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Timing your entry into the stock market is no easy task… Here's an investment strategy to remove the guesswork involved

by , 17 September 2014

In an ideal world, you could identify when the market was on the rise and put money into the market. But unfortunately it's not as easy as that.

So what can you do to improve your chances of investing at the right time and benefit from rising prices?

Opt for rand cost averaging.

Read on to find out more…

The ins and outs of rand cost averaging

Rand cost averaging is an investment strategy where instead of investing a lump sum into the stock market, you drip feed the same amount on a monthly basis.

By following this type of investment strategy, you avoid the worry of trying to time your entry. Over time, your monthly investment amount buys you more or less shares depending on the share price at the time. This smooths out over the long-term.

Rand cost averaging is one of the best ways to slowly build up savings and an investment in the stock market. And it’s the most accessible way for many investors who don’t have a lump sum to invest.

If you do have a lump sum to invest, chances are you’ll fret over timing your entry into the market. You don’t want to buy in when shares are prices are high only for a correction to come along.

Rand cost averaging avoids this worry. And you also benefit when the market falls. You buy an increasing number of shares at low levels.

If you’re risk averse, rand cost averaging can be a great strategy to follow.

Tips to successful rand cost averaging

But you must stick with the strategy whatever the market is doing. Can you keep ploughing money into the markets on a monthly basis when the market is very volatile?

Many investors battle with fear during times like this and want to sell their investments. With rand cost averaging you must keep buying.

You also need to make sure that account for inflation. So if inflation is at 5%, you need to insure you increase your monthly investment amount by 5% every year.

This will help you grow the real value of your investment pot.

So there you have it, a strategy to remove the guesswork involved with timing your entry into the stock market.

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Timing your entry into the stock market is no easy task… Here's an investment strategy to remove the guesswork involved
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