Interactive Investor

Jeff Prestridge: my five wishes for the investment world in 2022

4th January 2022 10:15

Jeff Prestridge from interactive investor

After enjoying an energetic new year celebration, our columnist spells out his hopes and fears for the next 12 months.

Like many, New Year’s Eve remains something of a blur. I do remember at one stage dancing to the Bee Gees and thinking I was John Travolta (I’m not) – while I vaguely recall a lovely gentleman from the hotel providing us with hot toast and butter at two o’clock in the morning, watered down with a feisty Jack Daniels.

But as I hobbled round my local parkrun the next morning – wishing I hadn’t boogied so vigorously to Night Fever – I began to put my mind to 2022. What would I like to see happen in the investment world in 2022? I came up with five wishes (greedy, I know) – but one for every kilometre of the muddy parkrun course I just about completed.

First, like any equity investor, I hope that 2022 will be a good one for stock markets. Indeed, I would be quite happy for a repeat performance of 2021 when the FTSE 100 powered ahead by 14.3%, its best year since 2016; the MSCI World Index of global equities advanced by 17%; and the S&P 500 in the US achieved a dazzling return of close to 27%.

Of course, there are possible headwinds lurking in the skies, primarily in the persistent shape of coronavirus and a possible deterioration in the world economy if further lockdowns are the order of the day.

World conflict is also a worrying shadow in the background with continued tension between Ukraine and Russia – and China’s sabre rattling in the general direction of Taiwan.

In the UK, the economy could also be adversely impacted by the continued energy crisis, rising bills (inflation) and, of course, tax rises come 6 April, the start of the new tax year. Household budgets are going to come under extreme pressure – and the government will need to be at its best to avert a crisis. Political uncertainty is not good for the UK stock market.

On the positive side, corporate profits generated by companies listed in the UK look likely to keep on rising – by how much will depend on coronavirus and whether there is a hiccup in the economy.

My money is going into the UK stock market in 2022 – with international exposure obtained through a well-diversified global investment trust.

Second, I trust that the wealth platform industry will keep doing all it can to make it easier for investors to look after their portfolios this year.

In recent years, investment platforms have transformed investing for millions of people, giving them the tools to take control of their long-term investments. But the offerings must continue to be improved in terms of customer experience and cost.

Investors must be encouraged from an early age to participate in long-term wealth creation. It means apps, it means less jargon, it means greater user friendliness. Charges must also keep coming down. 

Third, it’s not just wealth platforms that must offer value for money. It’s investment funds as well - open-ended funds (unit trusts as were) as well as stock market listed investment trusts. The latter, encouraged by consumer-focused boardrooms, have chipped away at charges in recent years, giving investors a fairer deal. That’s been a great development, but we need lower charges across the investment funds community.

Lower charges, I am sure, would compel more people to look at investments as opposed to being focused on cash savings. Even the regulator believes we (the nation) leave too much of our cash sitting in a bank earning precious little by way of interest.

Fourth, talking of regulators, it’s surely the year for the Financial Conduct Authority (FCA) to opine (finally) on the Woodford investment debacle. Who, if anyone, is to carry the can for driving investment fund Woodford Equity Income into the ground, leading to its suspension in June 2019 and closure in October of the same year?

Is it fund manager Neil Woodford who made a mockery of the term ‘equity income’ by investing Woodford Equity Income primarily in anything but income-friendly stocks?  

Is it Link, which as authorised corporate director was meant to oversee the fund and ensure it was being invested according to the fund’s objectives?

Is it those platforms and advisers who thought Woodford could do no wrong – and were prepared to push the fund until the day dealings in it were suspended?

This investment boil needs to be lanced once and for all. Until the regulator gets its act together and publishes its findings into this sorry episode, a cloud will hang over the investment funds industry. It needs to be blown away.

Finally, the investment industry needs to do all it can to support financial education in the classroom. Although money matters are now being taught in secondary schools, coverage is patchy – and usually dependent on the dedication of specific teachers who are prepared to go the extra mile.

Investment companies should be doing more. After all, the better financially educated kids are when they finally spill out of school, college or university, the more likely they are to embrace the financial world – and start thinking about things such as pensions and Individual Savings Accounts (ISAs).

As the Bee Gees would say (apologies to lovers of Night Fever):

Financial education fever, financial education fever
We know how to do it
Gimme that financial education fever, financial education fever.

So, in a nutshell, may 2022 bring strong markets, more user-friendly wealth platforms, lower investment fund charges, a regulator with backbone, and more extensive financial education.

Wishing you successful investing in 2022 and beyond.

Jeff Prestridge is a freelance contributor and not a direct employee of interactive investor.

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