Stock markets have enjoyed healthy growth in 2024.
The growth figures in the table could easily resemble ones you may well be happy with over the course of a year. In fact, they show the growth each index enjoyed up to 7 May.
Source: Google.com
During this time, several indexes have reached record highs ,with Reuters reporting the FTSE100 attaining a new peak on 8 May 2024, and Forbes confirming the same for the S&P500 in March.
Investment analysts are suggesting various reasons for the bull market we are enjoying. For example, BlackRock believe that the fact 2024 is an election year in both the UK and the US is driving optimism in the market. Meanwhile, Fidelity credit the earnings rebound, and believe markets could continue to rise throughout the year.
You may be tempted to delay investing your money
While the rising value of stocks can clearly be seen as good news when it comes to your current investments, you may be tempted to delay any further investments until values fall and you can buy more shares for your money.
When markets are high, it’s understandable that you might be nervous about an imminent fall.
The nature of investment markets is that they rise and fall and it’s inevitable that you may want to try and time the market in a bid to maximise your returns.
But here are two good reasons why the state of markets should have little bearing on whether you invest, and why you should not avoid investing at the current time.
1. The overall trend of the market is upward
Responding to the recent strong growth in markets, J.P. Morgan, have confirmed that big market rallies, of the kind you are seeing at the moment, tend to be followed by periods of further growth.
Source J.P. Morgan
The timeframe they use is 50 years – a similar length of time you would invest for, if you started investing when you begin working.
You can clearly see that even during times of relative investment and economic upheaval, with an oil crisis, a financial crash, and a worldwide pandemic, the overall trend is up, and market rallies have often been followed by further growth.
A recent report from Schroders provides you with further evidence of the long-term strength of stock market investment.
It reveals that during the last 98 years, the markets have been at an all-time high for 30% of the time.
The chart from that report shows the growth of $100 invested in the US stock market from 1926-2023, with figures adjusted for inflation.
Source: Schroders
Clearly, it’s important to remember that past performance is no indication of future investment success, but both charts do demonstrate that over the long term, markets generally trend upwards.
You should always consider one of the oldest investment adages: it’s time in the markets, not timing the market that counts.
As the two charts demonstrate, staying invested and adding more to your portfolio means you’ll benefit from each period of market growth.
2. Never forget investing is a long-term proposition
As we have often reminded you in our newsletter articles, there is no one-size-fits-all solution when it comes to planning your financial future, and this applies equally to your investment strategy.
You have your own unique set of circumstances and reasons for investing, and any plan we collaborate with you to put together will reflect specific issues, such as your:
- Ultimate financial aims
- Attitude to investment risk
- Capacity for short-term loss.
Your plan will reflect your own personal aims. At certain times it’s likely you’ll want to draw an income from your portfolio, while at others you’ll be purely focused on investment growth.
The key takeaway is that investing is a long-term proposition. While you may have short-term objectives built into your financial plan, such as buying property or providing financial support for your children, your long-term investment strategy will underpin all of that.
One way of looking at it is to see your investment strategy as the engine that powers your financial objectives.
Your investment portfolio needs to be well diversified and reflect your attitude to investment risk. In this way, the aim is that it’s designed to help you meet your investment goals, ride out periods of short-term volatility, and take advantage of the overall trend of markets to rise in the long term.
As you can see from the two charts produced by J.P. Morgan and Schroders, trusting in your long-term plan, investing regularly, and staying invested for as long as you can could help you meet your financial targets.
Get in touch
If you would like any advice or guidance with regard to your own investment strategy, please get in touch with us.
Please note
The value of your investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC legislation, which is subject to change.
