Removing the fear of investing
By James Paterson, Head of Advice
06 September, 2017
Investing money can be nerve-wracking. Not only do you have to make sure that you’ve chosen the right investment, but you don’t want to be caught out investing at the top of the market. This is where investing on a regular basis can be an approach worth considering.
Market volatility promotes some unusual behaviour in share market investors, especially when share markets perform poorly. Some see it as a great opportunity to buy shares and try and time their entry into the market to maximise returns. Other investors get nervous about losing money and sell their investments, turning a paper loss into a real loss. Understandably this can deter some people from investing. However, making regular payments is an approach that can take away some of the worry and can also make the inevitable ups and downs work for you!
For most of us, we can’t possibly know when the “right” time to invest is. A good way to reduce the risk of getting the timing wrong (especially in volatile times) and to take the emotion out of investing is to invest smaller amounts on a regular basis. A lot of investors like to employ a strategy known as Dollar Cost Averaging which is a fancy name for drip-feeding your investment over time. Dollar Cost Averaging involves investing equal amounts of money at regular intervals. If the share market does fall, you will have only invested some of your savings. In addition, your future investments will take advantage of the cheaper share prices now on offer. Investing regularly can help smooth your return.
A good example of this was back in 2007 when KiwiSaver launched. It just so happened to coincide with the global financial crisis which saw the unit price of our Growth Fund fall sharply in a relatively short period of time. While it didn’t feel pleasant at the time, investors who were putting money into the Fund on a regular basis benefited from this significantly when markets recovered. They were rewarded for having bought more units when the unit price was depressed.
At Fisher Funds we make investing regularly accessible and flexible. We can accept weekly, fortnightly or monthly investments into our Managed Funds from just $100. On top of this, you have access to these funds whenever you need providing flexibility that you don’t get from the likes of term deposits. Your money should quietly build over time and hopefully provide a handy sum when you ultimately need it. This is a great way to create a nest-egg for yourself or even your children.
So if you like the idea of an investment approach that can take the worry and emotion out of the decision, that can smooth your investment journey over time, and doesn’t require a big initial lump sum, then setting up a regular investment could be a great option for you to consider.