We’re nearly at the end of the 2022 financial year. I think there are some really good investment lessons to take from the last 12 months.
It has been a very eventful year, including the normalisation of COVID-19 in Australia, asset prices plunging and borders reopening.
What can we learn from FY22? These are some of the lessons I’m taking from the year:
Inflation is back
Inflation had been at a historically low rate for some time. But now it has surged higher in a big way.
There was a thought that inflation may stay low for a long time, perhaps forever, thanks to the constant improvement of technology, globalisation and supply chains connecting the world.
But, while the Russian invasion of Ukraine was largely unexpected, other elements were pushing up inflation before that.
Inflation is causing central banks to increase interest rates. When will rates stop rising? Who knows. But it’s hurting valuations. But for me, as someone with decades of share buying ahead, these lower prices are attractive for the long-term.
Don’t forecast forever-expanding growth without accounting for risk
There are/were plenty of ASX shares that were priced for very strong growth, but I don’t think those prices were taking into account the possibility of things not working out.
That’s why I believe it’s so important for investors not to get caught up in the hype too much of a particular business or sector.
The buy now, pay later sector has been walloped. For example, the Zip Co Ltd (ASX: ZIP) share price has fallen 87% in 2022, the Sezzle Inc (ASX: SZL) share price has dropped 90% and the Splitit Ltd (ASX: SPT) share price has dropped 57%.
However, amongst the plunge, I think there are some great long-term ASX share opportunities like Xero Limited (ASX: XRO), Adore Beauty Group Ltd (ASX: ABY), Temple & Webster Group Ltd (ASX: TPW) and City Chic Collective Ltd (ASX: CCX).
Cash is king?
For years, cash has been one of the least preferred assets. It earned next to nothing and it lagged the returns of most other asset classes.
But in 2022 cash has outperformed, ironically at a time when inflation is high. Investors obviously need cash to make those asset purchases.
The interest return that cash now offers is much better and seemingly growing every month.
My cash isn’t sticking around in my bank account long. I invest within a few days of it hitting my bank account – I’m loving these opportunities right now such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
