It’s ‘time to stop the timing’, escape the prison of indecision & reap the benefits of pound cost averaging.
While investment markets fluctuate wildly, almost on a daily basis, and doom and gloom pervades the news, it’s understandable why new investors, as well as existing ones about to top up their portfolios, feel nervous about investing. You may be thinking “should I wait to invest until things look more settled, or even wait until I see for myself that things are recovering”? This instinct may be normal, but it’s not rational from an investment point of view. It’s one thing to be told this fact – seemingly from the safe confines of an investment school – and another thing to accept and proceed with that advice in ‘the real world’.
There is a brilliantly simple tried and tested solution that can help rescue you from the prison of indecision which is fraught with recriminations such as “did I get my timing right?” and “did I miss the boat by investing too late or go in too early only to experience the pain of further losses?”
Pound cost averaging is an easy-to-implement strategy based on very simple mathematics and a process that’s been used by professional investors for decades.
With a unitised investment (such as your Investment ISA account, pension, investment bond etc) your money buys units in a fund. If you invest regularly, say monthly or quarterly, you buy a number of units with each contribution.
The number of units that you buy will depend upon their underlying value each month. Any fluctuation in their value will mean that some months you buy more, or less, units than in others. So in an unsettled market it can be an advantage to invest monthly as opposed to a one-off single lump sum.