Another new year - what will 2022 hold for us traders/investors?

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I wish I knew! But it will be fascinating. Will covid be on the way out and lead to good times with pent up savings being used on holidays leading to higher share prices?

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Perhaps travel and airline companies will take off? Maybe Easyjet, IAG, and Jet2com will leap. Or will higher energy prices and inflation lead to people deciding they can’t afford it and stay at home?

I’m a bit glass half-full and have picked up some Easyjet and Jet2com. I suspect people won’t be able to resist going on holiday at last if Covid weakens its grip.

I suspect the main thing this year is to be cautious about buying too heavily into any one share or sector. Because if you get it wrong your portfolio could take a giant hit.

Indeed looking around my mailbox (I know, old fashioned I should be saying  Insta, TikTok) a lot of especially newer traders have been undone by stacking up too much on just one share.

One example from my mails would be the internet retailer Boohoo. Unfortunately for many it was a big boohoo as the shares crumbled.

It seems in 2021 many bought into Boohoo as the shares rose but as the shares started to fall, they kept averaging down. One person admitted he’d lost more than £70k he could not afford.

He said he’d followed some internet/bb tipsters who had also kept buying as the share price retreated.

The reason he lost was down to emotion and us humans being pack animals. Losing on a share means comfort is required which means he kept going back to his favourite tipsters who just said keep on buying.

Instead what he should have done was been unemotional and set a stop loss or trailing stop loss to ensure he could never ever have lost so much.

Usually shares going down every day means something is probably wrong which may come out in the future. Some people are in the know whatever the rules.

The three main themes coming out of all this is then:

  1. Don’t buy more than say 10% of your portfolio in any one share.
  2. Have an exit plan, set a stop loss to ensure you never lose more than 20%. You can always buy back in later.
  3. Don’t get hooked on what an internet tipster says. It is only his or her view and they are not infallible and may have confirmation bias.

 

My emailer has promised me he will never again buy too much of one share and will always have a cut losses exit plan.

 

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