Invest
‘Timing’ the market not the be-all and end-all
A local fund manager has shed light on how investors can come up with meaningful strategies to get the most out of their dollars rather than wasting time worrying about things outside of their control, such as market conditions.
‘Timing’ the market not the be-all and end-all
A local fund manager has shed light on how investors can come up with meaningful strategies to get the most out of their dollars rather than wasting time worrying about things outside of their control, such as market conditions.
In a conversation with nestegg, investment associate at Stockspot Marc Jocum explained why he is not worried about markets reaching an all-time high.
“Evidence shows investors who try to time the market actually don’t perform as well. Instead, investors should remain disciplined and invest regularly,” Mr Jocum said.
Mr Jocum said, historically, when the sharemarket has reached an all-time high, the next 12 months generate an average return of 6.5 per cent, excluding dividends.
Further, research shows markets that have hit an all-time high historically deliver higher returns than investing when the market is not at an all-time high, he said.
“You can listen to all the reports of ‘the next Armageddon is coming’ to try and get a lower price. But anyone that has been waiting for the last five to 10 years have been waiting for a while, and they have missed on all this growth that happened in the bull market,” Mr Jocum said.
What can investors do?
According to the research, it does not pay to wait for a bargain to invest. Investors should focus on their strategy and continue to diligently add to their portfolio, regardless of bear or bull market conditions.
While markets remain expensive, Mr Jocum suggested that investors could look at diversification through gold and bonds as a way of offsetting any future downturn.
“Having these building blocks in your portfolio like bonds and gold help reduce that volatility, and they can provide positive returns as well,” he explained.
Mr Jocum noted that investors should focus on keeping costs low, remaining diversified across asset allocations, and not make too many “emotional” decisions.
“Investment strategy shouldn’t change regardless of where the market is at. At the end of the day, you should stick to your strategy and your long-term asset allocation,” Mr Jocum explained.
However, despite many investors hunting for greater returns in a low credit environment, Mr Jocum does not believe investors need to take high risks to get valuable returns.
“Investors don’t need to take so much risk. Instead of trying to find the next Afterpay, rather keep it simple focus on diversified asset allocation and keep cost low,” Mr Jocum concluded.
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