In an ideal world you want to buy shares or units at the lowest possible price and then sell them at their highest price meaning you make the biggest gain.
During these testing times the Coronavirus has had a huge impact on global stock markets.
Shares and units are at a much lower price than they were one, two, five and for some even ten years ago.
For those with spare cash available now could be a very good time to invest. But can the markets full further?
Actually it doesn’t matter. Here’s why.
Investing is never perfect, especially if you are waiting for the bottom
With all that is being reported in the news there is a temptation to think stock markets will fall further and that actually there may be an even better time to buy in the future.
That may be the case. Markets could certainly fall further if you invested now, but with each fall the potential future downside becomes less and the potential for missing the upside becomes greater.
History tells us that the lower stocks go, the less they are likely to fall further. The higher stocks go the less they are likely to go higher.
At the time of writing we know that the UK stock market (FTSE All Share) is around 30% cheaper than it was a month or so ago. A 30% discount you could say.
So, is a known 30% discount good enough? Or do you hold on for a potentially bigger discount (if markets fall further) with the risk your discount may be lost altogether (if markets rise)?
Investing is never perfect so know when enough is enough
If you invested £250,000 now when the markets have dropped 30% you will make a 42.9% return if the markets get back to where they were before the fall. That’s a gain of £107,250.
Now there comes a point when you have to ask yourself how much is enough gain for you?
We don’t know what is coming tomorrow, the next day, month or year. We DO know all the information that is out there today. We know the prices and the current fall. So, you either act with the facts or gamble with the unknowns.
Of course, if you are going to invest you need to be clear on your plan first:
- What are you investing for?
- What do you need?
- When do you need it by?
Then you need to be aware of the downsides and understand what you could potentially afford to lose.
Your investment portfolio should be built according to the level of risk you need, are willing and able to take.
If now is the time to invest for you and you want to ensure you invest in the right portfolio for you then why not take advantage of our free 15-minute call. You can speak to a Chartered Financial Planner who will listen to your situation, give you an outline of what you need to consider and guide you in the right direction.
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.
