Warren Buffett is one of the most respected investors of our times. In fact, given that he bought his first shares when he was 12 years old in 1942, became a millionaire in 1962 and a billionaire over 30 years ago, he’s been respected for at least a generation or two. And his advice for investing over the years is as relevant in 2022 as when first given. So if I was looking to invest £2,000 in the coming weeks, here’s how I’d go about it.

Be patient

The first point I’d take from Warren Buffett is that the £2,000 is going to be invested for the long term. I’m not looking to buy the stock in January and become a millionaire by December. Buffett spoke of the value of being patient when he said that “someone’s sitting in the shade today because someone planted a tree a long time ago”.

What he means here is that to enjoy the fruits of my investing, I need to let my stocks grow over time. If I’m happy with the research I’ve conducted, then the share price should increase in value in years to come. I shouldn’t be overly concerned if in the short run I don’t see much progress in my portfolio. 

If I struggle with this point, then I can always look to add some exposure to dividend stocks. This way, I’ll get the benefit of income paid out usually a couple of times a year. This will show results within my portfolio, even if my capital gains are still waiting to sprout.

Don’t overcomplicate things

One quote that I really like from Warren Buffett is when he said that “there seems to be some perverse human characteristic that likes to make easy things difficult”.

I can apply this to various points in life, but it’s especially relevant when it comes to investing. With my £2,000, I could create very complicated spreadsheets with many stock picks. In reality, I can create a very nicely diversified portfolio with a dozen stocks at most. 

I don’t have to make those picks really complicated. I can pick a few of my favorite sectors, and select a couple of stocks from each area. If I can’t find one that I like, then I can sit on my cash for a while until an opportunity presents itself. I don’t need to force things.

Wise words from Warren Buffett

So what have I learnt? Well, I’d take a long-term approach to investing the £2,000 by picking stocks that should have good future value. I’d also try to keep my portfolio simple. This would include not picking too many stocks, and making sure I have a balanced mix of different sectors.

In this way, I can hopefully weather whatever choppy seas (Covid-19, or other issues I don’t yet know about) come my way in 2022 with regards to the stock market.

Jon Smith and The Motley Fool UK have 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.

If there is one thing I am clear about when considering investing in 2022, it is this: the year will be an uncertain one. Here’s why. The recovery is happening, but is still slow. It may even go into the reverse if we go into another lockdown. Inflation is creating a lot of discomfort too. And supportive policies are being rolled back. On the other hand, we have the wherewithal to deal with the latest health challenge and even the price rises. I think this combination of negative and positive forces will create fluctuations.

The point is, a clear direction is not visible to me right now. So, how should I aim to earn solid returns on my stock market investments in 2022? I think the way to do this is by targeting stocks that are most likely to rake in returns for me. Note that all such investments are subject to risks. And we can never really know how things will turn out. But I can take calculated risks, and potentially come out ahead. In fact, in my experience, more often than not, that is exactly what happens. 

How to invest for dividends

To earn a strong passive income, I am targeting two kinds of FTSE 100 stocks now. The first is oil biggies like BP and Royal Dutch Shell. If the recovery continues, oil prices will continue to be on a tear. They do not have the biggest dividend yields yet, but I think they could increase their dividend amounts next year. Even if the recovery is small and oil prices tank, I could hold these stocks for the next few years and still earn reasonable returns. So I am not too worried about the downside. 

I am also looking at FTSE 100 utilities like SSE and National Grid. These might not have the best yields either, but they are sustainable. In the past year, utilities have mostly been steady in paying dividends. And besides that, all of them have dividend yields higher than the index average at 3.5%. 

Stock market investments for capital gains

For capital gains, I am focused on stocks that have a long history of steady share price increases. There are plenty of such examples in the FTSE 100 index itself. These include the likes of the high performing pharmaceuticals giant AstraZeneca, speciality chemicals producer Croda International, and warehousing and real estate investment trust Segro. They could have a slow next year if recovery picks up speed and beaten down stocks look more attractive. But going by both their share price histories and their expected performances, I reckon they could continue to do quite well even next year.

In summary

Whether they are dividend or growth stocks, to aim towards solid returns, I am most likely to buy stocks that have a long history of paying good dividends and returning good capital gains to  investors.

Manika Premsingh owns AstraZeneca, BP, Royal Dutch Shell B, and SSE. The Motley Fool UK has recommended Croda International. 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.

For anyone following the stock markets in the past few days, the latest inflation numbers would have been hard to miss. In November, annual inflation based on the Consumer Prices Index came in at 5%. This is a massive increase, and far higher than what the central bank believes it should be for sustainable growth. It prefers a number around 2%. 

