For the well-organised investor shares are often regarded as an excellent option – despite the ups and downs of the market.
And in choosing what shares to buy – and when – investors and analysts look to the FTSE 100, an index of the 100 most highly capitalised UK companies listed on the London Stock Exchange. A look at the Index’s highs and lows in the past 25 years underlines the importance a long-term view.
That said, only two prices should ever matter to the investor – the price you buy at, and the price you sell at. What happens in between really doesn’t matter.
Regular saving as part of a long-term investment strategy offers a flexible, affordable solution for many people. And by keeping some wealth liquid in the form of cash, deposits or short-term Government securities, investors should not be forced into selling shares at a bad time in the market. Diversity and flexibility are the watchwords for successful stock market investing.
Market timing – It’s too easy to miss the gains
Sharp falls in stock markets tend to be concentrated in short periods of time – just like the best gains. These gains often occur just before, or after, a market fall and an investor who tries to time investments is highly likely to miss out. Fidelity has analysed the returns from UK, US and other stock markets from 1994 to 2009. This shows that missing just a few days’ stock market performance can significantly impact performance.
The performance of the FTSE All-Share index over the past 15 years shows that an investor who missed the ten best days in the market would have ended up with a portfolio worth 46% less than one that had been fully invested throughout the period. Missing the ten worst-performing days would have resulted in a portfolio worth 85% more than one fully invested throughout the whole period.
The key to investment planning is to seek specialist advice from a wealth expert and get your money into funds managed for your benefit over the longer term. Then forget about them. If you follow these simple rules you are in a strong position to build up a substantial portfolio of investments in the long run.
To receive a free guide covering Wealth Management, Retirement Planning or Inheritance Tax Planning, produced by St. James’s Place Wealth Management, contact Simon Wyatt Chartered Financial Planner of the St. James’s Place Partnership on 01792 799506 or email simon.wyatt@sjpp.co.uk
The importance of a long-term investment strategy