In other words, should you take money out of the markets because you expect them to fall, or is it better to put more money in because you expect them to rise?
The evidence, however, overwhelmingly shows that it is better for investors to spend time “in the markets” rather than trying to “time them”. As mentioned earlier, there are thousands of factors that impact equity prices and it is difficult to accurately measure and predict real earnings growth in real-time. This suggests that 2020 is as good a time as any other for an individual to start an investment plan, provided they are committed to a long-term strategy which is appropriately diversified. The markets may fall further in 2020 if, for instance, a second wave of COVID-19 hits countries like the UK and leads to another slowdown in economic activity. Or, perhaps a vaccine is found and world economic growth becomes better than expected.
New investors should recognise that history suggests the short-term volatility of 2020 sits within a bigger picture of long-term market growth, and should not lead someone to abandon the markets. Rather, if you’re in a position to do so, now could be a great time to start investing for your future.*
*Please note this is not intended as individual advice as circumstances will vary. You should always seek professional advice.