In an article for The Wall Street Journal, Jason Zweig writes that the best investment for 2022 is discipline. Between the volatility brought on by the ongoing pandemic, spiking inflation and the Fed on the verge of raising interest rates, investors need to beware of acting impulsively and regretting it later.
While some investors are treating the prediction that the Fed will raise rates by 0.25% at least three times this year as a foregone conclusion, overhauling your portfolio based on that prediction would be a mistake, Zweig contends. Looking all the way back to the 1990s, the Fed has raised and lowered rates in ways that contradicted their own expectations and surprised the markets.
Last year the S&P 500 returned 28.7%—the 7th-highest gain in the last 50 years—and U.S. stocks have doubled in the last 3 years. But those fears of rising rates has already gotten the year off to a hesitant start and most Wall Street strategists expect tepid returns throughout the year. And big gains can still recur beyond 3 years in a row; it happened in the late 1990s, before the Dotcom crash in 2000.
All this to say, Zweig writes in the article, why discipline is the best investment virtue to possess. Drastically changing a long-term approach based on what might seem to be a sure thing in the short term, could likely result in a lot of regret. Instead, Zweig advises, develop good habits that become automatic, enabling your investment course to stay steady. Avoid checking your portfolio constantly on brokerage apps, and limit exposure to financial television. If a holding moves more than 5% out of the target you’ve set it for, buy or sell as needed to get things back into balance. Steps like this will help to think of investing as a habit, rather than a series of decisions, which, Zweig concludes, is the key to discipline.