2022/01/08
For financial markets, 2022 is likely to be less profitable than the previous one. Passive investments through BPIF and ETFs can be a good way to diversify a portfolio in an uncertain environment.
The year 2022 may become even more unpredictable for investors than the previous one. The main topics will remain inflation and its consequences, possible new strains of coronavirus, new "black" and "white" swans, which Bloomberg does not exclude. Saxo Bank's "shocking forecasts" for 2022 suggest that female investors will be able to deploy markets, and scientists will figure out how to rejuvenate cells and much more.
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The demand for "dreams, ideas and technologies of the future" will weaken, and investors will pay attention to companies that can generate stable profits here and now.
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Diversification of investments in 2022 is not just a good recommendation, but a mandatory approach for investors. Stock-picking (purchase of individual shares) remains for those who have a lot of experience, are ready to spend more time analyzing securities than usual, and most importantly, they are ready for the fact that even after a thorough analysis, there may be a high probability of a decline.
When deciding on the choice of an investment strategy - active or passive - a private investor should remember that successful investments can be made when investing in something he is well versed in, Jim Rogers, a well-known American investor, shared his opinion during a meeting of the RBC Pro Investors Club. "Many studies have proven that investments in the index behave better than active investments. Therefore, it is preferable for most people to invest in ETFs that follow the indices. And it is quite obvious that such investments are superior to any investors — both professional and non-professional," Jim Rogers added.
Berkshire Hathaway CEO Warren Buffett also advises private investors to buy funds. "Most investors are more likely to benefit by simply buying the S&P 500 index for the long term, rather than selecting stocks themselves, even if they are Berkshire Hathaway shares. The average person is unable to independently select shares," he said during the shareholders' meeting of the financial conglomerate.
The advantage of passive investments is that they do not need to choose the time or moment for investments. They are relevant for any phase of the stock markets or the economic cycle. However, investing in funds only makes sense in the long term.
The fundamental principles of passive investing are the time horizon and regularity: the longer the investment period, the better the result can be obtained. One year is the minimum recommended period for investment, so we recommend looking at a broader horizon, not just 2022, but three to five years or even more," Malin emphasizes.
Exchange-traded funds are a diversified set of securities within the framework of an investment idea. Having bought shares of four or five mutual funds, the investor receives a ready-made portfolio that will be invested in dozens or even hundreds of securities at the same time. At the same time, an investor does not need to have in-depth knowledge of financial instruments to manage such a portfolio.
We saw all the growth in 2021. The American markets gave more than 20% growth, and it is unlikely that we will see similar dynamics in the future. I consider it expedient to invest in funds with active management and in funds with absolute profitability in 2022. That is, in those funds that will be looking for profitability, and not an idea and one direction.
In 2022, Chinese stocks have a good chance to win back. Regulatory pressure is gradually decreasing, and more and more analysts are speaking positively about the prospects for Chinese stocks. At the beginning of 2022, we can see enough positivity for the dynamics of Chinese indices to change to positive. In addition, there are other emerging markets in the compositions, which in 2022 have serious chances to overtake the dynamics of the S&P500 - if the situation with vaccines normalizes and investors do not want to take risks in the overheated IT sector of the United States, they will turn their eyes to emerging markets.
As a result of the next round of strict regulation by the government, they have become outsiders in 2021. This means that they will certainly be one of the leaders of 2022. At least now the companies are so cheap that it's a sin not to take. China is the second economy in the world. It recovered faster than many countries from the initial pandemic shock: the worst indicators of GDP growth rates were recorded at the end of March 2020, and not at the end of June, as it was, for example, in the United States. And reforms aimed at demonopolizing business and strengthening the moral foundations of society in the long term should benefit it. Accordingly, ETFs based on Emerging Markets Internet & Ecommerce (NYSE Arca: EMQQ) will be suitable, which, in addition to shares of Chinese technology companies, includes shares of companies from South Korea, India, the Netherlands, Singapore and other countries: Internet services, retail, broadcasting, media, online advertising, games, travel, social networks.
In 2022, the problem of a shortage of chips in the world will continue to persist, and companies in the sector will continue to earn record profits. The sector has been showing a yield of 27% per annum for the last ten years. And with the increasing digitalization of our lives, this trend will only continue. Therefore, among the thematic funds, we would now prefer the semiconductor sector.
Experts also do not rule out growth in alternative energy sectors. To invest in it, you can use the Renewable Energy Producers fund from Global X (NASDAQ: RNRG), which includes more than 40 companies engaged in the production of electricity from renewable sources (water, wind, sun, heat from the earth's interior, biofuels) in more than ten countries (USA, Canada, New Zealand, Brazil, Austria, Denmark, Portugal, Thailand, Hong Kong, France, etc.). the topic of green energy will remain quite hot, but we must be especially careful when investing in it, since the risks of individual companies are very high. Therefore, thematic funds will help reduce risks and participate in the strongest trend of the next 30 years.
In 2022, the markets will not grow — rather, they will remain in place, and therefore it will be quite difficult to make money on them. The only ETF that I recommend to include in the portfolio is the gold ETF. And also, if high inflation continues, Commodity ETFs: coffee, cotton and possibly oil.
Michael Zippo
https://linkedin.com/in/michael-zippo-9136441b1
info@e-book.business
Sources: Berkshire Hathaway, RBC Pro Investors Club
The fourth edition of ITIL (IT Infrastructure Library) was presented by Axelos in February 2019. The ITIL v4 (PDF and other versions available) focuses on practical aspects of IT management and provides a holistic approach with emphasize on Agile, DevOps and digital transformation topics.
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