Investment lessons from 2022

1. Persistence can pay off

We have had underweight exposure to bonds for a while. This hasn’t always been an easy position to stick with. But last year, it really paid off, helping minimise damage from the bond market’s worst performance in over a century.

2. Look where the economy is heading

While we weren’t able to completely avoid the fallout from Russia’s invasion of Ukraine and high inflation, our “tactical” decisions served us well last year. We cut our exposure to equities several times in the first half of 2022 as the risks of stagflation and recession rose.

3. Have courage in your convictions

Many of the worst performing stocks in 2022 were the strongest performers of the pandemic years – especially in tech. We cut exposure to early stage technology early in 2022. Selling after an initial fall was difficult, but it was the right call. A disciplined approach based on valuations and an objective assessment of the outlook is important.

4. Sustainability: the journey's different but long-term outcome is similar

In 2020 and 2021, energy transition investments significantly outperformed the broader market. The pattern was reversed last year, as traditional energy producers spiked in value. It's a reminder that over short periods, the returns from a sustainable portfolio can look very different to a more traditional portfolio. But over the long term, we still expect similar outcomes.

5. Conflicts in far-flung lands can have a dramatic impact closer to home 

Regardless of whether they were invested in Russia and Ukraine, Putin’s invasion of his neighbour has impacted investors around the world. The soaring cost of energy and food is also causing hardship for millions of households. It is likely to mean inflation and interest rates remain high for longer than might otherwise have been the case.

6. Expect the unexpected

Very few people expected Putin to invade Ukraine this time last year. Not many would have predicted that the UK would have three prime ministers in four months and many of us had begun to take"price stability" for granted. Investors should never assume a certain future.

7. Make sure you’re getting paid for the risks you’re taking

It’s hard to believe now, but in 2021 investors managed to justify buying bonds with a negative yield. There were also many cases of investors paying very high prices for very risky ventures – which have since come crashing back down to earth. We managed to avoid the excesses in bond and equity markets – and avoided cryptocurrencies altogether.

8. Alternative thinking

Alternative assets outperformed equity and bonds last year – especially commodities. Away from financial markets, you may have benefited as whisky, precious stones and other highly prized items have also soared in price in recent months.