The impact of high inflation

I would not be too concerned about it if it were a one-off figure. But that is not the case. Inflation has been on the rise for months now. And many FTSE companies, from retailers to airlines, have flagged it as a source of concern. Moreover, I am most uncomfortable with the fact that it is expected to stay elevated next year as well. Some forecasters believe that inflation will average 4% next year. 

This is not good news for stock markets in a number of ways. High prices mean that you and I now have to set aside a bigger proportion of our incomes for making our purchases than before. As a result, we could have at least marginally lower savings for investments. And that marginal amount across all investors can add up to a lot less money going into investments. This in turn could slowdown stock markets’ growth.

Of course, it can be argued that if more money is being spent on consumption, then FTSE-listed companies could stand to gain. That could be true if they are able to pass on cost increases to end customers and not lose any customers in the process. Also, their bottom lines might still be impacted if they are unable to pass on the entire costs. And lower profits can impact publicly listed companies’ dividends and their stock prices. I think we could even see a stock market crash.

Hedging my stock market investments

The point that it all really comes down to is this. High prices impact our real incomes. With less to save and to spend, many participants in the economy are likely to be adversely impacted. And that includes both companies and individuals. There are some, however, that stand to benefit. 

The most obvious beneficiaries of high inflation are big oil companies right now. Oil price increases are driving high inflation, since the product is such an integral part of our daily lives. I believe that at least in the next year, buying stocks of these companies is a great way to hedge my stock market investments from inflation. They FTSE 100 oil stocks have already done quite well this year, and I reckon they will continue to do so in the foreseeable future as well. 

Of course if we go into another lockdown, oil demand will drop and the party will at least temporarily be over for these stocks. Also, their long-term future is precarious, considering the ongoing shift towards clean energy. Nevertheless, for now, I think buying these stocks is a good way to counter the impact of inflation on my investments. That is why I have bought them already. 

Manika Premsingh 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.

Investing in the stock market is one of the best ways to build wealth over the long run, I feel. So I plan to keep buying stocks for my ISA in 2022.

Having said that, I’m going to be very selective about the stocks I buy next year as not all companies are likely to see their share prices rise. With that in mind, here’s what I’ll be looking for when searching for shares to buy in 2022.

The best stocks to buy in 2022

The first thing I’m going to be looking for is stocks that aren’t vulnerable to inflation. This year, inflation has hit profits at many companies and I expect it to be a similar story in 2022.

Companies that typically aren’t vulnerable to higher prices are those in the software sector. These companies don’t have to worry about things like raw materials price increases and higher transport costs. Other companies that are also less vulnerable to inflation are those with pricing power. These businesses can raise their prices to offset higher costs.

The next thing I’ll be looking for is those with low levels of debt on their balance sheets. I think there’s a good chance interest rates will rise in 2022. If they do, firms with a lot of debt will face higher interest costs. This could impact their profits and their share prices.

I’ll also be looking for stocks that could benefit from the continued reopening of the global economy. I think these could do well in 2022 as economic activity picks up.

Of course, as a long-term investor, I’ll be after businesses that operate in growth industries and have long-term potential. I’m not just looking for short-term gains, after all. I’m looking for stocks that can generate big returns over the next five to 10 years.

Finally, I’ll be looking for stocks that have reasonable valuations. I don’t want to buy any that are overly expensive. I think that in 2022, expensive stocks may underperform as interest rates rise. 

3 shares that could do well in 2022

Putting this all together, one stock that ticks my boxes is payments company PayPal. It’s certainly protected from inflation. If prices rise, it should benefit because it takes a cut of every transaction. It also has a strong balance sheet. Meanwhile, it should benefit if consumer spending picks up.

Another stock that looks interesting is accounting software specialist Sage. It appears to be protected from inflation and if economic activity picks up, it should benefit as small and medium-sized businesses adopt accounting solutions. It’s worth pointing out that Sage shares look cheap compared to plenty of other software companies.

Turning to the small-cap space, I think Alpha FX could do well in 2022. It’s a fast-growing British company that specialises in FX hedging and payments. It has a strong balance sheet and should benefit from higher levels of economic activity. 

Of course, it goes without saying that all of these stocks have their own risks. There’s no guarantee they will perform well in 2022. So to minimise stock-specific risks, I’ll be investing my money across a number of different companies.

Edward Sheldon owns Alpha FX, PayPal Holdings, and Sage Group. The Motley Fool UK has recommended Alpha FX, PayPal Holdings, and Sage Group. 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.

