Financial markets will look a lot different in 2022.
With interest rate hikes and the Fed ending its bond-buying market stimulus on the horizon, investors are going to have to get creative to find profits in the ongoing bull market.
We don’t know with 100% certainty where the market will head next year. So, instead of focusing on what to buy, I want to talk about how to invest during 2022’s market in this week’s Investing With Charles.
This is our chance to lay some ground rules be heading into a new year of big profits.
It’s our 2022 market road map.
Here are some of the highlights from my conversation with our research analyst Matt Clark.
2022 Market Tips
Matt: Let’s start with the market. We’re still technically in a bull market, but stocks in all three major indexes have pared back. As an investor, what are you doing to prepare yourself for the unknown of next year?
Charles: I’ve been pulling away from buy-and-hold investing towards more active investing for the last couple of years now. For a lot of my portfolio, I stay short-term, which works out well. That’s what we do at Money & Markets, Green Zone Fortunes and our other services: We focus more on short-term opportunities, and I think that’s really what makes sense.
Now, you have to be aware of your position sizes. There’s a perception that shorter-term trading is riskier than longer-term investing, but shorter-term trading can actually be less risky if you keep your position sizes reasonable.
My first tip: Have a shorter-term focus. Be prepared to trade more actively.
Use Tax-Advantaged Accounts
Matt: Whatever you’re making a month, in terms of saving and preparing, what advice would you give readers for their personal finances leading into 2022?
Charles: Well, the first is to pay attention to the return you get from your investments. It should be more than just price appreciation and dividends. We get excited about that, but it’s only part of your return.
Tax benefits also factor in. You want to be using a tax-advantaged savings plan — 401(k), IRA, HSA, etc. — so that every dollar you put into those accounts comes with a tax break. It lowers your tax bill at the rate of your marginal tax rate. That’s a source of return.
As far as I’m concerned, a dollar in taxes deferred is a dollar in taxes saved.
Taking full advantage of those kinds of accounts is really a no-brainer. If you’re nervous about the market and you don’t want to go all-in, just go long and strong. Buy that index fund and be happy, no problem. You can still max out a 401(k) and just keep it in cash or money markets.
Depending on which custodian you use and its rules, generally speaking, you can do anything in an IRA you can normally do in a regular brokerage account. Get that money in those accounts. Push it in there and get a tax break. Then figure out what you do with it later. If you’re not ready to invest it, then don’t invest it. But get the tax break first. It’s a no-brainer.
Matt: I’ve always loved the 401(k). When you’re with an employer that is willing to match, that’s just free money for you.
Charles: It’s an instant, 100% return. For example — if they’re matching 5% — when you put in your first 5%, you just made 100% return on your investment, and you didn’t take any risk. You made an instant, 100% return because of that matching. If you’re not taking advantage of that, you might want to get your head examined because that’s the equivalent of somebody just dropping a bag of money in front of you and you not picking it up.
Actually, if someone dropped a bag of money in front of me, I might not pick it up because I might assume there there’s some mafia don attached.
Matt: It’s possible, yes.
Charles: But with the 401(k), there’s no strings attached.
Click here to watch the rest of our conversation, and get ready to grow your wealth in 2022.
Where to Find Us
Coming up this week, Matt will have more on The Bull & The Bear podcast, so stay tuned.
Don’t forget to check out our Ask Adam Anything video series, where chief investment strategist Adam O’Dell answers your questions.
You can also catch Matt every week on his Marijuana Market Update. If you are into cannabis investing, you don’t want to miss Matt’s weekly insights.
Remember, you can email my team and me at Feedback@MoneyAndMarkets.com — or leave a comment on YouTube. We love to hear from you! We may even feature your question or comment in a future edition of Investing With Charles.
To safe profits,
Co-Editor, Green Zone Fortunes
Charles Sizemore is the co-editor of Green Zone Fortunes and specializes in income and retirement topics. He is also a frequent guest on CNBC, Bloomberg and Fox Business.