Tim, many of us are aware that now is a great time to invest since markets are so low. However, with all the bad news of late, it's really difficult to part with my cash even though I know I should be doing so. I appreciate the Warren Buffet types of this world are snapping up the bargains, so how can we mortals also get involved comfortably. Yunus
Yunus, one of Mr Buffet's well-known phrases is that you buy when there is blood in the streets.
While most of us are battening down the hatches as we navigate uncharted waters of this financial tsunami, many seasoned investors are taking full advantage of the situation. As you appreciate, they have the ready funds and may not have the same financial and employment pressures many of us may have at present.
That said, if you have funds available, which you can comfortably commit to the markets, then you would do well to take advantage of this historical low.
Markets go up as well as down and history has shown that there is always a recovery. However, I stress and reiterate the word you place in the question; it must be comfortable for you and avoid the temptations of greed or the quick buck.
If you cannot stomach exposing all your capital at once then it makes sense to invest smaller amounts on a regular basis. You can benefit from a concept called unit cost averaging, which will allow you to sleep at night and potentially give you some great upside. I will go into a little more detail on how this works with the aid of a diagram, below.
You can see that when markets are depressed the unit value drops and when one is investing regular amounts then the ability to acquire more units at a cheap price is achieved. And when the price rises again, one has a larger number of units in hand to benefit form the upturn.
It can be seen that example B has ended up with a higher fund value even though the unit price is ultimately lower. Like many great concepts, its beauty is in its simplicity.
There are numerous regular savings vehicles available and seek professional advice to determine the one that meets your criteria.
As with everything at present, there are deals to be had and some companies offering such solutions are also tempting investors out of their shells with enhancements to new portfolios.
Settle on a comfortable budget, seek independent professional help and take advantage of the bargain market through unit cost averaging.
- Tim Searle is CEO of Globaleye, a leader in financial services for the Middle East. Send your financial planning queries to: money@business24-7.ae
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