Many investors are asking whether now is the right time to wade into markets. This is a fair question given the levels of volatility we’ve seen since the turn of the year.
The FTSE 100 index, a useful indicator of equity market conditions, has fallen by around 15% over the last 12 months.
Is it time to take the plunge?
If you’re already invested in markets, it’s very important that you stay firm and ride out this particular rocky patch.
If you’re sitting on the market sidelines, however, current levels intuitively feel like a buying opportunity. But how can we be sure?
Well, the answer is we can’t be. Many market observers will have their own opinions (and agendas) but no human being can yet reliably call the bottom or top of any market.
The only person who knows the right time to invest is the investor. What’s more, they don’t even need to know the inner workings of markets to make such a decision.
An investor should ask themselves three questions:
- Do I believe markets tend to rise over the long-term? (i.e. does capitalism work?)
- Why am I investing and for how long?
- What impact would a further short-term fall in markets have on my lifestyle today?
If your answers are….:
- To grow my money/generate income over five years and beyond.
- Little or none.
…you should be closer to making the decision that’s right for you.
I would liken this to investing in property. A friend was recently telling me about an investment property they bought three to four years ago. Within a couple of months of investing, property prices in this particular London suburb took a 5% dip and then plateaued for several months (prices have since recovered very nicely).
My friend regretted not waiting a little longer to secure a lower price, but I think he was being a little hard on himself. There was no way of knowing that prices would fall when they did. Had he suspected they would fall and then delayed investing, there was every chance the market could have risen!
So whilst my friend’s timing wasn’t perfect, do you think the investment will serve its purpose of providing income and capital growth over the long-term? I’d say almost certainly…in fact, he’s made strong progress already.
Time is on your side
Whether buying or investing, we all like to feel we’re getting the best deal possible. Timing does play a part in this process but there will also be other complex factors involved, often way beyond our control.
So if you intend to invest over a long period, try to take a step back and look at the bigger picture. In the end, the success of your investment strategy will be less about TIMING the market, and more about TIME IN the market.
As ever, feel free to get in touch if I can be of any help to you and your financial plans.
Thanks for reading.