Investment timing is impossible. No one can time the market as there are so many unforeseen and market shock events that affect any asset that you may wish to invest in.
We all know and understand the basic rule of ‘buy low, sell high’ but in reality, the only thing you can do in terms of market timing is make ‘educated guesses’. By educated guesswork, we mean that you use the normal rules of economics and the economic cycle to build reasoned arguments as to why it may be a good time to invest or alter the weighting of your portfolio (big or small) to reflect what a normal economic cycle can reasonably be forecast to do.
When to invest in Gold
By gold, we do not mean precious metals mining shares, we mean physical gold. As you may already know, gold and precious metals used to be the backbone of a country’s currency.
See What is Money?
Gold was a safe haven for central banks to support their currency, so you should always look at gold and precious metals as a safe haven investment. It is a tangible asset (i.e., it is a physical item, that you can handle and trade with). Demand for Gold increases when there is economic and/or geopolitical uncertainty. Even RAF pilots and SAS forces (behind enemy lines) carry gold sovereigns for survival and bargaining in times of war.
You should do the same in times of geopolitical uncertainty.
Between 2014 and 2019, gold prices flatlined between $1,100 and $1,400 per ounce and then with covid-19 lockdowns in 2020 and the global economy shutting down, gold rocketed to $2,117, it then fell back to around $1,600 in 2021 as we opened up and vaccinations started. Russia invade Ukraine in early 2022 and gold climbed again to 2,095, then to fall back to 1,742 later in 2022. In December 2023, gold set another year high of $2,135.39 per ounce as fears for conflict between NATO and Russia escalated.
Buy gold when you see just the slightest hint of economic or geopolitical tension.
When to invest in Stock Markets
Buy low, sell high, we all know the rule, but it is impossible to call the market. For stock markets, we go back to the educated guess work principle.
When investing in shares, you are investing in businesses, You own a share of the company and therefore benefit from capital growth of the business as well as dividend income when profits are distributed. It therefore stands to reason that you should invest in companies where their sector is set to grow or in countries where their economies are growing faster than others.
The world’s most famous investor, Warren Buffet, buys for value and generally holds. Buy low and hold.
We suggest when:
Timing is impossible, so look for trends and do not think of technicalities. Think about human nature and how people spend money (or not). If you are nervous for your money and your security then so are many others, confidence will push markets up or down as company profits rise or fall.
You should also research consensus views of the future of markets.
If all else fails with stock markets, keep it simple: buy low, hold, and sell when you have had some growth (we usually use 10% as a benchmark for this). If markets fall 10% we buy and if markets increase 10% or more, we sell and switch to other sectors or funds. KISS principle: Keep It Simple Stupid.
When to invest in Property
Mark Twain said: “Buy land they aren’t making it anymore” and the truth then is still the truth today.
The UK property market is also attractive to international investors and when the £ is weak, it makes it an even more affordable as well a solid long-term investment for rents and growth.
Our view on property is to not even think about timing when you buy property. If you find a property that you like and can afford it and it delivers what you need in terms of a home, rental income or capital growth potential then do not wait.