‘Now isn’t the best time to invest’
‘I want to wait a bit to see what happens’
‘Lets get this data release out of the way first’
So, when is the best time to invest?
A lot of investors held off buying shares before the EU referendum as they were anxious as to what would happen. Following on from the vote to leave the EU, the same investors held back from entering the market amid talks of a housing market crash, FTSE 100 firms expected to leave the UK etc. However, investing at this time would have been almost perfect.
By investing with regular contributions this will help to lower the risk thanks to Pound Cost Averaging. Pound Cost Averaging is a technique that reduces exposure to falling markets from investing a lump sum. By investing at regular intervals more shares are purchased when share prices are low and fewer shares are purchased when prices are high. The investor will be better off in falling markets (Source: Morningstar)
As you can see from the example above with Barratt Developments, Pound Cost Averaging is where shares are bought on a regular basis (where the arrows indicate). If you bought a lump sum of Barratt shares the day before the referendum (571.25p) you would currently be 8.22% up (Based on share price as of 03/08/2017), however you would have been at one point as much as 40% down. Compare this with regular, equal, monthly contributions you would be 18.22% up and also benefited from a dividend yield of just under 2%.
‘Now isn’t the best time to invest’. Incorrect,by using the correct strategies you can lower your risk and with a bit of patience help increase the potential to swell your portfolio.