You may feel there’s a lot riding on this coming year. I know I do. There’s quite a lot I want to achieve, and I’m putting myself under some pressure to achieve it by this time next year.
One thing you’ll see a lot of on Morningstar.co.uk and our sister sites as the new year approaches is personal finance content. The beginning of a new year is always a good time to run a reset on your life and figure out if there’s anything you want to achieve, change, or improve. For my part: I have a couple of pensions to consolidate, and I’d like to get out of my Terry Smith fund.
To that end, check out Morningstar’s editorial staff talking about their new year financial resolutions in an article curated and edited by my Canadian colleague Ruth Saldanha. It might give you some inspiration – and there’s lots in there. My US colleague Syl Flood, Morningstar’s senior editorial director, has decided to offload the losers from his portfolio, while Lindsey Stewart, Morningstar’s director of investment stewardship, wants to finally define what a sustainable fund is!
But just with my personal goals, with any resolution comes a bit of pressure. Investing is no different, as it comes with the pressure both to select the options that are right for you, and – crucially – to ensure they perform correctly.
Over this latter bit you may have way less control than you think. Given all this, it’s perhaps worth beginning the year with a bit of perspective on performance. Here is short list of reasons why you shouldn’t put all your money on 2023.
You Need a Long Time Horizon Anyway
Everybody wants to get rich quick, but investing a long-term project. If your 2023 life goals depend on the performance of your portfolio, you may want to go back to the drawing board. Consistent investment performance is very gratifying, but it shouldn’t – and cannot – always take center stage.
It Would be Wise to Expect Upsets
Most people would probably cite the spread of coronavirus in late 2019 and early 2020 as the biggest recent upset in their lives, but 2022 has thrown plenty at us. Inflation was the most painful phenomenon for people’s bank balances, but the onset of war (and its consequences) on the borders of Europe was difficult to watch too. In the UK, the stock market has arguably performed quite well considering the backdrop, but nobody's saying we shot the lights out. Sadly that could continue.
There’s a Whole World Out There
I recently had a conversation with a fund manager that served as a pleasant reminder of some of the investment themes that will define our world beyond 2023. But there’s even more good news. My colleague Kenneth Lamont – a senior analyst in our manager research team – is spending more and more time on thematic investing, and has just released a new tool to help investors survey that landscape. There’s a whole world out there, and it doesn’t stop with 2023. Megatrend isn't going away.
The Big Date For Your Diary
A boring reason to think beyond 2022: tax. Over Christmas I was talking to relatives about a short-lived Liz Truss plan to make the academic year run January to January. This inevitably snowballed into a heated festive "discussion" about the merits of aligning other calendar years. For now, the tax year still runs April to April, so build that into any of your financial planning for 2023-2024.
Equity Investing Has a Calendar of its Own
The tax year doesn’t run January to January, but nor does the corporate year either. Equity investors will be well aware of the myriad ways bigger companies report their earnings and dividends, but the key thing is this: we won’t know companies’ full year results for 2022 until well into 2023, and the same will go for 2023.
Ollie Smith is UK Editor at Morningstar
