2022 in Review for the Investing Experience

Whether you consider yourself to be an avid investor or a novice, 2022 could potentially have been worse for the investing industry when compared to 2008.1 If you were among many at the start of the year, few believed that 2022 would end up as it did. The perfect storm arrived when it came to investing: recession, inflation, and war.

2022 vs. 2008 Facts

With the Consumer Price Index or CPI in 2008 at -0.02% and in August 2022 remained near a 40-year high at +8.3%, inflation showed signs of being worse during 2022 than in 2008. 1 In 2008 the S&P was at -37%, when compared to the first two consecutive weeks of December 2022 the S&P was down 6.4%2 showing that 2008 was a much worse year for stocks than 2022.1 And let us not forget about Crypto – it was just in the infancy stages in 2008 and with the collapse of the banking system, it began gaining traction of interest from investors.1 Crypto started 2022 nearly twice as valuable as it was in January 2021; however, after the crash of the $32 billion dollar cryptocurrency exchange in November 2022, it continues to show its volatility in the market.3 Cryptocurrency is still up to no good and here’s why.

As an investor, are you committed to staying prudent and disciplined over a lifetime, or are you ready to panic, cut, and run from the market?  Creating a solid framework to help in building your portfolio and potentially grow wealth, there are 3 simple yet solid rules to consider when investing: own equities, diversify globally, and rebalance.

1. Owning Equities

Matson Money believes that owning equities should be at the heart of every investor’s portfolio. Analyzing nearly 100 years of stock market data, historical data shows that equities perform well over long periods of time; this remains true when factoring in the Great Depression, wars, and recessions.4 It is one belief that people choose to not hold equities for long enough periods of time, which can result in jumping in and out of the market by attempting to “time” the market. Investors often sell too late in the dip and return after markets are already rebounding, possibly missing the opportunity to capture the upside.

Equities are usually riskier than fixed-income assets, however, historically they can provide a higher rate of return.Due to there being more risk involved, stocks have historically provided a higher rate of return than fixed-income instruments. “It is pretty simple, the market rewards investors for investing in equities,” according to Mark Matson, Founder and CEO of Matson Money.

2. Diversify Globally

If the market can provide a risk premium for equities, what else can it do? Investors may believe they are diversified by owning different mutual funds or being in multiple investment vehicles. This behavior became known as home bias and the local bias, meaning investors may be inclined to invest disproportionately into local and domestic assets, which does not necessarily follow diversification strategies for their portfolio.5 To be prudently diversified means having investments in many different asset classes and countries.

Matson Money has over 24,000 equities in 79 countries,6 following the Nobel Prize-wining concept known as Modern Portfolio Theory or MPT.7a Developed by Dr. Harry Markowitz – a member of Matson Money’s Academic Board8 – MPT theorizes that diversification can increase expected returns for a given level of risk.7a By using MPT, we can compare the expected returns of various asset classes to help identify those with high expected historic returns but dissimilar price movements. From there, we create a correlation matrix that compares each asset class to one another and helps to identify the potential benefits of adding different assets to a portfolio. Watch Mark Matson on TD Ameritrade for his take on why investors should diversify globally.

3. Keep Calm and Rebalance

What is rebalancing? The process of realigning portfolio assets back to established target weightings. Rebalancing involves periodically buying or selling assets in your portfolio to maintain your original desired level of asset allocation and risk tolerance.9

Why rebalance? Risk Management.

Markets change, and advisors rebalance to ensure that their client’s portfolios haven’t drifted away from their original allocations. Rebalancing can place investors in a position to make informed investment decisions based on their risk tolerance rather than being panicked and selling out of asset classes that are down and buying them when they are high. By rebalancing on a regular basis – we recommend reviewing the process quarterly – advisors can help to ensure that they are not only maintaining the right ratios but that they are also allocated to a diversified range of stocks, not simply top-performing ones.

“No one can tell you where the next 20% movement will be, up or down, but we know throughout history the next 100% movement is always up,” Mark Matson states.

Rebalancing also helps advisors to sell when equities are overweight and overvalued and buy when they are underweight and undervalued – something advisors may know in theory, although in practice can be more difficult. If you haven’t talked to your advisor about rebalancing, here are 3 reasons why you should.

While Matson Money adheres to a simple investing strategy; own equities, diversify, and rebalance. We also coach advisors and train investors on the potential biases that can knock you off track in your investing plans. Looking throughout history, there have always been periods of chaos, fear, pain, and struggle. These periods were often followed by peace, tranquility, bravery, and courage when in the face of fear. Investors should create long-term strategies to stay disciplined with a portfolio that can withstand the volatility of the market.

