Jon Smith explains a few tactical stock market ideas and thoughts on how he can get the most out of his portfolio in the coming months.
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It’s been a difficult path to tread as an investor so far this year. Global markets have exhibited higher than average volatility. There’s also been rising uncertainty regarding a potential stock market crash due to the cocktail of higher interest rates, high inflation and lower growth. With all of that in mind, here are some of my stock market ideas to try and have a positive last few months of 2022.
In coming months, I don’t expect things to get any easier in terms of picking stock market winners. This doesn’t mean that I can’t do well, but one factor that becomes really important is my risk management.
This involves trying to buy at the right time. If I’m looking at a stock, am I buying at record highs? Is the company due to release results in coming days/weeks that could materially change the business outlook? When is the next dividend due to be paid?
All of these points could impact whether it’s smart for me to buy now or wait. In turn, this can impact my profitability.
It might seem odd to be talking about next year when I’m wanting to help my performance for 2022. Yet now that most half-year results are out, investors will start to think about how the world could be in the future, and make decisions based on that now.
For example, I think that electric vehicles will continue to grow in popularity next year. For manufacturers and other companies associated with this sector, the share price isn’t simply going to jump at the start of January 2023 as people wake up and see the positive outlook. The early movers will try and invest now, or even already have cash invested.
For stocks that are in the red, I want to avoid selling unless I think the company’s prospects are terrible. If I sell and book the loss, it’s a done deal and I’ll have to make that money back somewhere else. However, unrealised losses now have the potential to flip to being profits at some point in the future. Even in the few months until the end of the year, a stock that’s down can still help me.
For example, if I’m holding a stock that’s down 20% now but is only 10% down come December, it’s improved over this period. I’d prefer to have a stock that’s already up 20% that gains another 10%, but a reduction in losses is always a positive.
My last thought is that I want to be able to take advantage of any scenario that happens in the markets in coming months. Some are saying that the short-term rally is the start of a raging bull market. To this end, I wrote last week about four growth stocks that I think could outperform if this is the case.
So I’d allocate some of my free cash now to these growth ideas. When I include it in my diversified portfolio, if the contrarian view is right then it could provide a nice kick higher to my performance for 2022.
Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.
Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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