How 2022 Changed Investing Forever

Stuck about what to do next.
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Investing is an ever-evolving process. Year in and year out, new investment themes come and go, with some having more staying power than others. In 2022, this pattern remained, with some passing investment fads making temporary headlines while others seem like they may, to some degree, change investing forever.

Unlike in some prior years, when changes like zero-commission investing seemed to open the doors to more investors, 2022 was the year where many investors got hurt. Many of the largest changes over the past 12 months fundamentally altered how investors in 2020 and 2021 made money and may, unfortunately, scare those investors out forever.

Even if that’s the case, 2023 will no doubt bring a new slate of changes, hopefully some that are more beneficial to investors. With this in mind, here are some of the sea changes that the 2022 market brought to bear.

Crypto Winter

All the way up until Nov. 2021, cryptocurrency seemed almost unbelievably resilient. Although even the industry’s market cap leader Bitcoin was incredibly volatile — regularly shedding up to 50% of its value before bouncing back again — crypto in general seemed to always be able to disprove its naysayers. 

However, things may have changed on a more permanent basis in 2022. After that peak of above $67,000 in Nov. 2021, Bitcoin reversed course and began trending down, accelerating its decline in 2022. As of Dec. 2022, the crypto market has shown no signs that it’s going to recover this time. In fact, if anything, the news has only gotten worse, thanks to the nearly overnight collapse of cryptocurrency platform FTX.

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Some analysts fear this might only be the tip of the iceberg in terms of the duration of the so-called “crypto winter.” Cryptocurrency has always been a speculative asset, but according to some — it may carry more risk now than ever.

GameStop & Meme Stocks

So-called “meme stocks” made quite a splash in 2021, posting unbelievable gains and making headlines around the world. Backed by hordes of online investors who banded together on Reddit’s financial message boards, one of the driving forces behind the movement was to “punish” hedge funds and short sellers who were betting against the stock.

The combination of increased buying and the ensuing short squeeze moved up stocks like GameStop as much as 400% in a single week, and 1,625% in a single month.

But 2022 hasn’t been as kind to the meme stock community. GameStop, for example, is down about 40% YTD as of Dec. 8, 2022, but that loss is closer to 70% from its 2021 high.

With GameStop essentially going nowhere in 2022, and a recent documentary shedding light on who really got hurt during peak “meme stock mania,” many analysts question if this type of investing has changed forever. Even shares of former meme stock darling AMC Entertainment, which shot up 16% in early Dec. 2022, for example, remain down more than 70% YTD.

60/40 Portfolios

The so-called “60/40” portfolio has long been considered the standard example of the balanced portfolio. With 60% in stocks and 40% in bonds, the belief was that this type of portfolio exposed investors to the upside of stocks while still protecting them with exposure to more conservative bonds.

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Historically, bonds have tended to rise when stocks were falling, and vice versa. Plus, a 40% allocation to bonds generally provides income and stability to help reduce the volatility of an all-stock portfolio. But in 2022, the reliability of this type of portfolio was blown out of the water. In a year in which both stocks and bonds declined precipitously, the “safe haven” aspects of the 60/40 portfolio dissolved.

This could affect financial planning models for years to come, if not forever.

The Metaverse

Much like crypto and meme stocks, the metaverse was touted as the future of investing in big, splashy headlines in 2021. Reports of “land” sales in the virtual world reached eye-popping extremes, such as the $5 million transaction that took place in TCG World. But much like crypto and meme stocks, what skyrocketed in 2021 came crashing down to Earth in 2022.

The average price of land in the metaverse fell from $16,300 in Feb. 2022 to $3,300 in June 2022, a fall of nearly 80%. Shares of Meta Platforms, the company formerly known as Facebook that changed its name — and its focus — to capitalize on growth in the metaverse, fell 66% on a YTD basis as of Dec. 7, 2022.

While Meta Platforms may eventually recover from current low levels, for the time being, the metaverse itself seems dead in its tracks — and more speculative than ever.

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