Time in the market or timing the market – what’s the best way to invest?

It’s not only people who are grounded by the crisis. The coronavirus crisis has put global trade on lockdown too.

Factories have shut up shop, airlines are grounded, and shipping lies at anchor. Stock markets around the world have been volatile. But although it may be too early to see a light at the end of the tunnel, the fact that China (where the epidemic started) is already starting to lift restrictions at least suggests that light actually exists.

Some investors have concluded that the markets have seen the bottom and may even have taken their first tentative steps on the way back up.

Timing the market

It’s easy to think that successful investment is a matter of timing. Buy stock cheap, just before the price starts to climb, and sell just as it reaches the summit and before it begins its descent. In the current climate, with every stock well down on its value of just a few months ago, it may be tempting to believe that now is the ideal time to invest.

In some cases, timing the market in this way is an effective way to lose money.

When markets are volatile, they go up and down with little apparent cause, and even less warning.   You simply don’t know what any stock is going to do next. It’s an old piece of stockbroker’s wisdom that nobody rings a bell at the top of the market.  Unless you have access to tomorrow’s stock prices, you are just as likely to buy a cheap stock that is set to become even cheaper.

Time in the market could build wealth

The more money you have invested in the market, and the longer it has to grow, the greater the potential profits can be.

The key to success is to have an investment plan and stick to it as the market declines and recovers, to allow overall steady growth. Sharp falls in share prices can be frightening. But there is no point in selling and crystallising the loss. Simply ride out the ups and down and benefit from the recovery when it comes.

Investing regularly and staying invested can help smooth out market highs and lows over time.

At Continuum we believe that the technique of pound cost averaging can help. With it you invest a small amount regularly. It can reduce exposure to a market downturn, reducing losses by averaging them against gains.

In a volatile market, the average price per share tends to work out lower when you save regularly.  Regular small contributions have the potential to build into a sizeable pot and investing in this way could increase the value of your investments in the long term. Paying monthly direct debits from your current account into a regular saving scheme make investing simple.

At Continuum, we believe that you can potentially profit from the recovery – but that the best way to do it is with a considered long term investment strategy.

Many people have been forced to look at their investment plans again after the coronavirus falls. There is no formula that guarantees investment success, but having an investment strategy based around your investment needs, that offers a broad range of investment and the technique of pound cost averaging –  and above all is for the long term  – may be the best solution.

Getting started

When you need to think about your investment plans, it might pay to get professional help. At Continuum we can provide the help and expertise you need

Get in touch. To discuss how to plan your investments in now, please call us.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action

The value of investments can fall as well as rise and you may get back less than you invested.