Everything You Need To Know
- Time IN the market, not timing the market -say what?!
Investing – long-term holding of assets that increase in value, produce an income or ideally both. Investing accepts that there will always be ups and downs, but that markets will tend up, especially with income reinvested, IF you stay the course long enough.
Trading – short-term flipping of assets, hoping to gain from the impact on the asset price of things like news-flow, financial results. Trading is timing the market – you’re hoping to benefit from the upswings and miss out on the downswings by trading in and out, trying to get the timing right. - This is an easy mantra when things are going up, less so when things are going down.
- Market timing means you have to make a series of (impossibly) good decisions. Example in Global Financial Crisis of 2008 – had one client who claimed to see what was coming, early on in 2008. Against advice he disinvested some of his ISAs. He missed the worst of the decline to March 2009. But he waited until late summer of 2010 to reinvest. He got one decision right, but the other one very wrong – he missed out on something like 30% growth from the bottom to the point at which he finally reinvested.
Everything You Need To Do
- Think like a multi-decade investor. If markets go down – who cares? So they’re down for a few months – you’re investing for decades! This perspective makes it easier to ignore short-term challenges, even big ones.
- Just Keep Investing. For monthly investors – those building wealth – market downturns are a godsend. Markets are on sale!
- Ignore the news. By the time any story about markets is in the news, it’s too late to react. As a retail investor, you also can’t move very fast, especially not if you’re holding funds, which we suggest you do.
- Invest with the end in mind, like a planner. A good planner builds in worst-case scenarios and stress-tests the plan. Having a plan which governs your investing and wealth-building gives perspective too. If you know where you’re heading, it’s easier to keep your eyes on the prize.
