My Stocks and Shares ISA is down considerably this year. In fact, it’s down around 8% since the beginning of 2022. So my losses are greater than the FTSE 100, which has fallen around 4%, but much less than the FTSE 250, which is down 21% year to date.
So, it’s definitely not been a good year for markets. Unless I invested purely in commodities, it’s almost certain that I would have lost money this year. And that’s because we’ve seen a cocktail of negative pressure. Higher inflation, interest rate rises, geopolitical tensions, and negative economic forecasts have pushed stocks lower.
But 2022 could be a good year for Stocks and Shares ISA investors. Let me explain why!
Why is my portfolio down?
Firstly, why has my portfolio performed worse than the FTSE 100? It’s largely because the Footsie has been held up by mining and hydrocarbon stocks like Rio Tinto and Shell, while I moved away from these sectors earlier in the year, assuming that a slowdown in China would impact commodities. I was wrong.
Instead, my ISA portfolio includes a number of stocks from industries that haven’t done too well at all. For example, I’ve got shares in housebuilders, which — despite soaring house prices — have been pulled down by interest rate rises and expensive fire safety pledges.
What’s the upside?
While it’s never good to see your portfolio losing value, I’m not too worried. Firstly, I’m investing for the long run, so I’m thinking about what my portfolio will look like in five to 10 years. Secondly, the current volatility creates opportunities for investment. Right now, I’m investing for growth and dividends.
Investing for growth
Some stocks have lost a huge proportion of their value this year. This was particularly the case with growth stocks, but losses can be seen across almost every major index.
As a result of these losses, some stocks are starting to look a lot less expensive. For example, Chinese EV maker NIO is down 58% over the past year. This is pretty reflective of the performance of many other US-listed growth stocks.
So NIO looks considerably more attractive now than it did a year ago. It doesn’t make a profit yet and it trades on future profitability.
But the same goes for value stocks. Housebuilder Vistry is down 32% since the beginning of the year (down 29% over 12 months). It’s been doing well in quarterly updates, but clearly the market is concerned about a downturn over the next year.
Larger dividends
I’m also on the lookout for bigger dividends. As share prices fall, the dividend yield grows. Taking Vistry as an example again, it’s currently offering a 7.25% dividend yield. This is because the share price has fallen while the dividend payments have remained the same.
Bigger yields are also great for my portfolio amid higher levels of inflation.
Sure, investing right now may seem daunting to traders. Risks of an economic downturn are weighing on the market. However, as a Foolish (not foolish) investor, I’m focusing on the opportunities for my portfolio to grow.
