Will 2022 be your most successful year as an investor yet? Maybe. But if that's your goal, then you'll need to stay away from these huge mistakes.
1. Not preparing for a stock market crash
We don't know what the stock market has in store for the current year. Last year, stock values largely held steady even as the pandemic raged.
This year, there's a new variant to contend with. There are also, however, new COVID-19 treatments coming down the pike that may help offset some of the damage it has the potential to cause.
Either way, we don't know how the outbreak will impact the economy or the stock market. And while there's no reason to expressly anticipate a stock market crash, it's important to prepare for one nonetheless.
For the most part, that means doing a few key things. First, shore up your emergency fund. That way, if stock values plummet, you won't have to raid your portfolio while your investments are down.
Next, make sure you're well-diversified in your portfolio. Having a nice mix of assets could help you better weather a crash.
Finally, if you're all set with emergency savings, hoard some cash in your brokerage account so you're able to capitalize on buying opportunities if stock values do indeed plummet. Market crashes are often regarded as a negative event, but actually, they can be a great time to invest more.
2. Overloading on crypto
Whether you've yet to dabble in cryptocurrency or not, you may be eager to load up on it this year. But before you do, remember that crypto is still a pretty speculative investment. Digital currencies have only been circulating for a little over a decade, and it's still unclear to whether they're a viable long-term investment or not.
This isn't to say that you shouldn't put money into cryptocurrency. But should you do so at the expense of being able to add quality stocks to your portfolio? Probably not. A better bet is to invest a smaller portion of your available cash in crypto, but not go too heavy on digital coins.
3. Steering clear of real estate
You might assume that real estate is a poor investment choice for you because you don't have the desire to own and maintain properties -- and face the risks that come with that, like having to deal with repairs. But actually, branching out into real estate can be a good way to get some diversity in your portfolio. And you can do so without owning physical properties.
REITs, or real estate investment trusts, are companies that own and operate different properties, whether it's malls, warehouses, or data centers. Like stocks, many REITs trade publicly on major exchanges, so it's easy to track their share prices.
REITs are, to a large degree, a safer investment than owning physical real estate because they offer more liquidity. You can sell off a REIT faster than you can complete the sale of a home. And because REITs tend to pay higher dividends than most stocks, they're also a good way to secure a steady income stream that you can use or reinvest.
Make it a good year
If your goal is to do well as an investor in 2022, then it pays to prepare for a stock market crash, tread lightly with crypto, and consider branching out into real estate. Those decisions could spell the difference between a successful year and a disappointing one.