As 2021 draws to a close, it’s useful to take a look back at the big investing themes over the last year and see what lessons you can take with you into 2022.
Each year is completely different from the last. But some of the trends from the last twelve months may give you some insight into what’s ahead. So let’s take a look at what’s happened and what investors might expect going forward.
One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.
What have been the big investing themes of 2021?
It’s pretty crazy to think that it was at the beginning of 2021 that the whole GameStop saga exploded. It’s an event that seems like it happened a lifetime ago, but it set quite a strange tone for investors.
The meme stock craze did become a little subdued, but stocks like AMC have carried the torch throughout the year. Other key themes for investors have been:
- Rising inflation fears
- Slowing growth and tech stocks
- Renewed focus on climate issues after COP26
- Supply chain issues and a weakened global recovery
- Lingering coronavirus problems
- Cryptocurrencies performing both excellently and terribly
What investing lessons we can take into 2022?
From all the positives and strange events we’ve seen over the last year, here are some key lessons you can take and apply to your investments in 2022.
1. Expect the unexpected
Just like 2020, plenty of things happened in 2021 that no one would have banked on. It’s safe to say that no one knows how each year is going to unfold.
It’s worthwhile setting goals, but make sure there’s flexibility in your investing plans. Stay focused but remain aware that things could change. You may have to make a pivot, keep some cash aside to buy a dip, or adjust for any changes in your life.
2. Don’t get used to unrealistically high returns
Lots of new investors have joined the markets over the last couple of years, which is great! But if you’re one of these people, you may have been spoilt by enormous returns.
It’s important to remember these exceptionally high returns aren’t the norm. So, as you head into 2022, don’t put your portfolio at risk by chasing unrealistic profits. Otherwise, you could end up losing all the gains you’ve managed to make.
3. Stay diversified
Although most markets have performed well, it only takes one big government crackdown or one huge company failure to really shake up an economy or an industry.
There’s no way to predict who’s going to have a good or a bad year. So the best way for you to invest is by making sure you have a diversified portfolio. How you choose to diversify will depend on your investment strategy. The main thing to remember is to have some kind of variety in your portfolio.
4. Make sure you don’t over-invest
Investing is an excellent way to build wealth. But as life returns to normal, you may find you’re not able to invest as much as you have been – and that’s okay.
Keeping your debt down and your finances under control should be your main priority. Don’t let your investments jeopardise your financial security. Only invest what you can afford and ideally just use money that you won’t need for at least a few years.
5. Avoid trends
Meme stocks and cryptocurrencies hit some big highs in 2021. But they also hit some epic lows, and a lot of people got burnt.
The same can be said for stocks and shares. Following trends can make you some short-term profits, but the situation can turn sour very quickly. Investing for the long term and avoiding quickly changing trends can be a better strategy to deploy in 2022 and the years ahead.
How else should investors prepare for 2022?
Thomas Fitzgerald, fund manager of the EdenTree Responsible & Sustainable Global Equity fund believes that bond yields and interest rates will play a key part in performance going forward
He explains, “Certain stocks and sectors look vulnerable to the risk of rapid repricing of bond yields.
“Valuation uplift and low rates have played a key role in the spectacular returns of many growth stocks, and extremely elevated valuations are concentrated in some ‘growth’ segments of the market that are more sensitive to rising rates.”
Whatever happens, you can only control your decisions. One of the best ways you can benefit no matter what the market is doing is by using a cheap share dealing account to keep your fees low.
By using a top-rated stocks and shares ISA, you could reduce how much tax you pay on any gains. Just remember that all investing carries risk and you may get out less than you put in.
Here’s hoping for positive 2022!