Six key steps to long term investing
4.Time, not timing
As we have said earlier, you may be taking a big gamble if you try to work out the best times to buy or sell your investments. ‘Timing the market’, as this is called, is fraught with danger and can be costly when you get it wrong.
One way to avoid the risks of ‘timing the market’ is to spread your investment through a series of single lump sum investments or a regular monthly savings plan. This is because you are cushioned from ups and downs in the stock market since you are buying your units at a variety of prices and over a period of time. This is the principle of ‘pound cost averaging’ in which you’ll get more units when markets are down, and less units when markets are higher.
The other benefit of this approach is that it takes the hassle out of trying to time market rebounds which is notoriously difficult to do, even for the experts. Bear in mind, however, that if you could have invested a single lump sum, it is possible to lose out if the market is on a rising trend.
'We take a 5 to 10 year view when investing, and we ask our customers to do the same.'
Joe Walters, Fund Manager of our UK Growth Trust
