There is no doubt that the past two years have been marked by unforeseen and widespread economic challenges felt by nations across the globe. Yet, despite these challenges, share markets have continued to flourish, producing strong returns for investors. For example, by the end of 2020, the return for the US S&P 500 was +18% after an even stronger result in 2019. And the total return for 2021 was +26.9%.

Incredibly, investors were able to capitalise on opportunities such as falling share prices and innovative, future-focused companies – with many investors seeing their returns skyrocket like never before. But will it continue? Can it continue? For how much longer? And what should investors do now to prepare themselves for whatever the year ahead may hold?

We turned to some of the partners in the Sharesight ecosystem – who are experts in the Australian investment market – and posed four key questions to them. We saw some consistent themes across the responses in this article, including stock market volatility, rising inflation and interest rates, as well as the impact of new technologies. To give yourself the best chance of ensuring your portfolio doesn’t take a downturn in 2022, we strongly recommend you give all these invaluable insights and recommendations a very close read.

What’s your overall investing recommendation for new investors in 2022?

Andy Rogers, Director of Stockbroking, CMC Markets Invest: “Volatility has been a powerful trend impacting the markets since COVID-19 took hold and is set to continue in 2022. With that in mind, one tip for new investors is to review the strategies they can put in place that will mitigate risk and help to minimise the impact volatility has on their portfolio. An example of this is the Dollar-Cost Averaging (DCA) method. DCA is an investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset, the aim being to reduce the impact of volatility on the overall purchase.

“With DCA, the purchases occur regardless of the asset’s price and at regular intervals. Investors can also decide what their exit price, on any investment, will be by utilising the trailing stop loss order. This allows you to ride the wave of a company’s share price with a safety net that will exit you once the price retraces. Using these strategies will remove some of the complications around attempting to time the market correctly in order to purchase equities at the best prices and can ultimately enhance investment performance.”

Mark LaMonica, Individual Investor, Product Manager and Co-host of Morningstar Australia’s Investing Compass podcast: “What’s been happening is not normal. There’s a lot of confidence in a market that, according to many traditional indicators, resembles the peaks that preceded some of the worst crashes in history. The biggest key to being a successful investor is to stick to it over the long-term so investors should temper their expectations going forward.

“There is some value in mentally preparing for a bear market and combining a study of history with a sceptical view of many of the current pronouncements about how ‘this time will be different’. Ignore the market noise and remember why you are investing. Do you have a goal in mind? Properly define the reason why you are investing and plan for this goal using a long-term mindset. Construct your portfolio mindfully, understanding each and every investment you make. Know your weaknesses as an investor, whether it’s nervousness when markets drop or euphoria when markets rise. All of this seems like common sense, but as Warren Buffet said, investing is simple, but not easy.”

Pat Garrett, Co-CEO and Co-founder, Sixpark: “Study and appreciate share market history. If you’re investing for the first time in 2022, the rear-view mirror is enticing: even with the rapid 34% drop in the US benchmark S&P 500 in early 2020, the total return ended up being more than 18% in 2020, on the heels of an even stronger rise in 2019. And 2021 is looking to exceed 20% total return for this same key benchmark.

“These returns are high by historical measures, and history suggests that markets pull back, or “correct” (meaning down 10% or more) about every 19 months. This is normal, and volatility is the price of admission to achieve strong long-term investment returns. So the most valuable tip for a new investor in 2022 is to understand that volatility and market corrections are not unusual. It’s typically best to be patient and stay the course with your long-term investment strategy rather than allowing short-term market gyrations to alter your course.”

Jason Leong, CEO and Co-founder, Pocketsmith: “It may be tempting to follow trends and do what your friends are doing. Instead, start with small steps and take the time to understand your investment personality, risk appetite, and what values are important to you. This will help shape your investment strategy with intent and purpose.”

David McEwan, Founder and Lead Analyst, Stockfox: “Watch out for inflation. Inflation is going to continue to be an issue in 2022, regardless of whether the causes are transitory such as supply chain disruptions, or are more permanent such as a wage/price spiral. As a result, I expect prices for all forms of physical items, from food to household items to gold, to rise.”

