:

• What we invest in (hopefully good companies).
• The amount of research we do (more than a quick search).
• How long we stay invested for (time frame).
• When we buy and at what valuation (bear or bull market).

When we combine this, we get: time spent researching good companies at a cheap price to hold for the long term.

Reasons not to sell: As Michael Batnick of Ritholtz Wealth Management highlighted in a chart the dozens of reasons to sell, he also showed how easily the market can make new highs.

Must-read: How should investors prepare their portfolios for 2022?