Do Not Stop Saving During Market Falls
Published / Last Updated on 21/02/2022
We have recently had discussions with a couple of clients:
- One client had stopped their monthly savings into an ISA when markets fell due to the omicron variant in December 2021.
- Another was considering stopping their monthly savings into pensions due to worries about stock markets amid the Ukraine/Russia crisis.
When you are saving regularly, you should be happy when stock markets fall as this means your next monthly contribution will be buying even more units or shares at a cheaper price. This should continue for the following months whilst markets recover.
By doing this, you will have bought even more units at a cheaper price meaning your investment or pension will grow just that little bit extra. If you invest £100pm and the unit price is £1, you buy £100 units that month, if next month the unit price is £0.93, your £100 bill buy 107.5 units. When markets recover, those extra units will give you even greater profit.
Put another way, when you save monthly, you then get the average price over a year or a few years meaning you have spread the risk of market volatility and have bought units at loth lower and higher prices that should balance each other out to give you the average price over the year. We call this ‘drip feeding’ but the technical term is ‘pound cost averaging’.
See our post cost averaging video: Hedge Markets
In volatile markets, keep saving or investing regularly.
