The start of a new year is the perfect time to change old habits and make choices that promote growth and well-being. This isn’t only good advice for life, but also for one’s investments. As we get ready to welcome 2022, there may be no better opportunity to look back at how the investment landscape has changed, consider where the biggest opportunities for the next 12 months will come from, and take note of which investment habits you need to shake.
So says Kapil Joshi, Head of Collective Investments at Momentum Investments, who points out that building a game plan for the upcoming year is a critically important way to start a productive new year. “A lot has happened over the last two years, and it is safe to say that the investment landscape may never be the same. Cryptocurrencies have made game-changing moves, the world has embraced an entirely new way of life, and alternative investment vehicles have shown what they’re capable of.”
With this in mind, Joshi lays out five important points to keep in mind as you figure out your investment resolutions for 2022.
1. Be aware of social media’s impact
By far the most unusual phenomenon in the investment market in the last year or so, must be ‘meme stock trading’. The most notable case of this is, of course, when investors (spurred on by one particular Reddit thread) pushed US-based company GameStop’s stock price from $20 to $350 in just two weeks. This forced Wall Street traders, who were betting the stock would decline, to unexpectedly lose a lot of money.
Other meme stocks in the US market this year include AMC, BlackBerry and Bed Bath & Beyond, among others. While the work-from-home environment made it easy for day traders to keep a close eye on stocks, it also led to a massive increase in emotional investing and trading. Knowing this, savvy investors will have to remind themselves not to get drawn in by the investment whims of the masses whenever a story breaks on social media. The effects of these investment surges are short-lived, and investors stand to lose more if they give in to the temptation to follow the crowd over sound financial advice.
2. Hedge funds are doing better than ever
As an example, the much-maligned hedge fund has shown its true value over the last two years. They are increasingly proving themselves to be exactly what investors need to diversify their portfolios and access wider return sources.
While more conventional investments struggle to regain the growth they have lost since the start of the pandemic, hedge funds offer investors a wide array of strategies that can help them to achieve their investment goals more effectively. From identifying over-valued stock to detecting anomalies in market prices, and even anticipating central bank monetary policy behaviour, the opportunities to blend these strategies for specific investor outcomes are endless.
3. Employment will continue to be an issue around the world
Going into 2022, labour markets are still tight, with many open positions going unfilled. The phenomenon known as the “great resignation" of workers from the workforce has left many businesses with major skills gaps. In addition to this, strike and protest action has been on the rise, and may well continue to grow in the coming year. This will continue to have critical impacts on labour costs, supply bottlenecks, and inflation – which will certainly affect the stock markets. With this in mind, it may be wise to revise your expectations for certain investments for this year.
4. Prepare for the unexpected
If the pandemic has taught us anything, it’s the importance of a personal emergency fund. If you haven’t already, now is the time to start. Ideally, you should have three to six months’ worth of living expenses in this fund, with the money kept in a low-risk, liquid account. As soon as you have this in place, you’ll be in the best position to avoid dipping into long-term investments to pay for short-term needs if you are ever in a financial pinch.
5. Boost your retirement savings
Covid-19 has caused many savvy investors to re-evaluate their ability to enjoy the retirement lifestyles they envision. In fact, many people who found that they were able to cut some of their living expenses during the lockdown have started funnelling more of their earnings into their retirement plans. This would be a good strategy for anyone, and the fact that most of us are saving more money by working from home, provides the perfect opportunity to put more money into our retirement vehicles.
“I believe that there is a lot to look forward to in 2022. However, the world has changed forever, and we need new game plans to get the most out of our investments right now. 2022 is the perfect time to review your finances, investments and personal assets, to ensure that you make your money work for you in the most effective way possible,” Joshi concludes.