Where to put your money in 2022?

Howdy,

Gone are the days when it was relatively easy to make money from investments, and at the same time, there were times when you didn’t lose much by keeping your money in the bank.

The current situation comes with challenges on all levels:

1. Inflation is no longer something that is only felt in statistics — today it is felt every time you buy something. See how you have to pay more lei every time you fill your shopping cart or when refueling at the gas station;

2. Stock market corrections, but not even Black Friday. There were corrections, but not even on Black Friday, of 15–20% on the indices. Indeed, there have been much larger corrections to some individual actions, but they have offset the actions in the “old economy” of natural resources that have not allowed the indices to fall too much. In addition, the stock exchanges recovered about half of the corrections. Thus, the current situation is not buying the dip with all the money as it is blood on the streets. Rather … a little blood started to flow on the streets … and we don’t know if we’ll be able to put patches on if it’s ready or if it’s just the beginning.

3. Besides the covid that seems to be coming back … we also have war … Superb, and more uncertainty, more fear, and more negative emotions.

4. Real estate, the perfect hedge in times of inflation … with war real estate can take either up or down quite a lot … it depends on the outcome of the war, more than inflation.

5. The Fed is gone dollars. We do not know at what rate and how they will get rid of the $ 9 trillion injected into the economy.

6. Supply chain and economy — In essence, for the economy to thrive, it must continue to grow. Thus, companies will continue to make profits. But … if these companies can’t produce as much because they don’t know what microchip they don’t know or what special screw they know … then all the companies will be affected in the chain, including those that provide services for those who produce physical products. This creates even more inflation and slows down the economy.

7. Raw materials — All products are more expensive and, in turn, more expensive. It is especially important to increase the price of energy because energy (oil, gas, electricity) is part of the costs of any factory. Now, and because of the war between Russia and Ukraine, we have 2 big producers of raw materials (energy products, food, industrial metals) on the block.

8. Tensions over superpowers — Sanctions, declining international trade, lack of confidence — all further affect the economy.

9. The risk of economic crisis — Points 5, 6, 7, and 8 above put pressure on the economy and the profits of companies. The problems are mainly on the supply side. However, if inflation continues to erode the money of the population (which still has substantial savings accumulated in the last 2 years), then we could have a problem in terms of consumption.

10. The potential for escalation of the military conflict — Even more uncertainty. Uncertainty causes certain investments and expenses to be delayed by both corporations and the general public.

What to do during this period?

1. First of all, we need to keep calm. Let us not throw ourselves into hasty conclusions, nor let us be paralyzed by the thought of a catastrophic scenario.

Let’s not fall into the trap of thoughts like “I’ll tell you, there will be a crisis in which 2008 was a small child” or, even worse … “This is the third world war”.

Such thoughts, accompanied by strong emotions, will only paralyze you and make you act impulsively.

2. Second — continue to produce, work, and invest. Who stops working in times of tension, panic, etc. he is most exposed to a personal economic crisis. In addition, it puts its shoulder to the entry of the country’s economy into recession.

3. See reality as it is . This means that you have to diversify your investments globally, especially in developed economies.

Also, much of the savings should be kept and invested in EURO and USD.

4. Only you can take care of yourself and your money

This is about the fact that many are outraged by the fact that bank interest rates and government bonds are well below inflation — no one (state, banks, etc.) has the guts to protect Gigel's savings from inflation.

Everyone will give you the lowest possible interest rate that you will accept in the absence of alternatives. The fact that Gigel is losing purchasing power — it’s just statistics — is called the inflation rate and is published monthly.

Also, unfortunately, no government, central bank, or banking institution has an interest in teaching Gigel how to multiply his money. Gigel has to go to work, pay taxes and consume. All this goes into statistics (that matters), the fact that Gigel becomes more prosperous and has a good life does not matter for institutions (it does not go into statistics that Gigel becomes financially independent and is prosperous and happy).

So … only Gigel has his well-being as a priority.

5. Uninvested money is lost through inflation, poorly invested money is lost through declines

The remaining money loses 10% per year of inflation and never recovers.

Money that is poorly invested can be lost 100% from the first year.

The smart money invested can lose some percentages this year, recover them all, and even reach a surplus next year.

The point is, I don’t see decent alternatives to stock investing today. It’s just that not all at once and not in any kind of action.

The safe option is to go for global ETFs and possibly well-thought-out factors or sectors.

The even better option, but much harder, is to go for those actions that produce exactly what is most demanded at the moment and what is expensive and becoming more expensive: energy, agriculture, banks, and industrial metals. But here you have to be careful that you have to get out of them at a decent time.

And an annoying option — more dangerous, but with a higher chance of winning, would be to buy technology stocks at decent prices when those decent prices appear.

Conclusion

All this should be done with patience and discipline, not by sudden movements. There are still great uncertainties in the market.

But all our approaches should be rational. Let’s manage our emotions and not act on impulse.

Success