Welcome to 2022
Planning for a better year
An early January challenge can be pinpointing the right time to stop wishing each other a ‘happy new year’. Of course, different views are held on when appropriate although majority opinion seems to fall in the range from one day to one week.
Happy new year !
A greater challenge at this time of year is thinking about our own plans and goals for the next 12 months. This can relate to personal, family or business objectives.
The early new year period is also an opportune time to restate some deeply held beliefs on financial planning and investment management.
For many of us 2021 was a disappointing year. Hopeful of a return to normal, we instead experienced an extension of 2020.
Eternal truths
Whatever the next few weeks, months or years may bring, our principles remain the same. They help to provide a solid foundation for your financial planning, irrespective of short-term market movements.
We believe the only consistent approach to financial success is goal-focused and planning-driven. Whilst failed investors tend to react to stock market news, our approach will insist on sticking to the plan i.e. your plan.
Your financial plan is underpinned by investing in a globally diversified investment portfolio. This portfolio is built to stand the test of time, and despite what you may read, does not require regular adjustments to account for short-term changes in investment markets.
While each new world event brings with it a degree of uncertainty, we make no attempt to forecast the global stock market. The same goes for trying to time the market such as when to buy and when to sell. Anyone who claims that they can successfully do so on a regular basis is likely a fraud and should be avoided.
Furthermore, we view risk differently compared with many financial advisers. We believe that risk is not only how much your investment portfolio goes up and down. We believe that risk is the chance of you not achieving your goals and running out of money in later life.
We’re here to help keep you ‘in the market’, particularly during scary times. This helps provides you with the best chance of growing your wealth and providing financial security, both now and in the future.
Another good year
The news cycles had a few themes emerge this year. A lot of airtime was understandably devoted to Covid, but supply chain challenges and the return of significant inflation have been recent areas of uncertainty.
The year may have been disappointing on many fronts, but investment markets have been positive. While the front pages continued to be filled with pandemic updates, world markets have quietly marched upwards.
The world’s largest stock market index is (at the time of this writing) up by c.27% since January 2021. This is on top of the index rising by c.28% in 2020 and c.16% in 2019. These figures may seem incredible to those who’ve only been exposed to negativity for close to two years.
The great companies of the world continue to make profits, with this being either reinvested into attractive projects or distributed to shareholders. By investing in these companies, through the portfolio created for you, you stand to benefit from this human ingenuity.
Based on historical returns, we know that the stock market typically falls in value every four years or so. 2021 is the third year of continuous positive returns. This is not a prediction, but it’s a data point worth knowing.
What to do with this knowledge? As stated above, portfolio changes are only necessary when your goals change. Keep in mind that one of the main ways to capture the full market return over the long term is to ride out the frequent declines.
The declines are usually temporary, the advance is normally permanent over the longer term – if only you remain invested.
Looking forward
We’re confident that what we’ve been through before will help us as we confront the future. While history may not repeat itself, it does tend to rhyme.
I look forward to catching up and reviewing your plans and progress in 2022.
Barra Gorman
Chartered Financial Planner
Foursquare Financial Management Ltd