Image by Shutterstock: 13_phunkod
Image by Shutterstock: 13_phunkod
Investing lessons to learn from 2022
Article written by Mike Taylor, Pie Funds – 14th November 2022
This year has been a challenge for investors as global markets navigate significant world events. What are some of the key things we can learn from 2022? Founder and CEO Mike Taylor explains.
Significant global events have meant rocky markets this year, resulting in a bear market. Downturns are never enjoyable for anyone, but there are always lessons to be learnt and tips to be reminded of. Here are a few of them.
Downturns bring opportunities
Even though we are in a downturn, not every company is doing badly. Some global sectors and themes are stable, if not performing strongly, despite these volatile external factors. This year, sectors like healthcare, renewables, infrastructure and building, and some aspects of travel have shown growth.
Don’t fight the US Federal Reserve
There is a saying, ‘Don’t fight the Fed’. That’s for a reason. If the Fed wants to slow demand, remove liquidity and raise rates, you don’t want to go against the tide of the world’s largest central bank. And vice versa.
The Fed has already told the market many times what to expect. They will continue to raise rates for the remainder of 2022 and possibly into 2023 and then hold them there until inflation is back below 2%. The best outcome at this point will be for bad news to become good news. If the economy slows and, as a result, inflation falls, this will be good news for investors.
Reach out to the experts
If you haven’t received financial advice and this year has been particularly unsettling, maybe it’s time to talk with an expert about your investments. There is inherent value in a trusted relationship with someone who can travel with you on your investment journey. Another reason for feeling unsettled could be your portfolio is not set up to suit your personal situation and risk tolerance. An adviser can help with this too.
Investing is for the long term
It can be easy, and often enjoyable, to focus on short-term returns. But a bear market is a reminder that investing is for the long-term – sometimes 20, 30 or 40 years. Dips in the market could last a couple of months, a year, or even several years. This year’s downturn might be unsettling, but market volatility is the price you pay in the short term, to hopefully benefit from returns over the long term. Try to focus on your long-term investing goals. If you’re feeling unsettled, try to not check your investments too much, maybe every 6 or 12 months.
Keep investing during a downturn
If you’re able to, continuing to invest regularly during a downturn can bring benefits. Every month the market falls, your investment contributions allow you to buy at lower prices. You can get maximum benefit from this if you invest regularly – this is called dollar-cost averaging. It’s an investment strategy where you invest a fixed amount regularly, no matter what the prices are and what the financial markets are doing.
Bear markets don’t last forever
Investing is seasonal. Right now, we are in winter, but spring will come. Bear markets are a normal part of investing and do not last forever. I’ve been investing for more than 20 years and I’ve seen plenty of bear and bull markets during this time. Make no mistake, bear market investing is hard, even for professionals. But having been through rough times before, in my experience, the best returns have sometimes been achieved roughly 12 months after a bear market ends. My best year in funds management was coming out of the Global Financial Crisis (GFC). Try to stay positive, better times will return.
Disclaimer: Correct as at 14 November 2022. Mike Taylor is the CEO and Founder of Pie Funds Management Limited. You can view our disclosure documents on the Pie Funds website. For personalised financial advice, please speak to a financial adviser.
Investing lessons to learn from 2022
Article written by Mike Taylor, Pie Funds – 14th November 2022
This year has been a challenge for investors as global markets navigate significant world events. What are some of the key things we can learn from 2022? Founder and CEO Mike Taylor explains.
Significant global events have meant rocky markets this year, resulting in a bear market. Downturns are never enjoyable for anyone, but there are always lessons to be learnt and tips to be reminded of. Here are a few of them.
Downturns bring opportunities
Even though we are in a downturn, not every company is doing badly. Some global sectors and themes are stable, if not performing strongly, despite these volatile external factors. This year, sectors like healthcare, renewables, infrastructure and building, and some aspects of travel have shown growth.
Don’t fight the US Federal Reserve
There is a saying, ‘Don’t fight the Fed’. That’s for a reason. If the Fed wants to slow demand, remove liquidity and raise rates, you don’t want to go against the tide of the world’s largest central bank. And vice versa.
The Fed has already told the market many times what to expect. They will continue to raise rates for the remainder of 2022 and possibly into 2023 and then hold them there until inflation is back below 2%. The best outcome at this point will be for bad news to become good news. If the economy slows and, as a result, inflation falls, this will be good news for investors.
Reach out to the experts
If you haven’t received financial advice and this year has been particularly unsettling, maybe it’s time to talk with an expert about your investments. There is inherent value in a trusted relationship with someone who can travel with you on your investment journey. Another reason for feeling unsettled could be your portfolio is not set up to suit your personal situation and risk tolerance. An adviser can help with this too.
Investing is for the long term
It can be easy, and often enjoyable, to focus on short-term returns. But a bear market is a reminder that investing is for the long-term – sometimes 20, 30 or 40 years. Dips in the market could last a couple of months, a year, or even several years. This year’s downturn might be unsettling, but market volatility is the price you pay in the short term, to hopefully benefit from returns over the long term. Try to focus on your long-term investing goals. If you’re feeling unsettled, try to not check your investments too much, maybe every 6 or 12 months.
Keep investing during a downturn
If you’re able to, continuing to invest regularly during a downturn can bring benefits. Every month the market falls, your investment contributions allow you to buy at lower prices. You can get maximum benefit from this if you invest regularly – this is called dollar-cost averaging. It’s an investment strategy where you invest a fixed amount regularly, no matter what the prices are and what the financial markets are doing.
Bear markets don’t last forever
Investing is seasonal. Right now, we are in winter, but spring will come. Bear markets are a normal part of investing and do not last forever. I’ve been investing for more than 20 years and I’ve seen plenty of bear and bull markets during this time. Make no mistake, bear market investing is hard, even for professionals. But having been through rough times before, in my experience, the best returns have sometimes been achieved roughly 12 months after a bear market ends. My best year in funds management was coming out of the Global Financial Crisis (GFC). Try to stay positive, better times will return.
Disclaimer: Correct as at 14 November 2022. Mike Taylor is the CEO and Founder of Pie Funds Management Limited. You can view our disclosure documents on the Pie Funds website. For personalised financial advice, please speak to a financial adviser.
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