What Are The Best Investments In 2022? Where To Invest
Many investors are wondering where to invest in 2022. Investing your money is a complicated task that requires careful consideration. However, there are some things you should know before investing in any type of asset or product, as not all investments will offer the same return as others.
Investing in 2022 can be a simpler task if you have a financial advisor to guide you. The key question to answer before investing any savings is: what type of asset would be the most suitable for my current situation? Answering this question will help determine where every penny should go and which investment product best suits your needs.
Current market situation 2022
After 2021 where investors found profitability in almost any asset. Investors in China, Brazil, and those shorting the major stock indices have paid the piper in a year that almost all asset classes returned positively.
In 2021 there was a bullish euphoria in almost all sectors. The rally in value companies filled hundreds of pages of financial journals, in case the time for this style of investment was yet to come. And, it seems that they were not wrong since at the moment the funds based on value investing are among the winners of the year.
However, last year has also left worrying things: the arrival of inflation in an uncontrolled way in some Western economies, brings the rise in interest rates closer, which makes assets such as fixed income and the valuations of some sectors tremble.
On the other hand, we cannot lose sight of the growing interest in sustainability. Sustainability has become a very popular concept in the last year. Companies will continue to use sustainability as a marketing resource, and the same goes for investment funds, as many sustainability-themed funds have recently emerged.
In the next decade, we will be abandoning current cars to drive electric cars. This will increase the consumption of the electrical network and since nuclear energy is quite unpopular, it would be interesting to analyze to what extent renewable energies will be able to sustain the supply of the electrical system in the future.
Finally, the economy will move towards decarbonization. Apart from reducing environmental pollution, this will also reduce the price of the electricity bill, since the supply of electricity through renewable energies, especially wind power, is less expensive.
Some electricity companies are already switching to this model, pretending to be part of the forerunners of sustainable investment; however, let us remember that until very recently most of the electricity supply came from non-renewable energies (at least in Spain), which not only polluted but also made the electricity bill more expensive, increasing the profits of electricity companies.
Having reviewed the economic situation and current trends. Let’s get down to business and talk about where to invest in 2022.
If you are looking for a magic ball to earn money without risk in this article, I would recommend you stop reading it right now. We are not fortune-tellers nor will we try to deceive you by giving false assurances, what you will be able to find is our vision about the situation of the market and the situation of each asset.
Where to invest in 2022?
We are going to review the main assets or investment vehicles that we have at our disposal, commenting on their degree of risk and how they are expected to behave in 2022.
We recommend you consult this section to learn about all the options available to you.
invest in deposits
Where to invest right now? In deposits? This option within the world of investment is still not very advisable, except that you assume a loss of purchasing power close to 6%.
Risk-sensitive savers may be satisfied with such a paltry compensation, but why not get enough of the savings? After all, being able to consume more in the future is something that in general we would all like.
Years ago the accounts came to be remunerated with a 4% APR, and a situation like this occurs again already seems like a distant dream. The worst thing for this type of saver is that they have two problems:
- Deposits do not give return
- Inflation skyrocketing to over 5%
Nor do we see a rise in rates this year in Europe that allows banks to increase what they offer for this type of product and even if they arrive, we estimate that it will take time to see them reflected at the branch.
However, there will always be investors whose tolerance for risk is minimal and who will refuse to look for alternatives to deposits, so it is convenient for them to compare the best deposits even though other investment vehicles may offer much more promising returns.
invest in stocks
The bag is not a game. The main criteria to apply are to invest in what one knows well and with the money that is not necessary for our daily expenses. Also, if we think we have found an excellent investment opportunity, be able to tolerate volatility in our portfolios. Even if there is an economic downturn, a financially healthy company will be able to withstand the impact.
In any case, there will always be profiles of investors who like or wish to have a stock portfolio. For this year we believe that the most benefited actions will be those sectors that manage to transfer inflation to their prices:
- real estate
- Actions with moat
- tourism recovery
- Health expenditure
- Raw Materials
The shares that suffered the most in 202 1 were those of China and Brazil, as well as growth companies that were at stratospheric valuations.
On the winning side, European, emerging, and commodity-related small-caps shone after a very negative decade.
To buy shares it is also important that you do it with the best rates.
invest in bonds
Public fixed income, traditionally considered a safe asset, currently rewards the investor with very low returns (especially in the Eurozone); in the case of the German Bund, these become negative.
However, in this asset class, both for public and corporate fixed income, there will always be opportunities.
