Tuesday, 13 June 2017

Time in the market - not “timing” the market

It’s impossible to predict the “right” time to enter or exit the market consistently. Financial markets move very quickly, so getting in at the bottom or out at the top is a matter of luck rather than judgement. Over the long term, history has shown that, the longer you remain invested, the better your chance of achieving a positive return. Dipping in and out increases the risk that you will miss out in the longer term. Ultimately, it’s not about timing the market – it’s about time in the market.

With this in mind, it’s worth considering the benefits of “pound-cost averaging”. This might sound complicated; essentially, however, it is just regular saving. Smaller amounts that are regularly invested over time will incur a range of prices; if you regularly invest smaller amounts of money – rather than one large lump sum – in your chosen investment, you will reduce your portfolio’s sensitivity to short-term market fluctuations. Moreover, investing a small amount of money every month will help you to get into a regular savings habit without putting too much pressure on your cashflow.

It’s true that, during periods of increasing prices, regular savings won’t reap the full benefit of the initial rise in the same way that a lump sum would have done. However, during periods of market instability or decline, your regular sum will invest at a lower price, buying a greater number of shares or units in your chosen investment.

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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