Disclaimer: Please note the below is opinion and should not be taken literally as advice. Instead, consider contacting TVC for professional investment advice tailored to you.
As we enter a new year, we reflect on the tumultuous past few, which saw the effects of the Pandemic cause volatility for economies the world over. The COVID-19 disruptions could indeed serve as a wake-up call for investors to bolster their finances.
For instance 2020 could be considered a great learning ground for investors – even though many stocks lost more than 50% of their value, by the end of the year stock prices had rebounded and index funds recovered. While the year 2021 has been full of mixed market performance, overall, global benchmark indices indicate that it was a great year, with an astounding USD 17 trillion added to global wealth by the world’s equity markets.
As economies see a restart and the world looks set on the road to recovery, here are some investment lessons to take into 2022:
1. Diversify your portfolio
If we have learnt anything, it’s that life is unpredictable. Contingency plans have become more important than ever and investors should be wary of betting on a single strategy. Diversifying is the best way to average out the benefits offered by different investment instruments and remain on track to achieve your long-term investment goals. When looking to diversify, consider your risk appetite and financial goal/s.
2. Stick with the plan
All investors should have a financial roadmap which drives them towards their long term vision and goals. This is determined by your financial goals, also taking into consideration your risk tolerance i.e. how much volatility you can stomach.
Even when major market changes occur and you might be surrounded by panic moves from other investors, don’t get rattled but instead stick to the plan.
3. Do your homework
In order to feel confident in your investment decisions, it’s important to do the proper research, preferably with the help of a professional. Remember, past performance does not guarantee future success, so be careful of looking too much at 2021 to determine your 2022 trading.
Instead, consider important factors like business sales, existing debt, market share, products, industry, and existing leadership – as these will reveal more about the position of the business and its potential future performance.
4. Don’t panic or lose optimism
The Pandemic has shown us that life doesn’t always go as planned, which can be upsetting. However, the worst time to make decisions is when emotions are running high. Rather than panic in response to external factors, focus on your portfolio.
Remember how the initial COVID-19 outbreak saw some sectors badly hit, while others – like pharmaceuticals and IT – bounced back due to shifting demand? This demonstrates that even the best investments might go through depressed periods and market volatility will come and go. It is how we manage our responses to them that will determine our long-term investment outcomes in the end!
5. Take stock of your portfolio
Especially if you’ve been investing for some time, it’s important to review your portfolio in light of recent events and amid a surge in equity return, and as market movements skew the allocations in your portfolio.
Does your portfolio still align with your financial goal? Is there a good balance between your long-term investments and your buy-and-hold strategy? Or have you since taken on excessive or insufficient risk? Our TVC experts can help with this!
6. Make the most of the tax benefits of investing
Investment Vehicles like Tax Free Investments and Retirement Annuities allow investors to accumulate their wealth without being taxed. Other investment vehicles, like sinking funds and endowments allow investors to pay personal income tax at a fixed rate of 30% which, depending on their income, could be lower than their marginal tax rate.
These tax efficient vehicles have different degrees of liquidity. Our Certified Financial Planners at TVC specialise in tax planning and finding the right investment vehicle for your needs.
Get in touch with one of our TVC financial advisors to invest wisely in 2022 now!