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The investment strategy that is always profitable

Posted by: Brian Dennehy
Membership level: Free

 

This is not a get rich scheme promising outlandish returns. It is essentially regular investing but with a twist.   And it has been very successful for our advisory clients since the 1980s.

What’s the twist?

We observed “the twist” from the late 1980s when the first emerging markets fund was launched. For prolonged periods these higher risk funds went sideways and down, and were then followed by 1-3 years when they exploded upwards, doubling and trebling in value.

One of the beauties of this automated strategy of regular investing is that, until it explodes upwards, little judgment is required. The longer the market goes sideways and down the better – you buy more and more, cheaper and cheaper, increasing your profit potential.

No timing pressure, no stress

Dripping into the market (you might also hear it called Pound Cost Averaging) is a great way to invest with the caveat that you still need to be investing into the right funds (see below).  You don’t have to think about market timing, which is impossible to get right consistently. 

And as you aren’t constantly watching the markets it gives more time to devote to other things – like life!  After all, investing is a means to an end, not an end in itself.

Who is it suitable for?

The strategy is ideal for:

  • Anyone with over-large sums on deposit...
  • ...but attracted to stock market potential without putting their capital at undue risk
  • Anyone with regular surplus income from month to month
  • Patient savers or investors with long term investment horizons
  • Parents or grandparents investing for a child


Ideal starter for young people and ISA investors

This is a perfect strategy for young people starting to invest. Sadly there is limited focus on bringing good savings ideas to the attention of young people, because there is little profit in doing so.  But it really isn’t too difficult.

Good savings ideas must be simple, effective, practical and flexible.  This investment approach is all of those things.  Plus it is also a great way for young people to learn about investing.

With the minimum investment on FundExpert level at just £50 per fund per month (similar on other platforms), regular saving has never been more accessible for young people.

Most ISA investors wait until towards the end of the tax year to make a lump sum investment.  Often this is in a rush, which doesn’t make for rational decision-making on fund choices.

It makes much more sense for ISA investors to make a long term commitment via monthly savings.  You don’t need to worry about the immediate market timing, nor the ups and downs over short periods once you have started investing.

What should you invest in?

You want to buy into a fund which falls into one or more of these categories:

  • Cheap
  • Beaten up
  • Very unpopular or widely detested
  • Supported by a long term theme or need

Here are a few sector ideas:

ACTION FOR INVESTORS

  • Sensible investing isn’t a get-rich-quick scheme...
  • ...it’s underpinned by process and discipline
  • Over time, dripping into the markets is a sensible disciplined strategy for many savers/investors...
  • ...providing you are patient
  • Add a process for selecting outstanding opportunities, and it’s a winning formula

FURTHER READING

Topic: Generating growth


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