- Investment management
- 3 minute read
As part of a well-thought-out investment strategy, you want to be able to take advantage of potentially profitable market opportunities, as well as have the ability to manage elements of risk.
This can be easier to understand with the guidance of a financial adviser or investment manager, but it still throws up the conundrum of whether there really is a best time to invest - is it possible to time the market to your advantage?
Things to consider before investing
Before you part with your cash, or appoint a financial adviser, you need to consider if it is the right time for you to invest. Your personal circumstances should be a primary indication of when you should start investing, rather than the current conditions of the market. You should think about whether you are in a suitable position financially to begin investing.
You should also think about the time-frame of the investment; whether this is to be medium-term or long-term, and if it serves your personal and financial goals.
Consulting with a financial adviser or investment manager will enable you to review your personal financial situation, evaluate the level of risk that is suitable, and determine the right investments for you.
What is value investing?
If you’re considering the possibility of timing the market, you may come across the idea of value investing. Value investing is an investment strategy that aims to identify and buy undervalued stocks. For example, if a bit of bad news causes the market to overreact and underestimate a company’s value, in theory, the price will rise in the future. Although there is no guarantee that it won’t fall further in value.
Value investing requires a lot of extensive research and involves defining the characteristics and valuation of the stocks in question - so it may be best to leave this to the professionals. Their expertise can work in your favour, since they will take the time to research companies to identify good, long-term opportunities for your investments.
The role of an active investment manager
When looking forward, there never really is an optimum time to invest in the market. However, a portfolio manager can be active on your behalf. Active management is an investment strategy which aims to invest to outperform a market benchmark or index. This differs from passive investing, which aims to match a benchmark or a market index. Active managers aim to outperform market benchmarks by researching, forecasting, and using their investment expertise to decide which investments to buy and when. They are ultimately aiming to modify risk and outperform the market – so, in the situation of a market downturn, active fund managers will make buy and sell decisions using their market research to match the objectives of their fund. As a result, active investing can mean that your portfolio’s value may be sustained or even perform well during a market slump. Though of course, if your active fund manager makes a wrong decision, your portfolio could do worse.
Market timing
Financial markets are dynamic and can be volatile. Therefore, it is very difficult, in fact near impossible, to predict future movements and therefore the ‘right time’ to enter the market. Taking a long-term view when investing, rather than evaluating the right time to buy, is a good place to start. If you’re ready to invest, starting as early as possible is likely to be better than waiting for an opportunity to arise.
An adviser can monitor your portfolio and its performance, ensuring that adjustments are made according to external factors, like market movements, as well as your own needs and circumstances. They can help you to understand any changes in the market environment and the impact on your investments. If you work with a professional, during a decline or in times of market volatility, you may be more likely to stick it out, as you’ll have an expert on your side to reassure you.
To find out more about our financial planning and investment management services, or if you have any questions about getting started with investing, contact us to find out how we can help.
Capital at risk. Any tax benefits will depend on your personal tax position and rules are subject to change.