It’s no secret that income investors had a fairly torrid 2020, thanks to the Covid-19 pandemic. Spend any time hanging out on online forums where investors discuss this sort of thing, and it’s not difficult to come across people who saw quite startling reductions in their investment income.
 
And, as I’ve remarked before, UK investors were seemingly hit disproportionately hard — not least, in my view, because of actions taken to constrain dividend payments by the Financial Conduct Authority and Prudential Regulation Authority.

Banks and many other financial institutions, for instance, saw dividend payments banned outright. Other businesses were warned not to make dividend payments if that meant consuming capital that could otherwise be used to bolster the business’s resilience.
 
Prudent, yes. But also potentially tough on investors relying on those dividends to pay the bills.

Belt-tightening 

A recent study from the Association of Investment Companies (AIC) — a representative body for investment trusts and Real Estate Investment Trusts (REITs) — helpfully puts some figures on all this.
 
Citing Janus Henderson’s Global Dividend Index, the AIC notes that UK dividends fell 41% in 2020, but that dividends globally were only 12% lower in 2020 than 2019.
 
And, as I say, that 41% cut was painful. 63% of the income investors surveyed by the AIC had to cut back on non‑essential items or activities, for instance. 39% had to change or cancel holiday plans for financial reasons, and 19% had to delay their retirement.
 
Overall, 87% of income investors were impacted in some way by a loss of income from their investments.

But let’s go back to the UK’s 41% cut in dividend income, versus the global average of 12%. To me, that reinforces the wisdom of a course of action that I’ve previously advocated in these columns: an element of global diversification. This needn’t involve dealing through foreign exchanges or brokerages: plenty of London-listed ETFs and investment trusts offer global and international exposure.

Sit it out — or do something?

The pain hasn’t gone away, of course. By mid-summer this year, the dividend situation was improving markedly, although overall dividend levels were still below those of 2019.
 
Again, the AIC’s survey panel tells of ongoing pain. 41% of income investors were still cutting back on non‑essential items or activities (down from 63% in 2020), 22% had again had to change or cancel holiday plans for financial reasons (versus 39% in 2020), and 16% had had to delay their retirement (19% in 2020).
 
Better, to be sure, but far from a full recovery.
 
Consequently, many investors — 45%, that’s almost half of them — are sitting it out, waiting for better times, and accepting a lower income for the time being.
 
But others are pursuing a more proactive course of action.

The hunt for income

It turns out that almost a third of income investors (29%) are making portfolio changes as a result of the income cuts of 2020 and 2021. So what exactly have these investors done?

40% have reduced their exposure to investments that have cut dividends. That’s fine as far as it goes, but it could mean taking a capital hit – a lot of those stocks still have share prices below 2019 levels. I think that I’d have been tempted to sit it out, if I could afford to do so.
 
45% have also moved more into growth investments. Again, that’s fine as far as it goes, but many growth-focused investments offer only a derisory yield, and therefore income. If income is what you’re after, then growth shares are hardly a panacea.
 
So I’m afraid that I’m with the groups of investors who have pursued two other strategies: first, topping up investments that are more likely to pay dividends (a strategy pursued by 32% of those investors who have been making changes to their portfolio), and second, looking for alternative — and more resilient — income-producing investments. 56% of these investors did that.

So what are these more resilient income-producing investments?

Bonds, in some cases. But although the income from bonds might be resilient, it won’t be much, with bond yields close to historic lows.
 
UK-focused and globally focused investment trusts, in other cases. The benefit here is decent yields coupled to trusts’ ability to pay from income reserves — most trusts sailed through 2020 with their dividend payments unaffected.

And also investment companies such as infrastructure firms and REITs. In both cases, many of these were also unaffected by 2020 — although not all: REITs exposed to the High Street, say, or to student accommodation, did obviously experience some turbulence.
 
In short: I’ve said it before, and I’ll say it again. Infrastructure firms and REITs feature large in my own holdings — and while my own income stream wasn’t entirely unaffected by the events of 2020, the hit from Covid-19 was far less than that reported by many other investors.
 
So it won’t surprise you to find both infrastructure firms and REITs among the ‘Ice’ selections of our investment analysts at Share Advisor.

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.

In another article today I talked about my biggest investing lesson from the pandemic, and that is to expect the unexpected. I think this article can be seen as an extension of the same lesson. The unexpected is not always the unknown, like a virus, or that which cannot be timed, like vaccine development. Sometimes, it can also just be as seemingly banal as policy measures undertaken to support business and the economy. And that is what I am really going to bear in mind for my FTSE 100 investments for 2022.

