The last two years were like a rollercoaster ride for us all. Although we welcomed 2022 with the rise of the Covid-19 cases again, this time, we were better prepared to face the uncertainties – do you agree?
But let’s take a moment to review 2021. Did you, as an investor, feel panic and shiver running through your body during market uncertainty? If yes, don’t worry – you weren’t alone! Things were quite unpredictable back then.
Now that markets are actively recovering, are you searching for direction to strengthen your investment portfolio in 2022? Then, follow five solid investing strategies and instruments listed in this blog to move towards a confident path this year.
Quick Read: 6 Investment Lessons 2021 Taught Us
Tips For Building A Successful Investment Portfolio
Does your excitement fire up when your investment portfolio records the result you’re hoping for? While this rewarding experience is a wonderful feeling, here’s an important thing to keep in mind: You cannot escape the market risks. However, what you can do, though, is navigate these risks with three key strategies to own a financially sound investment portfolio this year.
1. Choose Quality Over Everything Else
What is the most important factor you consider (besides the product’s price) when buying something? Of course, product quality. Correct?
Apply the same mindset for your investment portfolio: Include quality stocks and instruments for greater returns.
Remember, you’re playing in a risky field. This instability makes it extremely important to avoid significant monetary losses. So tell me – Does this challenge motivate you to think of ways to be well-prepared? Then, apply this tried-and-tested strategy:
Conduct in-depth market research before making an investing decision.
Typically, create a spreadsheet and fill in details, like:
● Market Trends & Predictions
● Listed Companies Performance & Potential
● Market Leader’s Opinions
● Global Phenomenons & their impacts on the markets
Next, make your analysis or consult with your financial advisor. Shortlist quality companies that will prove to be worth your money. Bonus Tip: Protect your investment portfolio from high volatile stocks and instruments in the new year.
2. Build Yourself A Cash Reserve
Have you seen a pendulum clock? The one where its string moves back and forth when the clock moves to a new hour? The stock market’s motion is similar to a pendulum clock; multiple factors are responsible for swinging the market values during the trading hours.
However, you can follow this two-step strategy to invest at a time when things are fairly under control:
Step 1: Build a cash reserve for yourself
Step 2: Wait for market corrections, i.e., invest in the markets when stocks fall by 10%
While this investing mantra sounds promising, remember this timeless tip: Don’t go overboard with your cash reserve. That is, save just enough to make a good investment – because the value of money will reduce with the rising inflation rate.
3. Cross Your 2021 Investing Limits
Don’t we all make resolutions to become a better version of ourselves in the new year? In 2022, it is time to expand this same logic to improve your investment portfolio.
I believe money management is an art that not many people know. But here’s a trick to help you own a strong investment portfolio in 2022: Save a bigger slice of your wealth for investments than you did in 2021.
Let’s say, for instance, Sam was earning AED 20,000 in 2021 and saved 15% (i.e., AED 3000) for his investments. Then, in 2022, we evaluate his investment progress in two scenarios.
His promotion raised his salary to AED 26,000. This hike motivates him to save 28% (13% more) for his investments.
He didn’t receive a promotion and got no salary increment. However, he cuts down on unnecessary expenses and saves 20% (5% more) to improve his investment portfolio’s quality.
Did you spot the common factor in both cases? Sam decided to move to healthier investing levels. This move allows him to work with more capital and expand his chances of earning better returns.
Interesting Read: What Is Holistic Financial Planning?
Top Instruments For Your Investment Portfolio
Your goals, risk capacity, and capital determine the kind of investments you add to your portfolio. This section talks about the top two instruments that I think will work well for investment portfolios in 2022.
However, I strongly suggest running a due check on your finances and risk appetite before adding these instruments to your investment portfolio.
1. Floating Rate Bonds In Fixed Income Portfolio
In simple words, floating rate bonds do not offer a fixed coupon. Instead, specific market benchmarks determine how much interest an investor earns through these bonds. This flexibility to gain from the current value works in an investor’s favor, especially when the markets take the bullish stand.
Floating rate bonds are low-risk, less volatile, and diversified instruments because they:
● Are government-issued (i.e., supremely fewer default chances)
● Have safer benchmarks (e.x. repo rates)
● Hold less exposure to negative price movements
2. Dividend Growth Strategies For Profitable Portfolios
Make patience your primary investing resolution goal in 2022.
As an investor, aim to park your money in instruments that pay you back in equal intervals. After all, the goal is to earn yourself money, right? Then, invest in dividend-paying organizations.
Study companies for three key signs before investing:
● They are registering growth year after year
● They are generating higher cash flows than the previous operating year
● They give returns equal to or exceeding the inflation rate
Must-Read: The Art Of Making Smart Choices
It’s Time To Make A Positive Investment Portfolio
While it’s early to discuss this year’s projection, one thing that you should keep constant is your approach towards investing: That is, research well and aim for the long run.
Do you need help planning an investing strategy for your portfolio or seek clarification about your existing positions? Then, click here to book a consultation call with me, and I will be happy to discuss your requirements in detail.