Time to invest?

24 May 2022

2 minute read

Most would-be investors share a common concern: should I invest now or should I wait?

Whether taking the first steps towards investing or committing additional savings to investments, most would-be investors share a common concern: should I invest now or should I wait?

Trying to time the market carries so much uncertainty that success is near impossible – even for the experts. Here’s the lowdown on why it’s worth considering the theory that it's time in the markets, not timing the market that counts.

Lump sum investing

One of the fundamental principles of investing is to put your money to work as soon as possible. An investment needs time to grow, so the longer your money is in the market, the more chance you have of reaching your goals. If you feel comfortable with where the markets are going, investing all the money (that you've earmarked for your long-term investments) at once (rather than drip feeding it into the markets monthly) would likely suit your needs.

Regular investing

If you prefer to invest bit by bit – or don’t have a lump sum to invest anyway – you can drip feed your money into the stock market.

Since financial markets rarely move in a straight line and prices move up and down, by phasing your money into an investment over a period of time, you invest across a range of prices. Your buying power increases when the share price falls, and drops when prices rise. So, you effectively pay the average price over a fixed period, which can help smooth out market volatility. Committing to investing regularly often takes some of the emotion out of investing and provides a structure to engagement with an advisor or setting aside time to think about your investment plan.

Don’t fret over volatility

Whichever way you get your money into the markets, it’s important to keep a long-term view. If you are investing for 10, 20 or even 50 years it’s likely there will be bad years along the way. By investing regularly or remaining invested through the cycle and sticking to your long-term plan, you can hope to reap the rewards.

The magic of compounding

Compounding is another reason to hang on to investments for the long term, as it can seriously turbocharge your returns.

In simple terms, your money earns a return in the first year, and both the original cash and the return benefit from any growth in the second year. In the third year your investment is further enhanced by any returns achieved. This snowball effect is called compound growth.

Many companies pay dividends quarterly or half yearly which means that compounding can get to work more quickly. Reinvest those returns rather than take them as income, and the growth will compound. This means you’ll see your money grow – as long as markets remain positive over the long term.

Investments are not written in stone

Should the right choice be to change some investments, adjustments are easily made. This might be if your circumstances change or if a fund manager leaves and the new manager wants to change the way the money is run. Your portfolio should be reviewed regularly to ensure it still meets your goals.

Next steps

Getting professional advice on how to construct a portfolio and keep it under review can go a long way towards growing your savings into a meaningful fund. Speak to your Wealth Manager or contact us.

Please remember the value of investments can fall as well as rise. You may get back less than what you originally invested.

Things to consider

The value of investments can fall as well as rise. You may get back less than what you originally invested.

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