- About ETFs - All about Exchange Traded Funds
- OEICs - Why we don't invest in OEICs
- Liquidity - The importance of liquidity in investment
Investment Timing
A quick look at the performance of the FTSE 100 index over the last 30 years (as shown above) should be enough to convince anyone that the secret to great investing is timing. When to buy and when to sell. InvestwithQ's portfolio managers, Tideway Investment Partners, focus a huge amount of their research effort on the subject of timing. To do this they are constantly reviewing a number of key factors;
- The valuations of companies' shares relative to historic valuations - are they cheap, average or over-valued?
- The economic environment in which companies are operating - will they be able to increase profits?
- What is the current investor appetite for shares - do investors want to buy going forwards, or are they likely to be selling?
There is no simple solution to this, it's an art as much as a science. Economic conditions can feel horrible in one country but if economic growth is recovering in other countries and there is strong demand for shares, markets can rise unexpectedly. Similarly, all around can look quite rosy, but if share prices have been pushed to exuberent levels and investors can see a slowing in economic growth ahead, then markets can fall steeply.
There are however, some sensible, well established and tested principles that Tideway Investment Partners follow to ensure that the chances of mistakes in this difficult area are minimised:
- Always plan investments and cash flow needs such that you can hold investments for a reasonble time frame, at least 3 years plus and ideally 10 years plus. This takes the pressure off making short term calls which are notoriously difficult - most day traders end up losing money over time. This is particularly important for those looking for income from their portfolios either immediately, or in the next few years.
- Always protect profits when you are fortunate enough to make them, don't be too greedy.
- Be prepared to cut losses if things don't go as you were expecting or world events change.
- If in doubt stay out! There is nothing wrong with holding cash deposits for a while, although held for the long term they will ultimately be likely to lose their value relative to inflation.
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