"President Trump scares me — should I stay out of the markets?"
🔸 Plus: The influencer knocked up by Elon Musk 🔸 Conservative Friedrich Merz set to become German Chancellor 🔸 Nike shares move on news of Kim K partnership 🔸 Tesco's apricot cereal 🔸
Your 2-minute guide to demystifying money and making you richer
The markets, year-to-date
S&P 500: 6,013.13 ⬆️ 2.24%
FTSE 100: 8,659.37 ⬆️ 4.83%
Bitcoin: $95,796.11 ⬆️ 2.5%
GBP to USD: $1.26 ⬆️ 0.91%
GBP to EUR: €1.20 ⬇️ 0.16%
(As of Friday market close.)
The Trump effect on markets
We got a smart question about Trump and money from a reader this week:
Q: I get that putting my cash in an ETF/stocks and shares ISA is probably going to provide a better return. But what about doing it RIGHT NOW? I'm truly worried about the Trump effect on markets: what's he going to do to them? I know the S&P 500 is doing well at the moment but will there be a moment when markets begin to object, e.g. to his protectionist stance?
A: Your question is a good one. Everyone asks this at one time or another. The answer is to think about your timeframe. Are you investing because you want to cash-out in one year? Or is your time horizon five years or more? If it's five years or more — congratulations. The time to invest is always now because that long-term outlook gives you time to ride out any dips.
As this Mi2 post on “the win-rate of stocks” shows, there is a chance you’ll lose money in a short timeframe. But the longer you leave it in the market, particularly if you stay in longer than five years, your win-rate will approach 100%.
If you're trying to make a quick buck over the next year or so — eh, good luck with that.
‘Cost averaging’ is your friend
More usefully, one way to think about this is that you shouldn't just be investing once with a lump sum and hoping that the markets go up. The smartest thing to do is to invest regularly, a percentage of each paycheck. That way, when the market goes down, your monthly investment is picking up stock as it gets cheaper (and you're therefore buying more stock than you could have the month before). When the inevitable rebound happens you'll be quids in. Obviously, this requires long-term patience.
This process is called "pound cost averaging" and the result is that you pay, on average, far less for the stock you're buying than investors who buy in just once.
Remember, there is never a bad time to invest:
When stocks go up, celebrate — you made some money!
When stocks go down, celebrate — you can get them cheap!
We have a few other posts in our archives on the topic of cost-averaging and timeframes:
The Moneyin2 Guide to Wealth
The Moneyin2 Guide to Wealth will get you the biggest return on your savings by maximising cash matches from your employer, free cash from the government, and shielding your investment gains from tax. It takes you step-by-step through the world of pensions, SIPPs, ISAs and ETFs — all in plain English.
And for dessert …
Nike shares move on news of Kim K partnership. (SKIMS FTW)
Fans beg Tesco to bring back their favorite apricot cereal
Conservative Friedrich Merz set to become German Chancellor
The new rules for a 5G-enabled tube: Only morons make calls
The influencer knocked up by Elon Musk. Some say she tried for years to seduce him, and they brought receipts.
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