What to Do After a Disastrous 2022

First, don’t panic and look on the bright side. Secondly, tune out all of the financial pundits and stick to your investment strategy. Third, have the proper historical perspective. Remember, investing is not just about financial concepts, mathematics, and statistics, but rather having the right temperament to avoid the emotional traps of fear and greed. When something bad happens in the markets usually something good happens. Keep in mind that the experts are often wrong when it comes to making market predictions, so it is critical to focus on the facts and what has happened historically. Gathering and analyzing historical market returns is not a difficult task but keeping your emotions in check after gathering the facts is the more difficult challenge.

So, what does history tell us about disastrous year-over-year returns experienced over the last 90 plus years? If we look at market returns from 1926 through the end of 2021 then the view of the future looks a little brighter. Since 1926, there have only been 7 instances, including 2022, when the market has experienced returns of negative 15 percent or more. Since 1936, following a market decline of 15 percent or more, the market has returned 31 percent on average the year following the decline. In 2022, the market declined negative 18.11 percent and has been given the name “The Great Inflation” by some pundits as skyrocketing inflation is believed to be the major cause of the turbulent and negative returns experienced in 2022. What does the new year hold? Again, market pundits are making their usual conflicting and wild predictions about what will happen in 2023, but the reality is that while no one can know, history suggests something positive.

Sticking to your investment strategy is another component of being a successful investor in difficult markets. Unfortunately, many investors chase returns by shifting their investment approach based on which fund had the best or highest return in the most recently completed year. Of course, what happens in most cases is that switching strategies by chasing returns results in lower returns over time. So, the theme in 2023 should be to stick to your strategy and set aside your emotions and recognize that now is a great time to invest and not the time to get conservative. Bad times are followed by good times particularly the year following midterm elections.

Are you looking for investment ideas beyond basic asset allocation strategies? if so, then you need to look no further than Investoristics. In 2023, new and fresh investment approaches should be top of mind as investors grow tired of investment strategies that fail to generate returns that exceed the market. Exceeding market returns does not have to mean taking more risks. At Investoristics, our approach has achieved marketing beating returns that provide significantly higher returns than any market index with lower risk.