Policy interventions lead to booming sectors

Let me explain. There is no denying that the coronavirus wreaked unexpected havoc on the stock markets last year. But policy measures put in place to stem the spread of business challenges yielded unexpected benefits too. The most prominent example of that is China’s policy stimulus, which brought a mini-boom for FTSE 100 industrial metal manufacturers. In a typical economic slowdown, this cyclical segment would be hard hit. 

But the policy support provided to it meant that it became among the best performing sectors around even during last year’s slowdown. Even now, the best FTSE 100 dividend yields are offered by industrial metal companies. While their stock prices have taken a bit of a hit in the past few months on tempered forecasts for metals prices, I think there is reason to believe that the party can go on for them. US President Biden’s ambitious infrastructure plans could keep them buoyed, if it goes through. So I would keep a look out for developments in this aspect. 

FTSE 100 real estate boom

Another example closer home is the real estate sector. The UK government’s stamp duty holiday was a big reason for the housing market boom last year. Like metals, the property sector is also cyclical. During booms, when people experience rising incomes, they are more likely to buy assets like houses. Similarly, slowdowns could mean lower employment numbers and slower rises in incomes, which in turn could reduce the chances of house purchases. But buoyed by lower tax rates, people in the UK bought a whole lot of houses last year. FTSE 100 house builders have reported strong order books because of this.

However, the policy is now being rolled back. And this is perhaps already visible in on-the-ground numbers as well. There are predictions of an expected slowdown in the housing market now. Also, the UK’s construction output, which can be seen as a partial proxy for house building, is also declining. In other words, policy support both encouraged and is now slowing down the real estate segment. 

What I’d buy now

My point here is that I am looking out for all kinds of policy actions in 2022 that could be significant for my FTSE 100 investments. I am looking at the two segments mentioned, and also at banking, which could gain big time as interest rates rise. In fact, I have said earlier that I am bullish on the segment, partly for this reason. I am looking to buy banking stocks now.

Manika Premsingh 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.

A new financial year is soon upon us, and I am planning on my investments for the Stocks and Shares ISA for next year. Investing through such an ISA can be good because it allows me to avoid taxes on both capital gains and dividends. And it even gives me an investment allowance of £20,000 in a single financial year. I have plenty of FTSE 100 stocks on my investing wishlist, but three in particular stand out for me right now for 2022. 

#1. Lloyds Bank’s much-awaited rally

The first of these is Lloyds Bank, which I have written about a lot in recent days. I think many things are going in favour of banks these days, which could lead to a rally in 2022. The most recent of these is the interest rate increase by the Bank of England recently, which could encourage commercial banks to increase their lending rates as well.

This, in turn, could improve their margins. The bank can also pay dividends at its own discretion, now that the central bank has removed restrictions on them, its recent performance has been fairly strong and a recovery is underway. At the same time, its share price is not back to its pre-pandemic levels. 

On the flip-side, its dividends are not back to pre-pandemic levels either and the recovery could slow down, due to the Omicron variant. But I reckon there is a higher possibility of the stock rallying than not. So I would buy. 

#2. Ashtead is one of the best FTSE 100 stocks for me

Next, I like the industrial equipment rental company Ashtead. I always liked the stock, but as one that caters to the cyclical construction sector, among others, its performance has been particularly noteworthy recently. The company keeps going from strength to strength. In fact, its share price has risen so much over the last decade, that it completely obscures the increase in its dividends. As a result, its dividend yield is quite small, but the actual return on investment, if held for a few years, is quite high. 

However, I am a bit wary considering there is now news the infrastructure bill might not go through in the US. Ashtead does much of its business in the US, so a strong source of potential growth could be lost now. But going by the company’s growth, even during tough times, I am quite encouraged to buy the FTSE 100 stock anyway. 

#3. Segro could gain from long-term trends

Lastly, I like the warehousing real estate investment trust Segro. It has seen an impressive share price rise over the past years. But I think the best is yet to come. Online spending’s growth has accelerated sharply during the pandemic, increasing demand for all services across the e-commerce ecosystem, from warehouses to packaging materials. This FTSE 100 stocks finds itself in just the right industry. And its expansion continues and its results are good.  

Of course, it is possible the pandemic-inspired spurt in e-commerce was a flash in the pan. That could cool considerably once Covid concerns are behind us. But somehow I do not think so. I’d buy the stock. 

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.

