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Where to invest in 2022

14 December 2021

Money & Life team

Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.

This year has seen both the property and stock markets gain ground, despite successive COVID-19 lockdowns. Housing values especially have risen sharply in the past 12-months, leaving many would-be home buyers out in the cold. But with significant headwinds ahead for global growth, and inflation rising, where should you put your money in 2022? We asked Certified Financial Advisor Rachel O’Connor from Flourix Wealth for her view.

It’s been a good year for investors and home owners, with both property and equities rebounding strongly. The ASX 200 has added around 9.93 per cent for the year, while national housing values added a staggering 22.2 per cent in the year to November.

However, markets have cooled in recent months as investors, and home buyers, become more cautious. Ongoing disruption to global supply chains due to COVID-19, combined with other political and economic challenges, has triggered inflation and slow global growth. This is known as stagflation, and it presents a unique challenge for policymakers.

In Australia, the housing market has been easing for a few months, as worsening affordability, more availability and the end of stimulus spending take effect. The threat of potential interest rate rises is also looming, which could be having an effect on buyer sentiment.

So, if you have funds to invest, where should you look? Here, Certified Financial Planner Rachel O’Connor from Flourix Wealth shares her top investment trends for 2022.

1. Think ethical investing

Climate change has been front and centre throughout 2021, culminating in the UN COP26 Climate Summit in Glasgow in October/November. Ms O’Connor says it’s a wise financial and environmental decision, to consider this in your portfolio.

“Over the coming months and years, governments will increase their commitment to cutting greenhouse gas emissions, which will present significant headwinds for companies operating in high emissions industries,” she says.

“Companies in industries such as renewable energy and technology are likely to benefit from this major shift. To me, it makes sense to position your portfolio for this.”

There are several different ways to approach ethical investing, so do your research and find out what’s the best fit for you. Start by considering your values and what you’d like to achieve with your investments. Then consult a Certified Financial Planner® who is experienced in ethical investing for advice.

Read more: An intro to ethical investing and How to invest ethically

2. Look offshore

With the Australian market making up just two per cent of the MSCI World Index, Ms O’Connor says it makes sense to diversify overseas.

“The local market is highly concentrated in the financial sector (30%) and materials (18%), with less exposure to sectors like technology (5%) and communications (4%),” she says.

“On the other hand, the MSCI World Index (excluding Australia) is weighted towards technology (23%), financials (13%) and healthcare (12.5%). So allocating some of your portfolio towards international markets is a great way to increase the diversification of your portfolio between regions as well as sectors.”

As the world continues to recover from COVID-19, and slowly embraces a low-carbon future, there will be significant opportunities overseas in sectors like healthcare, travel and tourism and technology.

3. Exchange Traded Funds

Finally, if you’re looking for a simple and effective way to invest in the stock market, Ms O’Connor says you can’t go past Exchange Traded Funds (ETFs).

“When it comes to investing, I’m a big believer in low cost, broadly diversified exchange-traded funds,” she says. “You can use ETFs to construct your whole portfolio, based on your appetite for risk.”

An ETF is a managed fund that can be bought and sold on a stock exchange. There are different types of ETFs, including ones that track an index, for example the ASX200, or a commodity, like gold. You can choose from different risk profiles, including high growth, growth, balanced or conservative.

Ms O’Connor says investors who want to get more involved can choose an ETF targeting a specific region, sector or theme. For example, you can invest in an international ETF, or an ETF built around sustainability.

“Research shows time and again that it’s very difficult to beat the market,” she says. “So investing in index-tracking exchange-traded funds is likely to result in as good, if not better returns than can be achieved through stock picking and active management.”

Want to make 2022 the year you get started on the path to financial freedom? Speak to Certified Financial Planner® (CFP® professional) about ways to secure your financial future. You can find one using our Match my planner tool.

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