This Is Why You Should Invest Now

Getting caught in the middle of a global health crisis that’s infected over 2 million people worldwide and left over 140,000 dead was definitely not on our agenda for 2020. None of us signed up for this. With the current headlines around the globe, looking into investing might be the last thing on your mind. But here’s news – if you’ve been thinking about taking a position in the stock market for some time, or want to maintain your investment portfolio, now’s the perfect time to make a move.

Prices are low

This is your chance to buy low, sell high – the fundamental principle of good investing. Stable companies such as Disney, Coca-Cola and Nike are generally safe to invest in, rewarding shareholders with high returns over time. So strike while the iron is hot, because their share prices haven’t been this low in more than five years. If you’re still not convinced, let’s take a look at how much they’ve returned over 10 years following the 2009 stock market crash: Nike’s returns were 590%, Disney at 472%, and Coca-Cola at 108%. Investing in an uncertain time like this can seem intimidating, but there are many profit opportunities if you’re in for the long run.

You can eliminate the fear of making the wrong move

You might have heard investors worrying about whether or not it’s the right time. With dollar-cost averaging, the current market situation does not matter as much as the market trend over a period of time. It is a strategy in which the investor divides up the total investment amount across periodic purchases to reduce the impact of market volatility on his overall purchase. Regardless of the current stock price, purchases will still occur at regular intervals. So yes, this strategy saves you the stress and effort of having to time the market to make purchases at the best price – kind of like a hands-off investment strategy.
Let’s take a look at the last recession. Figure 1 shows the amount of profits an investor would have made by investing a lump sum at point A. After three years at point B, he has made a decent amount of profits – not bad.
Investment Graph with lump sum
Figure 1
Using the same amount of investments, Figure 2 shows how dollar-cost averaging is able to capture a larger amount of profits by effectively averaging out the investor’s per-unit cost. Although the market dipped significantly at times, dollar cost averaging ensured that the investor was able to do a top up to increase his holdings.
Investment Graph with Dollar Cost Averaging
Figure 2
While past market drops haven’t been as steep as the one we are experiencing, a quick look back on the history of the stock market would show you that blue-chip companies such as those mentioned earlier weathered through events like 9/11 and the Great Recession. Long-term Investors that held through eventually did well.
Of course, this is all under the assumption that market prices will, eventually, always rise. Investors who use the dollar-cost averaging strategy generally have a lower cost basis in their investment, which results in a loss on investments that drop in price. However, they stand to gain more on investments which increase in price.

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This strategy is also especially relevant if you don’t have a lump sum of money to invest. While there definitely are benefits to doing that, it may work against you if you enter the market at the wrong time. Using dollar-cost averaging, you’ll always know exactly when you’re going to purchase, and how much you’re going to invest. This gives you a certain level of reassurance and takes out the emotional factor in investment. Decisions are easily swayed by emotions such as fear or greed – and dollar-cost averaging saves you from that.

So, how do I start investing?

Here’s how to get started: find a brokerage. Setting up a plan with them should be a breeze. You just need to know which stock you want to purchase, and they’ll work their magic. You can then instruct your brokerage to buy automatically at regular intervals. Although you should be able to suspend investments, the point of the dollar-cost averaging strategy is to invest regardless of market conditions. If you receive dividends from your stocks, remember to ask your brokerage to reinvest those. That will compound your financial gains! But if dealing with stocks and shares isn’t your cup of tea, our preferred financial advisors are always ready to help you out on other instruments such as unit trusts, bonds and even investment-linked policies.

TLDR; If you are afraid of risks, the dollar-cost averaging strategy is for you - invest now.

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