Watch Mark Matson on Fox Business’s Maria Bartiromo’s Wall Street on why he says investors should be cautiously optimistic.



This content is based on the views of Matson Money, Inc. This content is not to be considered investment advice and is not to be relied upon as the basis for entering into any transaction or advisory relationship or making any investment decision.

This content includes the opinions, beliefs, or viewpoints of Matson Money and its Co-Advisors. All of Matson Money’s advisory services are marketed almost exclusively by either Solicitors or Co-Advisors. Both Co-Advisors and Solicitors are independent contractors, not employees or agents of Matson. Other financial organizations may analyze investments and take a different approach to investing than that of Matson Money.

All investing involves risks and costs. No investment strategy (including asset allocation and diversification strategies) can ensure peace of mind, guarantee profit, or protect against loss.

1. Could 2022 be worse for investors than 2008? Written by Taylor Tepper, published September 20, 2022. https://www.forbes.com/advisor/investing/stock-market-performance

2. Stocks close lower for a fourth day as recession angst dashes hope of year-end rally. Published December 19, 2022: https://www.cnbc.com/2022/12/18/stock-futures-inch-lower-to-start-the-week.html

3. A timeline of cryptocurrency exchange FTX’s historic collapse, published December 13, 2022: https://abcnews.go.com/Business/timeline-cryptocurrency-exchange-ftxs-historic-collapse/story?id=93337035

4. 2010 Dimensional Fund Advisors Returns Software. US long-term bonds, bills, inflation, and fixed income factor data © Stocks, Bones, Bills, and Inflation Yearbook”, Ibbotson Associates, Chicago (annually updated work by Roger G Ibbotson and Rex A. Sinquefield). The S&P data are provided by Standard & Poor’s Index Services Group. Fama/French and multifactor data provided by Pricing (CRSP), University of Chicago. Asset Classes defined as: Consumer Price Index for inflation, CRSP 30 day treasury bill index for Treasury Bills, CRSP Long-Term U.S. Government Bond index for Long-Term Government Bonds, S&P 500 Index for U.S. large stocks, CRSP 6-10 index for U.S. small stocks, CRSP 9-10 index for U.S. micro-cap stocks, Morgan Stanley Europe, Australia, Far East (EAFE) Index for international large stocks, and the international small stock index created by DFA using CRSP data for international small stocks. US Growth Stocks represented by Fama/French, US Large Growth Research Index, and Tech stocks are represented by the NASDAQ composite index. Hypothetical asset class mixes created using the allocations provided.

5. The home bias and the local bias: A survey by Eduard Gaar, David Scherer, and Dirk Schiereck. Published online November 12, 2020.https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7658434/

6. Holdings Disclosure: Fund of Funds Risk. The investment performance of client portfolios is affected by the investment performance of the underlying funds in which the portfolio is invested. The ability of the total client portfolio to achieve its investment objective depends on the ability of the underlying Matson-advised mutual funds to meet their investment objectives, on Matson’s decisions regarding the allocation of the portfolio’s assets among the underlying Matson-advised mutual funds, and on Matson’s decisions regarding investments made by the underlying Matson-advised mutual funds. The portfolio may allocate assets to an underlying fund or asset class that underperforms other funds or asset classes. There is no assurance that the investment objective of the portfolio or any underlying fund will be achieved. When the portfolio invests in underlying funds, investors are exposed to a proportionate share of the expenses of those underlying funds in addition to the expenses of the portfolio. Matson may receive fees both directly on your account as well as on the money your account invests in the underlying funds, and the underlying funds themselves may bear expenses of the mutual funds or ETFs in which they invest. Through its investments in the underlying funds, the portfolio is subject to the risks of the underlying funds’ investments, with certain underlying fund risks described later in this presentation. More information on mutual funds, ETFs, and associated fees, is available in fund prospectus documents, available online at: http://funddocs.filepoint.com/matsonmoney/.

7. Three Factor Model 

Fama, Eugene F. and Kenneth R. French. “The Cross-Section of Expected Stock Returns,” Journal of Finance, 47, June 1992.  

7a. Modern Portfolio Theory 

Markowitz, Harry. Portfolio Selection: Efficient Diversification of Investments. New York. Wiley. 1959. Print. 

8. Academic Advisory Board members receive compensation from Matson Money for their services which include, but are not limited to, independent leadership consulting; co-authoring white papers; and speaking at Matson Money conferences.   Advisory Board members may also provide insight to Matson Money on portfolio construction, asset allocation, quantitative analysis, investor behavior and other areas of expertise, as needed. 

9. Rebalancing: Definition, Why It’s Important, Types and Examples, updated July 12, 2022: https://www.investopedia.com/terms/r/rebalancing.asp