Fifth Deadly Money Mistake Poor Investment Timing

We have all heard the classic stock exchange market floor calls of “buy low” or “sell high”. 

It makes sense in most things that we would like to invest in to buy low and sell high.  For example, we would all like to buy property at a competitive price and then for the value to grow and when you come to sell the property, you have made gains giving you even more equity to buy a bigger home or enough to downsize and buy a property outright or even get a more competitive mortgage if you have a lower loan to value mortgage as you have more equity for security.

This is the same for investing money.  We all wish to invest and get income, growth or both.  Ideally, we would all like to time the market so that we buy in at a low price and sell at a high price much in the same way as property.  That said, with markets being so volatile, it is impossible to correctly time or call the market.

Amazingly, we get more calls from clients that want to invest when they see headlines like “stock market hits a new high’ and lower volumes of requests to invest when the headlines are “stock market has crashed” or “stock markets have tumbled”.

This is exactly the opposite to what we should all be doing and is the fifth deadly money mistake.

Take a Contrarian View

In the words of the world’s most famous investor Warren Buffet “be fearful when others are greedy and be greedy when others are fearful”.  In other words, when markets are confident and people have made money, that is the time to disinvest or look for new opportunities. 

• We even get calls from some clients who have seen good growth and then perhaps get too greedy or confident and want to invest more, over and above their risk profile.  Do not be greedy, our view:  "only a greedy person can be conned".
• We also get calls from clients that have seen losses and want to come out and by doing so, you create a real investment loss rather than a paper loss.  That is not the time, remember to be greedy when others are fearful.

Watch Video: Contrarian Investors

Contrarian Lump Sum Investing

• We have a very simple contrarian approach for our own money that said, we still try to offer clients a balanced but well-placed portfolio. 
• When we see stock markets at or near their highs, that is when we  get out and when stock markets have tumbled, that is the time when we invest. 
• We do not get our short term ‘bets’ right all of the time but when our decisions are balanced out over the peaks and troughs in the medium term, we do.

Contrarian Regular/Monthly Investing and Hedge Your Bets

Many of you may have heard the terms ‘drip feeding’ or ‘pound cost averaging’ or ‘dollar cost averaging’.  Plain an simply, when markets are volatile and bouncing up and down over a period, as they have been for the last few years, you wish wish to consider spreading your investments going into markets over a period to spread the risk and smooth out the ups and downs.

Using pound cost averaging or drip feeding can even make you money when markets have fallen over a period.  Watch Video: Power Drip Feed

Be Aware of Where Markets Are v Lows and Highs

Every week we publish our Traffic Light Investment Alert.  We offer running commentary or our positive, neutral, and negative sentiment. 

• When we see a market is down say 10% or more of its year high, we invest lump sums. 
• When a market hits a year high or all time high, that is when we profit take, disinvest, and look to other markets that may be down.
• When we see volatility and uncertainty, we either invest monthly or we drip feed lump sums in over 4 quarters to spread the risk.

Poor investment timing is the fifth deadly money mistake.  You cannot call the market as we have said already but you can make an informed investment decision and it is wise to have a plan for lump investing, drip feeding and regularly investing.  We use all these to good effect.

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