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Lessons Learned from 2022 Disappointments

Lessons Learned from 2022 Disappointments

January 11, 2023

Investor disappointments from 2022 can be a guide to building your portfolio, writes Peter Watson.

Five high-tech stocks that previously were considered the darlings of investing lost $2.8 trillion in the first 10 months of 2022, according to S&P Global.

These companies are referred to as FAANG stocks. Facebook (Meta), Apple, Amazon, Netflix and Google (Alphabet). Two of those companies changed its name as listed in brackets.

As many investors understand the year 2022 was very disappointing.

International stocks as measured by CAD MSCI data and reported by Dimensional Fund Advisors for the first 10 months of the year are negative 14 per cent. FANG stocks are collectively negative 27 per cent for the same time.

Lesson One. Stocks and sometimes groups of stocks can get on a strong winning streak. That typically does not last.

Lesson two. Diversification is your friend. If stocks have strong appreciation in value, that does not mean you should abandon the core principle of investing and that is diversification.

The cruel reality about investing is people often act on their instincts. If a stock or a particular group of stocks outperform the instinct, or the hope, is that strong performance will continue.

Investing in stocks can be dangerous. To manage that risk, we have three suggestions. Diversify, diversify, and diversify.

We hope 2023 delivers better results to your well diversified portfolio.

Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI. ACPI is a member of the Investment Industry Regulatory Organization of Canada. The opinions expressed are those of the author and not necessarily those of ACPI. Only investment-related products and services are offered through Watson Securities of ACPI. Peter Watson provides wealth management services through Watson Investments. He can be reached at www.watsoninvestments.com