HOW TO INVEST DURING UNCERTAIN TIMES
Timing the market is hard. Really, really hard.
Professionals spend their days analysing companies and markets looking for an edge, and even then, many end up missing their targets.
While market downturns can be excellent opportunities to buy shares in quality companies at a discount, they are next to impossible to predict. Very few people started the year predicting COVID-19 would come along and cause the disruption that it has. If you’re sitting there anxiously waiting for the next market drop you may miss out on a lot of upside before we get to that point.
Time in the market is much more important than timing the market. Plus, you can sleep better at night.
Think of investing as you would saving
The biggest barrier to investing is often getting started. Investing can seem foreign and complicated to a lot of people who are nervous about taking the first step. Others feel investing is for those with heaps of money and that they need a big lump sum to get started. None of these things are true.
One way to think about investing is to look at it the same way you would a savings plan. This simply means investing a certain amount each week, fortnight or month in a selection of companies or funds.
This takes the guess work out of investing. Instead of trying to buy when you think a stock is at its lowest, you simply buy a set amount of each company, say every month. This way, you’re able to take advantage of dips in the share price to purchase shares, but as you’ve got money at work in the market, you’re able capture any upside during strong markets.
With this approach, which is commonly referred to as dollar-cost averaging, you don’t have to have much money to begin with and before you know it, you have built up an investment portfolio.
Aren’t things a bit uncertain at the moment? Shouldn’t I hold off for a market correction?
Through March and April, markets pulled back as uncertainty reigned around how COVID-19 would disrupt businesses and entire economies. However, since this time, investors have got their heads around the risks, while governments and central banks have stepped in with support measures such as increased spending and quantitative easing. These have helped soften the blow caused by COVID-19. As a result, markets have recovered and stabilised somewhat.
Nonetheless, the future, as always, is uncertain and we could yet see another period of market weakness. Or we may not. The point is that no one’s crystal ball is perfectly calibrated.
So, should you hold off for a market correction that may or may not come? Well, with dollar-cost averaging you can have your cake and eat it too.
If you’re investing a set amount each month across a group of companies and markets do pull back, you’ll be set to automatically buy shares at lower prices – and without the stress and hassle of having to try to time it perfectly.
However, if markets continue to be resilient, you’ll be invested and able to participate in any positive price moves.
Either way, it pays to think long-term and not get too hung up on short-term movements in markets. The important thing is to have a plan in place and be investing. That small amount you put in each week or month will build up more quickly than you think.
Craigs can help you with a custom investing plan
Craigs was established in 1984 and over the subsequent 35 years or so we’ve experienced many notable market events – both good and bad. So, we understand that investing works best when you think long-term and stick to a plan.
Creating your own investment portfolio is easy
To help get Kiwis investing, we introduced mySTART. The first of its kind, mySTART is a flexible investment plan that enables you to decide how much to invest and how often. Investing either a $1,000 lump sum to start your portfolio, or as little as $100 per month, you can hand pick from 200 shares and funds from New Zealand, Australia and across the world. These have been shortlisted by our research team, one of the country’s largest, making your investment choices easier.
Quality investment advice – a phone call away
With mySTART, you also have access to a qualified investment adviser, who can help you with any of those tricky questions and to get started with your investment plan.
So, if you are looking to begin your investment journey, but need a bit of help to get started, get in touch with us today.