Brooke Roberts, Co-founder, Sharesies: “In the midst of the volatility, stick to your investing strategy. Be prepared for some ups and downs.”

What’s going to be the most important investing trend in 2022?

Mark LaMonica: “The rapid creation, evolution and meteoric success of investment products seems like the standard cycle now. We’ve seen it with thematic ETFs, SPACs, cryptocurrency, NFTs – classic examples of graphs that look like hockey sticks to the sky. Ultimately, people and organisations will keep creating these trendy investments as long as they make money from it. Investors should take a step back from these investments and understand firstly, whether they know what they are investing in, and secondly, why they’re investing in it. Regardless of what the most important investing trend is for the market, stay focused on what is important to you – many great investors that enjoyed success stayed clear of trendy investments.”

Pat Garrett: “Volatility – which, if managed patiently, can benefit investors over time. The combination of current unknowns and risks (including the ongoing pandemic, inflation trends, interest rate movements, geopolitical machinations, elevated property prices and speculative investments such as crypto) and markets now being near all-time highs suggests that investors should expect a bumpy ride in 2022.

“Of course, no-one knows how well or how poorly markets might perform in the coming year, but it would be prudent to have an investment plan that performs relatively well in a volatile environment. History would suggest that the pillars of such a plan include the combination of prudent asset class diversification, periodic portfolio rebalancing, reinvesting dividends, keeping costs low, remaining patient during market volatility and then sticking to the plan. I believe this approach provides the best investment outcome (and least amount of stress) over time.”

Jason Leong: “I think that investors are going to increasingly place small bets in crypto and the metaverse. Though risky, they reflect important spaces to pay attention to due to their predicted growth (the crypto economy is expected to top US$7.5T in 2022) as well their increasing influence on how people engage with each other on the Internet.”

David McEwan: “People managing their own portfolios is becoming a major trend, as they find the increased volatility of markets in recent times has meant more passive investments such as ETFs are not performing as well as they used to.”

Brooke Roberts: “Investing will be even more prevalent in our lives. You may already be having conversations with your family or friends and we’ll see this trend continuing. Long gone is money and investing as a taboo subject!”

Andy Rogers: “CMC Markets predicts that in 2022, traders are going to be looking for a one stop shop when it comes to investment apps, including the option to trade crypto currency alongside traditional stock options and international exchanges. Investors should be looking for a platform that can provide easy access to all of the products and markets they’re interested in.

“Increased app usage is likely to be supported by the drive in new-wave Gen Z and millennial investors throughout the next 12 months. We also anticipate heightened interest in sustainable investing with a focus on ‘green credentials’ into 2022. With a huge focus on climate change and reaching carbon neutrality in Australia and around the world, there is a growing appetite from investors to look at the ESG standards of the businesses they are interested in trading.”

How will technology impact DIY investment trends in 2022?

Pat Garrett:” Technology will continue to help you simplify and more efficiently manage your DIY investment activities so you can invest wisely while also freeing up time for other important activities in your life. What we are seeing at Six Park is more people who want to get invested without being caught up in the distraction, stress and time drain that can be part of actively managing a portfolio.

“More investors are using technology to automate much of the investment process like making automatic investment deposits over time, setting trading and rebalancing thresholds to steadily invest in a hands-off manner that aligns with their investment strategy (which can help reap the benefits of dollar cost averaging over time). In short, technology will increasingly be used to reinforce a famous quote: “Your money is like a bar of soap: The more you handle it, the less you have.”

Doug Morris, CEO, Sharesight: “The surge of interest we’ve seen in retail investing will continue to be underpinned by technology, from online brokers, to mobile apps, to platforms like Sharesight, technology has made investing more accessible than ever to DIY investors, and will continue to do so in 2022.”

Jason Leong: “Online retail investing platforms will continue to make financial markets and alternative investments increasingly accessible, allowing for highly diversified portfolios. Consequently, consumers will require and demand more ownership over their data, and with the Consumer Data Right proposed to be legislated in 2022, we’ll see more fintech apps that help busy households aggregate and manage their financial and investing lives all in one place.”

David McEwan: “The increased convenience factor from being able to trade quickly and cheaply from your phone means people are rapidly adopting fintech apps. This will continue to drive the growth of value-added apps like Sharesight and Stockfox, which make it even easier for people to have a total share market solution in their pocket.”

