The stock market was remarkably strong in both 2020 and 2021, buoyed both by stimulus money and by an exceptionally accommodative Federal Reserve. With valuations stretched by historical measures, the Federal Reserve looking primed to taper in 2022 due to inflation, and stimulus payments largely in the past, those bullish factors are starting to reverse. That could cause serious problems for stocks.
Rather than get paralyzed into inaction by all that uncertainty, it’s a better idea to take advantage of what the market is currently offering you. With a little bit of smart planning now, you can set yourself up to continue investing in stocks in 2022, while still protecting your overall finances from the near-term risks from the current lofty market. Read on to figure out a strategy that could keep you invested in stocks, despite the turbulence that may be headed our way.
Unless all three of those conditions are true, it’s nearly always a good idea to pay off your debts rather than try to manage through them. That holds true in all market conditions, but it especially holds true when the market is rocky. It’s tough enough to stay invested when the market is falling, and if you add rough debt pressures to the natural temptation to sell when the market is down, it gets that much tougher.
Add to it the risk of job losses and tough markets often going hand in hand , and getting out of most debt is really one of the best things you can do to keep yourself invested in 2022.
With a decent valuation estimate, you can recognize when a company is trading at a discount to a fundamentally supportable price based on its ability to generate cold, hard cash. That’s how you can train yourself to recognize cases when a stock was worth buying at $100 and is even more worth buying at $50, because the price dropped but the fundamental value did not.
With that type of attitude, you can actually get yourself in the position of being willing to buy more shares when a strong company is available for an objectively cheap price. That can put you in a position to where you’re willing to buy a solid company at a decent-to-cheap valuation no matter what the rest of the market is doing. More than anything else, that attitude and toolset might be able to keep you investing in the stock market in 2022.
