In the complex world of
investment, timing appears to be crucial. However – unless you are gifted with
foresight – you cannot consistently predict what the stock market will do. This
presents a problem for investors: not only to decide when to invest, but also
when eventually to pull their money out of the market. This is where the
benefits of 'pound-cost averaging' – or, in laymen’s terms, regular saving –
come into play.
Pound-cost averaging works on the basis that, by regularly putting smaller amounts of money into a fund or other investment, you can reduce the overall risk of investing at the wrong time. Compared with investing one large sum in a single transaction, the risk is mitigated by the fact that, over a period of time, your smaller, regular sums will be invested at a variety of prices.
Moreover, regular saving is a great way to build up a lump sum from almost nothing. Setting aside a lump sum of £5,000 is a tall order for plenty of people. However, putting aside £100 a month from your income might be less of an issue – and the addition of investment growth or interest means you could quickly build up a reasonable amount without necessarily noticing. And the longer you can leave that growing amount alone, the more impressive it potentially becomes. Most investment products offer regular savings as an option, including investment funds, Individual Savings Accounts (ISAs), life assurance and pension plans.
Pound-cost averaging works on the basis that, by regularly putting smaller amounts of money into a fund or other investment, you can reduce the overall risk of investing at the wrong time. Compared with investing one large sum in a single transaction, the risk is mitigated by the fact that, over a period of time, your smaller, regular sums will be invested at a variety of prices.
Moreover, regular saving is a great way to build up a lump sum from almost nothing. Setting aside a lump sum of £5,000 is a tall order for plenty of people. However, putting aside £100 a month from your income might be less of an issue – and the addition of investment growth or interest means you could quickly build up a reasonable amount without necessarily noticing. And the longer you can leave that growing amount alone, the more impressive it potentially becomes. Most investment products offer regular savings as an option, including investment funds, Individual Savings Accounts (ISAs), life assurance and pension plans.
For
more information please do not hesitate to contact the team at Ward Williams
Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.
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