Brooke Roberts: “Inevitably, there’ll be more and more choice for investors.”

Andy Rogers: “With cash rates remaining low, engagement with investment platforms by new users will continue to grow throughout 2022. CMC Markets anticipates this will be boosted by a new cohort of younger traders encouraged by social media platforms, as well as an increasing number of female traders. Research tells us that a high proportion of self-directed share investors often struggle with knowing what stocks to buy and when to sell – so expect to see new platform services that build on the robo-advice model and offer general trading advice and recommendations.”

Mark LaMonica: “Technology has been an excellent contributor to leveling the playing field for retail investors. Many of the services, information and tools that were inaccessible to everyday people are now readily available. Technology will continue to break down barriers and lower the cost of investing. As an industry, financial services has traditionally been focused on serving intermediaries (financial advisers) and institutions. The name of the game now is technology-driven disintermediation. The industry has shifted its focus, gradually, towards retail investors. In 2022, I anticipate this shift to continue and accelerate as the industry finds more ways to service the end investor.”

What’s one thing investors should be wary of in 2022?

Jason Leong: “2021 has been another great year for stocks, but a market correction is always a possibility for the year to come. Downside moves, though scary, are a normal part of the investing cycle, so it’s always good to remember that time in the market beats timing the market, and that dollar-cost averaging helps take the emotion out of investing.”

David McEwan: “Share prices are very extended by historical standards and much of this has been driven by easy money and low interest rates. These trends are now starting to reverse, which will make it harder for markets to keep going up at the rate they have done in the recent past.”

Brooke Roberts: “FOMO – remember to do your due diligence. Ensure you’ll be proud of being an owner of that company or of participating in that fund. Consider the key attributes and risks for each investment no matter the hype on social media or among your friends.”

Andy Rogers:” CMC Markets data analysis paints a clear picture around increased fees, including a jaw-dropping 33% increase in ETF fees paid by Gen Z investors. With that in mind, my number one tip is to be vigilant in reviewing fees and fine print from providers. For example, there’s been a wave of new actively-managed ETFs, which tend to have much higher fees than a traditional ETF. Make sure you fully understand the fee structure before making any commitment to invest. Consider that it may be more cost effective to buy the underlying stocks that make up the ETFs, and make sure you choose an established provider that can help you build a diversified and successful portfolio.”

Mark LaMonica: “If I had to describe the market in a word, it would be precarious. Interest rates are going up and inflation appears anything but transitory. We’re seeing high stock valuations – as high as we’ve seen in the past 70 years. Secondly, bond yields are low – as low as they’ve been throughout the past 70 years. That makes this an extremely challenging environment for investors, yet we continue to see all sorts of signs of speculative excess. Record volume of options trading and margin lending – both have exploded in popularity with retail investors. We see ‘buy the dip’ and declarations of shares being on sale after meaningless falls in the market.

“Ultimately, as we go into the new year, we need to be wary of the culmination of all of these factors. The market cycle isn’t broken, it’s running hot and there are a lot of speculative investors in the game now who only believe the market goes up. Instead, beware of an increasingly precarious market and stay focused on your long-term financial goals.”

Pat Garrett: “For new investors in 2022, one of the most important things to be wary of is to avoid letting your emotions drive your investment decisions. You cannot control inflation, interest rates, corporate earnings, unpredictable market movements and so on. And history suggests you shouldn’t try to time the market – it’s simply too hard. What you can control are the fundamental pillars of your investment goals and strategy, being well diversified, and then sticking to your plan, only making changes when something fundamental changes in your life or circumstances, not as a result of short-term market dynamics.”

We hope you have found these expert insights valuable and instrumental to your 2022 investing strategy. We’ll leave the final word to Sharesight’s CEO, Doug Morris: “After a strong 2021, investors should be mindful of the potential for volatility to affect markets, and prepare for what this may mean for their portfolio by looking at their asset allocation and diversification with tools like Sharesight.”

Looking to protect your portfolio against volatility? Sign up for a FREE Sharesight account today to track all of your investments in one place and get the full picture of your portfolio’s performance.