| |
A
gimme in Financial Advice seems to be that Equity (or Stockmarket)
investments are the best bet for the long term. |
|
| |
There
is good reason for this, in December 1974 the FTSE AllShare
Index stood at 61, in November 2001 it was around 2,500. |
|
| |
•
£100 invested in the stockmarket in 1974 could now be
worth £4,000
and on top there could have been
(say) a 2.5% yield (dividends) each
year. |
|
| |
•
£100 invested in the building society could now be worth
£300 if none
of the income was spent. |
|
| |
But
should we have blind faith? |
|
| |
Clearly
the answer is no. Equity investment is only appropriate if you
accept the risk that investments can fall as well as rise. Getting
the timing right is not possible – you might fluke it but
no-one can predict with any degree of certainty, how the markets
might fair over the next year let alone the next ten years. |
|
| |
Although
the perceived wisdom is that the long term will iron out short
term falls – it is not a gimme. The FTSE AllShare
Index all time high was in September 2000 when it stood at over
3,200. It might never be reached again or if the past is replicated
(with long periods of high inflation) it could stand at 99,959
in 27 years time! |
|
| |
So
question what you feel about this risk and try to achieve a
balance you are comfortable with. |
|
| |
|
|
