How long should you invest in the stockmarket?
Q: What's the minimum amount of time I could invest in the stockmarket? I've never invested before but I have £10,000 in spare cash that I've inherited and won't need for around five to 10 years. Is this long enough to make a good return?
A: Francis Klonoski is principal of Klonowski & Co in Leeds
There's no set time to invest; you could invest tomorrow and find your money has gone up dramatically by the end of the week and immediately draw your money out to gain a profit. Conversely, you could invest for five years – the arbitrary timescale that many use as a guideline – only to find that after four years and 11 months the stockmarket plummets and all your gains are wiped out.
This shouldn't deter you, though, as the point I'm trying to make is that there are no hard and fast rules with the stockmarket. However, history does show that over long periods the stockmarket provides the best returns.
You simply need to keep your investments under review: for instance, if you make a substantial gain it is tempting to leave everything invested as it is, when perhaps you should take some of your profits and reinvest elsewhere or even move into safer holdings such as cash or corporate bonds, depending on your age.
Taking a long-term approach is also more sensible than trying to time the market – especially given that experts have tried and failed with alarming regularity. Many investors would have withdrawn money when stockmarkets fell in 2008, planning to go back in "when things were more steady". They would then discover that had they stayed in, their investments would now have recovered and possibly even made gains. What works best is not timing the market but time in the market: it's a cliché but it holds good.
As this is your first venture, instead of investing the whole sum at once you may want to consider drip-feeding it in, at say £1,000 per month.
That way you are buying into your investments at different prices as the market moves over that time, so if there's a fall in any month you would be able to buy more with your investment.