I have had constant learnings during my investing journey. But the process was accelerated during the past two years of the pandemic. These learnings would not amount to very much, however, if I do not apply them to my investment decisions. So, I am resolved to do exactly that in 2022. Here are three of my top investing resolutions, keeping in mind that the pandemic is still ongoing.
#1. Keep cash in hand
If all my funds are tied up in either investments or to meet my expenses, I do not have free cash to invest at a moment’s notice if the opportunity arises. Like for instance, during the stock market crash of 2020. I did manage to make some good investments around the time. But not one of them was made at the absolute bottom for the index.
Now, I am a big believer in buying high-quality stocks irrespective of their current price. Because if I choose well, chances are that over time the stocks would rise anyway. But if I could buy them at a once-in-a-lifetime kind of low, my returns are likely to be significantly better over time.
#2. Choose dividend stocks carefully
Now, more than ever, I am carefully considering the dividend stocks to buy. As the pandemic happened, many FTSE 100 companies stopped paying dividends. And since stocks’ prices had also fallen at the time, I felt locked-in with investments that did nothing for me. At least for that time. Of course the pandemic is a rare risk. But even then, I think that as a long-term investor it is essential to keep dividend continuity in mind.
For this purpose, I would also look at stocks with low current dividend yields. It is possible that over time they could prove to be highly rewarding. An example is the industrial equipment rental company Ashtead. It has grown its dividends fast over the past decade. But because its share price has been rising as well, its dividend yield has remained underwhelming. For instance, it is a minuscule 0.7% right now.
But if I had bought it 10 years ago and remained invested for the entire time, as per recent AJ Bell research, it would have given me the biggest dividend yield among all FTSE 100 stocks. It is on my 2022 buy list now. The only red flag for me here is that it is closely connected to the cyclical construction industry. If the pandemic continues to be a drag on growth, it could be affected in the foreseeable future.
#3. Note the burgeoning sectors
If any sector took off during 2020 and 2021, it was e-commerce. And this includes not just online sellers but also stocks of paper and packaging providers, warehousers, and delivery companies. Their growth could slow down as the pandemic eases, but I think it is increasingly clear that e-commerce’s growth path has been accelerated during the time.
And that could explain why these stocks’ prices are still rising. I have no doubt that there will be ups and downs along the way, but on the whole, they will show strong growth. I intend to build my portfolio with these promising stocks in 2022.
