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HOW OFTEN do you see the headline ‘billions wiped on shares’? OK, I know, you don’t really see it at all do you, and that is because good news is so much less dramatic than bad news, so you are far more likely to see the ‘billions wiped off shares’ headline.
But think about it, is that actually such bad news? I know right now you think I am crazy, but bear with me and you will see what I mean.
You see, for those who are investors with holdings in the markets, the fact that they are falling is not good news. But if you are someone who invests regularly or you are thinking of investing, then actually seeing markets fall is something that you should not be put off by. In fact, it is a great opportunity for you to take advantage of.
When markets are overheated and rising like there is no tomorrow, there is an argument for thinking that would be a good time to sell your investment and take some profit – of course, you need to speak to you adviser before doing this as you must take account of all of your financial affairs. Yet it is still a time when many inexperienced investors will look to buy stocks and shares, as they gain confidence from the rising prices. In reality, they could be buying Fool’s Gold.
Investing your money is, at the most basic level, like shopping – the only difference is you hope that the shares or funds you buy will actually rise in value and you can then sell them for more than you paid. That is how investing or trading works.
So take an analogy – if you were in a shop and saw a great sweater that you decided you wanted to buy, would you wait until the price had gone up to buy it? No, of course not, you would either buy it when you saw it, or you would wait for a sale and get some money off, which would make it more appealing.
The same principle applies to buying investments. You need to look for bargains in the market – a fund or sector perhaps that has fallen out of favour because markets generally have fallen, but that still has good underlying values. That way, you can get more for your money, and will benefit more when the price rises again.
Even better, if you are a regular saver into a fund, you would be paying the same amount into your fund each month, and would be able to buy more units when it is cheaper. Then you have more units to rise in price, increasing the upside as markets rise again. This actually smoothes out the returns you get through the highs and lows in the markets.
So when you see the ‘billions wiped off shares’ next, do not think it is all bad news. It could actually present you with a brilliant opportunity.
First published in Asia Life.