With 68 record highs, 2021 was an exciting year for the S&P 500, and the turbulence has only intensified during the early weeks of 2022.
Concerns surrounding inflation, rising interest rates, and market valuations are dominating sector rotation strategies and fund flows.
If you’re looking to redefine your goals for 2022, here are a few investment resolutions to consider that can be implemented at any time, according to Kristina Hooper, chief global market strategist at Invesco.
Revisit your investment priorities during a scheduled time, as opposed to reacting to economic trends and market movement. Investment policy statements help investors, both institutional and individual, stay the course and keep focused on long-term goals, according to Hooper.
“The key is to do it in a ‘vacuum’ rather than in response to a market event,” Hooper said. “That helps take the emotion out of decision-making. After all, some of the investors who were most negatively impacted by the Global Financial Crisis and the pandemic were those who got out of markets when stocks started falling, only to miss out on substantial rebounds.”
Next, Hooper recommends having a well-diversified portfolio.
“For many investors, it’s not enough to just have exposure to stocks and bonds — that leaves out the potential benefits of alternatives. And within all three major asset classes, it’s important to be well diversified,” Hooper said.
According to Hooper, within both equities and fixed income, many investors are under-exposed to emerging markets and may benefit from increased exposure.
An equal-weight strategy, such as the Invesco S&P 500 Equal Weight ETF (RSP) or the Invesco ESG S&P 500 Equal Weight ETF (RSPE) can provide diversification benefits and reduce concentration risk by weighting each constituent company equally, so that a small group of companies does not have an outsized impact on the index.
It is also recommended to rebalance your portfolio at least once a year. That enables investors to take profits and ensure you are within the parameters of your investment policy statement, according to Hooper.
Finally, Hooper recommends keeping some cash on the sidelines to deploy during substantial stock market drops.
“You may want to dollar cost average in the case of a stock market correction, although recent drops have been very short-lived so there may not be a lot of time to deploy a dollar cost averaging strategy,” Hooper said.
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