Many investors flee to cash or gold in uncertain times in the hope that they will ‘bottom fish’ i.e. time exactly when the market has fallen to its low point and then buy back into markets at a low price. Equally, when invested, trying to guess when the market has hit its peak and lock out your profits at the top.
This is impossible to do. You cannot call the market.
The directors of this firm do invest their own money personally this way but they do not look for the lowest and highest points. They monitor market movements over a period and set a return rate of say 10% of 15% and once the market has grown or fallen by their target amount, they disinvest or invest.
For example, during coronavirus, they came out of all equity markets in January 2020 when markets had hit or were near their year highs to lock in profits/gains. They had predicted that coronavirus could drive markets down by 30% using the SARS virus of 2002/2003 as a past history benchmark.
Markets did fall quickly and then the directors invested back into equity funds near the bottom. At close last week, FTSE 100, Dow Jones, Dax, CAC, Shanghai Composite, Hang Seng and the Nikkei 225 did bounce back by over 35%.
This is not an exact science, this is investment gambling. We repeat, you cannot call the market. You should set targets for growth in the medium (5 years +) and in the longer term (10 years +) and try to invest at a fair value. Do not invest when you see headline ‘stock market hit an all time high’, do invest when you see headlines like ‘stock market crash’ or ‘stock market fell’. Decide on your limits, do not try and guess the bottom of the market.
If the market has fallen but you believe it is fair value compared to previous highs you should invest for the medium and longer term. Do not look at prices everyday, leave it until their brighter news about the economy and then you funds will likely have grown.
You should invest in markets and come out when you are happy with the price that you are buying in at or take profits when you are happy with your growth. Do not be greedy, you will fail. Make informed decisions about when you are happy to buy in, sell out and hold for longer term until you achieve your target. It could take weeks, months or years to get to where you are happy and always, always try to invest for value i.e. when markets have fallen – “be fearful when others are greedy and be greedy when others are fearful” said Warren Buffet.