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Is it a good time to invest?

This is a question asked frequently of advisers and the answer is usually straightforward in that it is normally better to invest than to see cash value eroded by inflation. However in times of extreme market volatility as we are currently experiencing, the answer is more difficult. The risks of investing appear higher now than they have for some time.

Short term volatility naturally makes potential investors nervous. Longer term market falls make investors even more nervous. Potential investors are generally tempted back into the markets when there is evidence of a sustained recovery. This may help investors to sleep at night but it may mean missing out on the best investment opportunities.

Many individuals like the thrill of trying to bag a bargain and will look to optimise the timing of investments. Some will win and some will lose. Most will both win and lose at different times. The majority of investors however have neither the time nor the inclination to make these timing judgements. They may leave decisions to 'experts' but in general these experts have a vested interest in investing. The best alternative is often to drip feed regularly into the market with little regard for timing or volatility.

Monthly regular saving allows you to gain from rising asset prices whilst benefiting from the purchase of more assets when prices are depressed. Those in our industry use the jargon - 'Pound Cost Averaging'. It is not exciting and it is not fashionable, but it allows you to accumulate wealth over the medium to long term. That sounds like an investment objective.

So is it a good time to save regularly? Almost certainly.

 

 

Date: 29th February, 2008
Author: Tony Slocombe

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