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It won’t be a surprise to many of us that countries all over the world are suffering from unstable economies, due to various economic impacts brought about by the pandemic, as well as various political factors – which are both influencing the cost of living, inflation, and economic instability. This can be a risky time for investors, and if you’re not sure how to manage your investments during this turbulent time, you may end up making decisions that could cost you. Below, we’ll look at some investment insights to help you out in 2022 – what to expect and how to handle it.
High Inflation
As many of us will be aware, inflation is increasing all over the globe. Inflation is happening as countries, economies and businesses around the world try to recover from the issues that they faced during the covid-19 pandemic. High inflation means that the cost of living generally increases – again, which many of us will have had first-hand experience of. Inflation may continue this year for many reasons, depending on both supply and demand. If a product is difficult to get a hold of, and it is in high demand, this is likely to raise the price. This is one of the main reasons why fuel and food costs are increasing. Various conflicts and the inability to get workers to help with production mean that prices are going up.
So, what does this mean for investments in 2022? It’s not all bad news, putting your money into the correct stocks within your investment portfolio means you can benefit from increased interest, and it is certainly more fruitful than holding it in a savings account.
Volatility
Because of the unstable economy, and various other factors that can have an impact on the economy globally, investors should expect increased volatility throughout the year. The market will remain unpredictable, growth is set to stall and inflation will continue to persist. And there will be various elements that could hurt the way the economy is recovering. A volatile market means that it is harder for investors to keep their money safe, and although all investment requires risk – investors will have to take on more uncertainty as they try and navigate the market. Knowing how to manage your investments in a volatile economy is key so that you don’t lose more than you need to – we will look at this in more detail below.
Reduced returns
Due to the above issues, it is worth keeping in mind that your investments may not be as fruitful as you once hoped. You should be prepared for reduced returns on your investments this year, as the market is unpredictable – but this will depend on where and how you have decided to invest. If you’re investing for the future, you should act sensibly and try not to panic. Pulling money out of your investments may stand you to lose more than you would if you left it there to ride out the storm.
How to invest in an unstable economy
So, how do you manage your investments when the economy is unstable? Firstly, you should make sure that your portfolio is diverse. If you spread your risk between a few different types of stock, you will be able to reduce your risk – and then you can rebalance your portfolio when necessary. You could also look at investing in companies that are less likely to be impacted by a dip in the economy, like supermarkets and healthcare companies. People will always need to buy from these businesses, no matter the cost of living, so this may be a more stable place to invest. When the economy is changing, it is best to ride it out. If you are investing for the future, the likelihood is that whatever you lose during this time, you will be able to make it back in the future.
