As the sun sets on 2022 – the first year of negative growth for global equities since 2018– curiosity about what 2023 will hold for investors intensifies.
While the start of the year is often seen as a time for a fresh start, there are some things that are worth carrying over into the new year. One of those is the key pillars of investing that have been proven to grow wealth consistently over many years.
You might be feeling tempted to move your wealth out of the equities that have performed so poorly over the past 12 months. After all, the emotional impact of seeing the value of your portfolio drop, as it has for many this past year, can be compelling.
But if you can rise above the noise of your emotions telling you to move your money elsewhere and instead focus on the tried and tested methods for growing wealth, your money could grow more steadily and consistently than it would if you shopped around.
Traditional investment philosophy is based on 100 years of data
If you’re ever feeling tempted to take a chance on unfamiliar investments, such as the ones that are often seen after periods of market volatility promising high returns and little risk, keep in mind the reason why you invested in equities in the first place. It’s because the philosophies that endorse this approach to investing are based on 100 years of market data and experience.
Much of the 20th century has seen uncertainty, political upheaval, and market volatility. And yet despite this, the key points of learning continue to prove themselves correct again and again.
Those lessons include:
- No matter how positive or negative an outlook may be, nothing is certain. Market conditions can change quickly and unexpectedly, so you can never be sure what’s around the corner.
- Even if you are very sure of what is about to happen in the markets, the timing can never be predicted. Often, during times of economic uncertainty, the markets change before the economic situation begins to improve.
- Investing in equities for the long term usually produces returns that significantly outpace the rise in the cost of living. This is driven by the fact that the companies you invest in through equities are run by some of the greatest innovators in the world, who ensure their business continues to thrive regardless of market conditions.
- Occasionally, the value of your equity investments will dip – it’s an inevitable part of investing in the stock market. But this doesn’t negate the potential of returns over the long term and the dips are impossible to accurately time.
- Remaining invested in your portfolio through good times and bad is usually the best way to benefit from the growth of global equities.
Equities could already be starting to recover
Generally speaking, markets are usually already starting to bounce back once the events that cause volatility have ended.
One of the key lessons from the past 100 years is that equities are driven by innovative business owners who will adapt to market conditions and ensure their business continues to thrive. It’s these people who enable equities to provide enviable returns to their owners over time. After all, they wouldn’t borrow these funds if they weren’t certain of their ability to exceed that amount in growth.
Such innovators are likely already working hard on ensuring a recovery from the recent market lows. As an owner of the company, you may soon notice your returns recovering too.
So this year, even if a recession does take hold, don’t let yourself be drawn into those alternative asset classes or investments that promise a way out.
Instead, keep in mind the evidence and conviction behind the key investment principles, and remember the historical returns that equities have provided over the past 100 years.
While they might be floundering at present, this is unlikely to be the case for very long. Soon enough, investors are likely to be enjoying a prosperous rebound to growth.
Get in touch
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