TIMING (is everything)?

If there was an easy answer to when one should buy or sell, we could all get rich quickly.

The truth is that if your timing is generally good and you have selected an at least average performing fund, then you will outperform the market. Timing is critical in investment. The trouble is that it is extremely difficult to identify the "right" time. The stock market might have been rising strongly for some years but who is to say that this trend will not continue? Similarly, the market may have been in the doldrums for some years but there is no guarantee that it will rise within a reasonable time. And of course the experts frequently get it wrong! Worse still, those responsible for marketing new funds are frequently rewarded according to the initial subscription monies raised from investors (and obviously not according to the performance of the fund in the future).

New fund launches tend to be made on the basis of the perceived response from the investing public as much as the anticipated performance. There is evidence to suggest that many fund management companies tend to launch new funds with the same or similar investment objectives as those of funds successfully marketed by their competitors in recent times and where the performance of those funds was initially very good. For example a few fund management companies were astute enough to launch internet related funds in the early days and they performed extremely well for a time. Following this, many other internet fund launches were made and investors piled in, keen to benefit from the boom in new technology stocks. Then came the inevitable sharp market fall in technology stocks in 2000 so that recently launched technology funds have, in the main, performed dismally. The early fund launches, on the other hand, still show a good return. The moral of the story is obvious - beware the marketing men! In this scenario a hard head is called for - it is the early bird that gets the worm and the late bird who meets the cat instead! So what is the answer to the market timing question?

Well, be realistic - nobody will get it right all the time and remember that your investment is meant to be medium or long term. Therefore, accept that you will never be able to buy at the bottom of the market or sell at the top. Here are some suggestions:- Lump Sum Investment You could average by initially investing say a quarter of the final anticipated investment in the fund and then invest the remainder in equal sums at regular intervals over say a two or three year period. Alternatively, you could invest only when the market is weak, again spreading the investment into separate equal lumps. Regular Investment Even if you are able to invest a lump sum, there is much to be said for regular investment. For example, you could agree to invest say £50 per month into the fund of your choice. The £50 will purchase a different number of shares each month because the share price will fluctuate in the usual way.

This "money cost" type of averaging is a very effective way of investing because your £50 will buy more shares when the price per share falls. The result is that the final average price per share is lower than would be the case if, instead, you were to buy a fixed number of fund shares each month. Not only that but, where they apply, many fund management companies offer generous terms by substantially discounting their own published preliminary charges to regular investors. These schemes are usually entirely voluntary and not contractual so that the investor may cancel or amend the subscription within