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.
Watch Video: Contrarian Investors
Contrarian Lump Sum Investing
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.
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.