Monday Musings 28/02/2022 – Market timing vs time in the market, to ISA or not to ISA
There is a well proven concept which is that market timing is almost impossible, think about the unexpected events of the last few years, and that time in the market was the correct stance. In other words, being able to go into or come out of the market at exactly the right time is tough, but if you stay in the market, you will ride the up waves as well as the downturns.
As you know the time is running out to take advantage of this year’s £20K ISA allowance that we all have. This allowance is a use it or lose it one. On the other hand, is this going to be the right time to go into the market bearing in mind the current turmoil in the markets. Thinking about what I have written above that being in the market is the key and timing the market is almost impossible how can I be suggesting that you should consider an ISA investment at this time.
Yes, I believe that this is the perfect time to use a process known as phased investment. What this means is that you invest into a Stocks and shares ISA but make the initial investment into a cash fund. Over an agreed period of time your cash fund gradually feeds investment into a portfolio of equity and bond funds. By doing this you can take advantage of what is called pound cost averaging. That sound very complicated but is quite simple to arrange and we would of course do this for you.
The idea is that if you invest the same amount of money over several periods, for example every month. As the market fluctuates you will buy more units or shares in a fund when it goes down and the value of these cheaper units will rise in line with the markets. I have put a chart below to demonstrate this.
|Period||investment||Unit Value||No of Units|
|Total £50||£1.00||100 Value £100|
What this shows is that in a time when the market has fallen dramatically and has not risen past its initial value you have double your money. I should stress that this is only an example of the concept and not me prediction of what is going to happen today.
So, if you are considering whether or not you should take up your ISA allowance do get in touch and one of our qualified advisers will be pleased to assist you.
Enclosed you will find our ISA brochure which will tell you all you need to know about ISAs
|31.12.2021||28.02.2022||% Change||% Change on week|
|FTSE 100||7384||7489||Up 1.42||Down 0.32|
|Dow Jones||36338||34058||Down 6.27||Down 0.06|
|Nasdaq||15645||13694||Down 12.47||Down 0.55|
|S&P||4766||4384||Down 8.01||Up 0.82|
|NIKKEI||28791||27476||Down 4.56||Up 1.2|
|Hang Seng||23398||22767||Down 2.69||Down 6.41|
|Shanghai||3640||3451||Down 5.19||Down 1.13|
|CAC 40||7153||6752||Down 5.60||Down 2.56|
|DAX||15885||14567||Down 8.29||Down 3.16|
YouTube: Straight Talk Financial Planning – YouTube
Find out more about the team on our About Us page, or Contact Us for more information.