We don’t know exactly what the stock market has in store for 2022. Stocks could flourish, or they could crash — or a middle-ground scenario might develop.
But regardless of how the stock market fares in 2022, it’s a good idea to aim to invest more. Here’s why.
1. You can set yourself up for a financially stable retirement
The money you invest in the near term could make it so you’re set financially in the long term. To live comfortably once you retire, you’ll need more income than what Social Security will provide. And your investment portfolio could serve as a nice income supplement at a time when you might no longer be earning a paycheck.
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In fact, let’s assume that you invest $5,000 in the stock market in 2022. Even if you sit back and do nothing, in 40 years’ time, that $5,000 will grow into almost $109,000 if your portfolio delivers an average annual 8% return, which is a bit below the stock market’s average.
2. You can battle raging inflation
In case you haven’t noticed, the cost of groceries, gas, and just about everything is way up. We can thank inflation for that.
In November, the cost of consumer goods rose 6.8%. And while we don’t know how inflation will play out in 2022, we can bank on prices staying high for a while.
A good way to fight inflation is to grow your money at a rate that outpaces it. And investing could be your ticket. In the example above, we used an 8% average annual return as a benchmark for our calculations. That 8% is still above the recent rate of inflation — as sky-high as it may be.
3. You can secure an income stream that doesn’t require you to work
If you want to boost your income in 2022, you can get a second job on top of your main one. But if you invest strategically, there might be an easier way to score an additional paycheck. It’s called loading up on dividend stocks.
When companies pay dividends, you get to choose how you use that money. You can arrange for your dividends to be reinvested, or you can collect your cash and use it to pay bills or do whatever else you please.
How should you invest in 2022?
The investments you choose in the new year should align with your goals and appetite for risk. Stocks have long been a steady bet, so you may want to focus on owning a piece of quality companies. That said, the value of stocks can rise and fall, and so if you’re going to buy them, it pays to plan on holding them for a long time.
If you have a healthy risk tolerance, you could also decide to invest in cryptocurrency in 2022. Or if you’re nearing retirement, you might play it safe and buy bonds.
Whatever you do, it’s a good idea to ramp up on the investment front if you’re able to do so. You stand to benefit in more ways than one.
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