It has been around two years since the coronavirus first surfaced in China. And around a year and three-quarters since Covid-19 turned into a full-blown pandemic. There have been all kinds of ups and downs since, with many investing lessons for me. But the one investing lesson that I will remember for a long time is to always expect the unexpected. 

Unexpected stock market crash…

Because as far as I can see, that has been the overarching theme for my stock market investments in the past couple of years or so. And I have not one but two examples that could persuade you, the reader, to believe so as well. For the first, we only need to look back to March 2020. Tremors to the stock markets in the UK were visible even in February last year as coronavirus cases started spreading. But it was not until the lockdown was announced in the country that the FTSE 100 index crashed by 10% in a single day to sub-5,000 levels. 

It was a golden investing opportunity. If I had kept some idle funds in my investment account for such a day, I could have bought some of the best performing FTSE 100 stocks at dirt-cheap prices then. And they would have held me in very good stead in the year to come. While I did not make purchases that day, I did fortunately do so while the stock markets were still pretty weak in the days that followed. Those investments have done very well indeed. 

… and a rally!

Just like the we did not know that a stock market meltdown is going to happen, we also did not know that a stock market rally will happen in November 2020. No sooner were the vaccines developed, that investors turned bullish. Within a couple of weeks or so, the FTSE 100 index gained more than 15%! Let me put this in perspective. In the entire last year, the index has risen less than that, by around 12% at the last close at the time of writing. 

So, if I had been feeling despondent about holding on to my beaten-down investments, that feeling was gone in a flash. As the rally ensued, my holdings’ share prices rallied. If I had cut my losses and run from those investments in panic, I would not have seen the gains I am seeing today. I could, of course, have exited those investments and bought stocks of more promising-looking companies. But in the current uncertain environment, who is to say how that would have turned out? 

One last point

There is something to be said for staying the course. And this brings me to what we at the Motley Fool often say, which is to stay invested for the long-term. Never mind the short-term gyrations. It can of course happen occasionally that our best quality investments go awry. This can be for reasons ranging from sudden discovery of company mismanagement to structural changes to industries. But by and large, these things happen rarely. And they are usually restricted to a small number of companies. Typically, the unexpected stock market crash or boom, which is what I am referring to here, can be a great time to either buy or reap rewards from past investments.  

Manika Premsingh 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.

The BT (LSE: BT.A) share price performed better than I expected in 2021. In 2020, I thought the company was a poor investment, considering its track record of capital allocation, weak balance sheet and increasing competition in the UK telecommunications sector. 

However, following a change of strategy, the company has surpassed expectations. The growth even seems to have surprised management.

Last year, management thought the business would have to seek out a joint venture partner to fund its fibre broadband across the UK. Now, the company believes it can do it itself. 

I think this change in sentiment highlights how the BT share price outlook is changing. After years of poor growth, the company is finally finding its feet again. Although earnings growth is yet to materialise, the group is moving in the right direction. As it invests more in customer service and infrastructure, the enterprise should see an increase in profitability. 

With that in mind, I see three potential scenarios for the BT share price in 2022. 

Growth outlook 

In the first and possibly best-case scenario, BT will be acquired. I think this is highly unlikely, considering the size of the company and national security implications. Still, it is worth considering, as French telecoms billionaire Patrick Draghi has acquired 18% of the business.

He has promised not to make an offer for the next six months, but considering he now owns nearly a fifth of the business, it is clear that he believes the enterprise is undervalued. 

In the base-case scenario, I think the company will continue to trundle along at its current growth rate. It will continue to pursue fibre broadband rollout to most UK homes and refine its pay-TV offering. The business will also meet its aim to pay a full-year dividend of 7.5p, providing shareholders with a yield of 4.5%. 

In the worst-case scenario, BT will revert to its old ways. Higher interest rates could force the company to reduce capital spending and divert the cash to cover interest costs. Management may respond by cutting costs elsewhere, impacting customer service, and erasing much of the progress made to improve service levels over the past few years.

The company may also have to backtrack on its dividend ambitions in this scenario. This would almost certainly put investors off returning to the shares.

The outlook for the BT share price

It is impossible to predict what the future holds for any stock, but I think BT is likely to meet my base-case scenario for growth next year. I believe the company will continue to move along at its current rate and meet its dividend projections. 

As the stock is currently trading at a discount forward price-to-earnings (P/E) ratio of 8.6, I believe there is also scope for the shares to re-rate to a higher multiple. Unfortunately, this is not guaranteed. 

Still, even without this growth, I would be happy to buy the stock for my portfolio today. 

Rupert Hargreaves 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.