The Fund Manager Says...

It is quite ironic that when valuations of shares are high, investors are willing to look at the long-term prospects and when valuations are lower they focus on the short-term problems. Investors tend to relate short-term volatility with long-term risk. There is too much focus on the short-term - daily, weekly or monthly price changes - as opposed to the long-term potential. The longer the time period, the lower the risk of investing in equity markets.

Some useful points about equity based investments

• Although there is no duration that you must hold your investment, it is best not to invest in an equity fund unless you can leave the money there for several years. ISAs therefore provide an ideal vehicle for long-term investment within a tax-efficient environment.
  
  
• Only invest money that you will not suddenly need in an emergency.
  
  
• Invest regularly - monthly by direct debit or at regular intervals, for example annually. This reduces the risk of a single lump sum investment when the markets might be at, or near, a peak like in early 2000. It also means that you will be investing after the markets have fallen sharply. However, this does not happen in practice. Fewer investors invest when prices are much lower, relative to the number of investors who buy when prices are much higher.
  

• Do not try and time the market - you may lose by getting in and out of the market at precisely the wrong times. Once you get out of the market it is difficult to get back in, especially if the recovery is swift and stocks continue to rise in price. Invest when you have ‘spare’ money - over the long-term it is time that matters and not timing.