Things may seem pretty dismal at the moment. The present financial climate is about as welcome as ants at a picnic. Markets are readjusting in the face of pandemic recovery and the war in Ukraine, and changes in government are always a cause for uncertainty.

In the face of a steady narrative of doom and gloom, the fiercest foe is despair. In times such as these, the best course of action is to keep steady and stay on your feet. Take heart that there are numerous strategies at your fingertips and many ways to secure your assets and to ensure you aren’t punished by the downturn.

Here are what we anticipate to be the top four wealth-building trends of 2022.

1. Passive income

Making money while you sleep—that’s the dream. Passive income may be difficult to manage, and even more so to establish, but the benefits cannot be overstated.

One of the best ways to make passive earnings is by investing in dividend-paying stocks. These allow investors to profit in two ways; through distributions made by the company and through appreciation in the price of the stock itself. In many instances, these stocks are in defensive sectors, such as utilities, consumer staples, or healthcare, providing stable, consistent earnings regardless of the state of the overall market. They are more reliable and better able to weather periods of economic decline or instability.  Furthermore, dividend-paying companies generally have deep pockets, allowing for comfortable, long-term performance and the ability to survive attrition.

Another great way to earn passive income is through earning rewards on crypto, such as Bitcoin or Ethereum, and stablecoins (cryptocurrencies tied to another currency or commodity) like TAUD and USDC. Swyftx Earn allows investors to earn interest on eligible cryptocurrencies held in their Swyftx trading wallet, with no fees, and a daily income automatically added to their total balance of cryptocurrency.

Swyftx earn graphic

Important to remember: Like any investment, there are risks associated with crypto. While it can be extremely profitable, it is highly volatile, and prone to massive fluctuations in value.

2. 2022: The year of the bear

Prices are low, and getting lower owing to a decline in the confidence of investors. That said, there are plenty of ways to take full advantage of a floundering market, and to come out better on the other side.

First, try to balance your cash reserves. While it’s essential to have fluidity and something to fall back on, the more you hold in cash, the more you stand to lose to inflation.

Second, a tried and tested strategy for negotiating volatile markets is dollar-cost averaging (DCA). Simply put, the process of investing your money over time, rather than in a single lump sum. Ideally, you will time the market to your advantage, and divide your initial investment into several portions, trading at a set time periodically.

The logic behind this method is that buying smaller quantities over time, rather than all at once, increases the odds that you’ll average a better return. This is particularly effective when it comes to trading crypto—picking a single time each week to purchase, regardless of the market value, in the hope you’ll end up with more than if you put everything on a single trade.

While the current financial climate may seem dire, we’d all do well to heed the words of the incontrovertible Warren Buffett, as he urged us to ‘be fearful when others are greedy, and greedy when others are fearful’—to take full advantage of a timid market, and to beware the inevitable decline of a reckless one.

Interesting fact: There is a term in investing, especially prevalent when it comes to cryptocurrency: ‘Buying the Dips’. This refers to buying incrementally as the price drops, and buying larger quantities as it decreases further. The rationale behind this is the age-old ‘buy low, sell high’—however, it is imperative to stress that this applies to strong, durable markets, such as Bitcoin and Ethereum.

To be frank, don’t put all your eggs in one basket. Spreading the risk is essential to surviving in an unpredictable economic climate.

3. Inflation-resistant portfolios

Hope for the best; prepare for the worst—and don’t discount the immeasurable value of diversifying your assets. Even in times of relative economic stability, it is still advisable to isolate the various facets of your portfolio—a risk affecting one may not affect the other.

For example, crypto markets are famously fickle. Investing in a range of currencies allows you the agility to weather the bad times. Sure, this might occasionally deny you a serious win, but that’s quickly offset by the benefits to the longevity and security of your investments. It also allows you to enjoy the stability of established coins, such as Ethereum and Bitcoin, while also allowing you to access the potential of mid-to low-cap coins.

Important to remember: Any bias aside, you don’t want to limit your portfolio to just crypto—or to any one asset. Investing in stocks, commodities, precious metals, and ETFs alongside your cryptocurrency allows you to spread the risk. If anything sinks, you have plenty more to prop you up.

If nothing is better than winning it all on a single enormous bet, then nothing’s worse than losing it all on one. And, when it comes to wins and losses, the prospective political climate should give every investor pause.

4. Post-election recap

In the wake of the 2022 federal election, with the Australian Labor Party having won a majority in the House, a number of considerations have to be made.

Labor had promised to make housing more affordable, specifically with assistance granted to first home buyers. Their initial pledge to reform negative gearing and the capital gains tax discount looks unlikely to materialise, as does the attempt at placing a cap on rising private health insurance premiums.

That said, it seems Labor remains committed to redressing the artificially high property prices created by the Reserve Bank, largely by allowing superannuation to be allocated to the family home (although this may cause the property bubble to keep expanding). The ALP had also promised changes to discretionary trust arrangements and the removal of excess imputation as cash refunds.

On the upside, there looks to be a significant investment in renewable energy and a firm attempt to improve relations with China.

Keep in mind that the policies of any party entering an election often resemble a wish list rather than a concrete agenda. Labor’s policy shift towards economic conservatism over the past term would suggest a moderate approach to fiscal reform. While a change in government always leads to uncertainty, compounding on an already demoralised market, the change will hopefully be short-lived. It’s in the best interest of the government to earn the confidence of Australian investors, and there’s little reason to believe the government under Albanese will be any different.

Summary

While 2022 may look to be as wild a ride as the past two years, the antidote to panic is serenity. Every step forward is a step worth taking, no matter your pace. Try to make calculated decisions and be certain to spread the risk. Having a sound strategy and sticking to a plan is the best foundation for solid investments, and negates the effects of emotionally-driven decision-making. Don’t hope for a miracle, and don’t despair; knuckling down for a slow and steady grind is sure to see you through.

Whatever happens, always remember your personal well-being is of the utmost importance. If avocado toast is what gets you through a Monday, we suggest a side of halloumi. It’s not gonna break the bank.

Written by Ted

Written by Ted

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