Covid-19 and global lockdowns experienced the past two years have had a massive impact on all facets of life, including investments, and has shaped the way of doing things in a post-pandemic world. We breakdown the most important investment lessons from 2021 and unpack next year’s anticipated investment trends for you to implement in your financial strategy.
2021 INVESTMENT FAILS
- Panic-mode decisions
When the global pandemic hit and impacted international indices, many investors acted impulsively and reinvested or withdrew their investments. With the passing of time, the markets recovered and left panicky investors having to count their losses as opposed to those investors who remained calm and waited out the initial decline.
- Cash reserves
The importance of having cash became apparent to many during the Covid-19 crisis. Putting money aside for unforeseen circumstances can help a great deal and avoid having to deplete long-term savings from your investments.
- Spread risk
Diversification of your portfolio is key to your overall risk profile and to avoid having all your eggs in one basket. It also helps with broadening your portfolio for when volatility hits. Also align your risk profile with your investment goals. There is no use in planning for a specific retirement income when your risk-averse approach cannot realise this goal.
- Personal values
The pandemic forced individuals to consider their values and what is meaningful to them. People have used their downtime to evaluate how to make an impact on surrounding communities and creating a sustainable environment. This also links to investments, since investors can choose in what type of assets they want to invest.
For example, if protecting the environment is important to you, considering ESG and impact investing would make sense to prioritise financial returns alongside a company’s impact on the environment and planet. This point comes across clearly as an investment trend for 2022.
2022 INVESTMENT TRENDS
- Green energy stocks
The evident shift to sustainability in recent years is creating a massive opportunity for investment into clean sources of power generation. These include leading companies in solar technology and electric vehicle manufactures, as opposed to fossil fuel companies for example, that have recently been under fire in news headlines. In addition, the current load shedding crisis in South Africa alone is a clear indication of the opportunities presented by the movement toward green energy solutions.
- Healthcare innovation
Medical and life sciences are increasingly developing new innovations—the technology used in Covid-19 vaccines a prime example of this. Investors can tailor their portfolios to specifically invest in the largest global healthcare companies and aim to achieve superior long-term returns given the increase in funding for these types of companies.
- Tech companies
Digital technologies are continuing to grow steadily which is likely to continue during 2022. The Covid-19 pandemic has set off a major increase in smart devices, wearables and home technology to accommodate the remote working movement. Investor portfolios can include funds with popular tech stocks such as Amazon, Netflix and Google. Other tech companies on the rise to keep an eye on include Salesforce, Tesla and Zoom Video Communications which has recently risen to fame.
- Cryptocurrencies
Though many investors were initially sceptical of cryptocurrencies, Bitcoin and its competitors have proven their lucrativeness, especially in 2021. It is predicted that 2022 will see more companies accepting crypto payments for product purchases. Depending on your risk appetite, investing at least a small percentage in cryptocurrencies could lead to major returns if 2021 trends repeat themselves next year.
APPLYING THESE LESSONS AND TRENDS TO YOUR STRATEGY
It is important to consider multiple personal factors when developing your investment strategy since everyone’s financial situations and goals differ. Bearing this in mind, we have illustrated a high level example to show you how to implement these lessons and trends into your strategy:
It is important to continuously adapt your assets and investments to align with our changing environment and new innovations. Get in touch with your financial advisor to discuss your 2022 investment strategy or to re-evalute your current strategy.