Provided it’s suitable for the individual, the market conditions should never dictate when to invest. Ultimately, we know markets go up and clients make money provided a sensible investment strategy is taken and clients are patient. However, I understand everyone likes a bit of a deal…..I’ve been thinking about a story, that looks at client's potential hesitation and the regret and confusion that can follow.
Carl and Nigel get talking about the world. Carl casually mentions to Nigel that a particular bottle of wine that he’s fond of has been on offer at the local store, usually its £10 a bottle now it’s only £8. He decided to buy 3 for £24, saving £6 or 20%.
Carl is very pleased. A few weeks later, Carl goes into the same store and finds the same wine is now £15 per bottle. Whilst he wasn’t expecting it to be £8, he was a little shocked by the £15 price tag. However, he could still afford the bottle and purchased it anyway.
Walking away from the shop Carl does some math's and works out that if he purchased 10 bottles when they were £8, this would have cost him £80. The same 10 bottles will now cost £150. He is now in a bit of a dilemma…..
1. Should he purchase 10 bottles for £150. The wine might increase inprice again and this way he protects himself from future price rises. Or
2. Wait in the hope there is another sale but risk another price increase.
He is kicking himself for not getting more when he could have.
The trick here is that you can’t control the price of wine or the latest movements in the stock market. Carl has done pretty well, he purchased 3 bottles of wine when they were on offer, and he should feel pleased with himself.
If you can afford to stock up on a few bottles of wine when its cheap then you should, ultimately most things get more expensive in time. Likewise, if investing is the right course of action, investing into the stock market when it has dropped you should see more benefit in the future. To use the wine analogy… you will be buying more bottles of wine for £8 when a few months ago they were valued at £10 and in the future might be valued at £15!
Not everyone is suited to investing – for example, if you’ve got a family wedding to pay for in a year’s time, then you won’t want to lock those funds away in an investment.
If you’re not sure, don’t hesitate– let’s have a talk.