Take emotion out of investing
THE uncertainty in the marketplace is causing many investors a great deal of mental anguish. Everyone wants to buy a share today and see it on the rise tomorrow, but with all the volatility, there's a good chance that whatever you buy today, may have lost value by tomorrow.
All the books on economic and financial data instill in us that it's usually better to buy when everyone is selling, but this is actually very difficult to do. Investors realise that a growth investment strategy is for the long term, but no one is happy to see their portfolio drop in value - even if only on paper.
With all the global uncertainty relating to currencies, commodities, politics, inflation, and the effects that this has on markets, there are many sitting in cash, waiting for a further fall they're convinced will happen before making their investment. They've now been waiting nearly three-and-a-half years.
As a financial adviser, it's even more challenging in these turbulent times because although investors commit to a long-term view and strategy, they still feel they've received poor advice when markets and shares are down.
Some watch their portfolio daily, more out of interest than concern of seeing lower values, and when markets are on the increase it feels great, but who admits to feeling good when your portfolio is down?
If you are the type of investor who doesn't follow your investment value regularly, I believe you have the stomach for the market and this is where you should be to achieve long-term growth. Unfortunately, few remain calm under fire and their most common reaction if shares have dropped will be: "Why didn't I wait until tomorrow or the day after to buy?"
This is the wrong attitude. I regularly urge investors to take the emotion out of investing. If you have identified value and bought a share which drops in price, see this as a great opportunity to buy more at this lower level.
It's unfortunate that we're constantly hearing about the market throughout any given day. This dominates the headlines and it's the first item on the news when markets are down.
Bombardment from the media unnerves people in different ways. Those who have just invested feel that they should have waited and those who are about to invest think they should hang on.
Statistics show that there is a great deal of money sitting in money markets when interest rates are at the lowest they have ever been, and yet investors still wait for markets to crash in the hope that they will be able to buy in even lower. I can assure them that if this happens, wanting the best results will dictate that they still will not be buying. They will anticipate a further market downturn and so will continue to play the waiting game.
There is currently a great deal of confusion out there as to how to best invest, but if you hope to beat inflation, you have to be invested in growth assets. The one certainty is that, if you invested in the money market, inflation will erode the purchasing power of your money.