“I’m going to wait until the market is at its lowest, and then I’ll buy up.” How often have you heard people say this? This is a common thing for potential investors to say, especially during tough times. But here’s the problem: they never put a number or timeframe on their plan, and that’s because ‘the market at its lowest’ is not something that anyone can predict. Not even Warren Buffett himself. If a financial adviser tells you that they can – run.
When people wait for the “drop in that market”, their cash sits in their bank account. The problem with this is that, currently, there is barely any return on cash. Interest rates are virtually at zero or 1% at the moment.
So, would you prefer holding onto cash and gain a 0-1% return while waiting for the “drop in the market”, or have a guaranteed return by investing, even if it’s a long term and possibly volatile plan? In the long run, people who invested will be better off than those sitting on cash.
Many of our clients come to us in their mid-50s. At this stage, on average, they have 10 years left of their working lives which equates to 260 paychecks. So, we look at how much of each paycheck they need to invest in order to achieve their personal retirement goals. It can be a difficult stage of life.
Throw in a worldwide pandemic with lots of false information getting around, and it’s no wonder people start to question their decisions. It’s human nature for one to think “what happens if I buy now, and then the market drops even further?” There is generally a lot of fear.
So, what is our recommendation and take-home message? Don’t wait for the market to drop – invest when you have the money. Pick a strategy and stick to it. You don’t even need to think about whether shares are cheap or expensive – just decide how much you want to invest each fortnight and stick to it.
It’s a long-term game. As Warren Buffett once said: Someone's sitting in the shade today because someone planted a tree a long time ago
Dallas Davison, Michael Hogue and Ali Hogue.