Where to invest in 2022 in fixed income? In 2021 the winners were High Yield fixed income, but for this 2022 with rate hikes, only flexible and short duration fixed income, as well as funds that invest in corporate bonds performing bond picking, can extract value from a market where returns will hardly be seen in the future as those of the last 20 years.
Invest in currencies/Forex
In the foreign exchange market, 2021 has been a year of recovery of the dollar against the euro and we have seen great setbacks such as that of the Turkish lira.
As we have mentioned, given the increase in interest rates and geopolitical tensions, it could be a year of great volatility.
Invest in commodities
A very popular asset class among traders. In the precious metals section, we have experienced strong revaluations in 2021, especially related to oil and natural gas. Many investors are still betting on having a part of their portfolios in gold as protection against inflation, although in the last year it has not worked at all.
Where to invest in mutual funds
The investor who does not feel confident enough to invest his money in a diversified way in the assets mentioned above can delegate this matter to an investment fund. However, it is important to choose wisely how to choose an investment fund, not all funds fit our risk profile and preferences:
- Funds by asset class
There are fixed income, variable income, and mixed-income funds that have historically managed to beat their benchmark and provide returns that can satisfy any class of investor depending on their risk tolerance. Discover the best investment funds by category.
Investors who have a certain sympathy or interest in certain geographical areas, sectors, or companies that incorporate specific ethical practices in their corporate code have access to thematic funds that adapt to their tastes and that also offer good returns.
For example, if we want to invest in Asia, large caps, and in the biotechnology sector, there is a wide range of options to choose from.
If we are also concerned about sustainability, which has become a very recurring theme, in the market, you can find a wide range of related funds.
Various marketers allow the client to access this wide variety of funds. According to our interests, it is convenient to compare the options that allow us to hire an investment fund.
Where to invest in index funds
The active vs passive management debate frequently occurs in the world of investment, however, the main indices indeed obtain very positive returns in the long term despite the years in which the economy is doing poorly already to the bag; therefore, even for those who are more in favor of active management, investing in index funds at least a part of their portfolio is a highly advisable option.
Where to invest in pension plans
This savings vehicle is more relevant than ever. By now any reader should be familiar with “the problem of public pensions”. This is a problem that is occurring in a generalized way in the Western world, and this is going to get worse since the current birth rates in contrast to the progressive aging of the population are insufficient to sustain the system.
This year, 2022, a new reform will come into force where participants will suffer the reduction of incentives for individual pension plans and, where we will see the birth and consolidation of company pension plans. Contributions to individual pension plans will only have a bonus of up to €1,500.
It seems that the government intends to encourage these plans by reducing the minimum of the maximum contribution of individual plans and increasing the limit of joint contribution (individual and employment plans).
In addition, a growing trend today is the existence of indexed pension plans, these plans are attributed to investors after carrying out a suitability test.
Invest in cryptocurrencies
This asset has gained quite a lot of popularity in recent years, however, it carries a lot of risks, since most investors ignore or are unaware of Blockchain technology, so you have to be careful with trends. This technology has the potential to possibly change the world in many ways.
Everyone knows the cryptocurrency par excellence: Bitcoin. This virtual currency has those responsible for the Central Banks concerned since there is a possibility that its implementation will end the effectiveness of monetary policies. Other cryptocurrencies such as Ethereum stand out for their smart contracts. Ethereum is behind the NFTs that have been so talked about lately.
Others, like the Dogecoin promoted by Elon Musk at the stroke of a tweet, remind the most veterans in the world of investment of past bubbles. We will see if they are really useful or if global restrictions can stop this new fever for cryptocurrencies.
In addition, there is also the possibility of investing indirectly through companies that use blockchain technology such as Microstrategy, Exchanges such as Coinbase, or bitcoin miners.
The great risk of this asset continues to be the regulation that several governments and central banks suggest they will impose in the medium term, as well as the fact that it has high volatility to add it to any type of portfolio.
The market is dynamic and is subject to constant changes. What is valid today, conditions may change unpredictably in the future. Planning an investment strategy is essential since it will be our lifesaver in an adverse environment. If it is difficult for us to define a strategy, going to a financial advisor or a Robo advisor may be one of the alternatives.
To those of you who have come this far, I encourage you to share your experience in the selection of investment channels and how your funds have behaved during these times. Have they fallen a lot, a little, or just the opposite?
We recommend you follow a document prepared by the JP Morgan analysis department that we have taken as a reference for the preparation of this article: Guide to the Market 2022
I hope you liked the article. See you in the comments. And what do you expect from 2022?