We are told that investing in the stock market over the long term always proves to be a better investment than to invest your money in a savings account. This is not entirely true and is usually quoted by those who have a motive to encourage you to invest.

It does depend what you mean by long term. Some people would consider a couple of years a long term but the advice is generally that long term is over 5 to 10 years or more.

If we look at the London stock market over the last 10 years we discover that it hasn’t always been such a good investment. It is important to keep in mind that shares will often pay dividends so it isn’t all about capital growth but if we focus purely on capital growth we find that investing in the stock exchange can be very disappointing if you get your timing wrong.

If you had invested in the stock market, either in a fund that follows the Footsie or the All Share market in the period around 1998 to 2001 those shares would now have about the same value. Some shares will have risen well but others will have disappeared without trace. If you had invested 5 years ago you would now be sitting on a great return. You would be making something approaching double your money invested.

All this clearly demonstrates that timing is crucial. If you decide to invest at the wrong time, which is when the market is around its peak then you may find it takes years to recover, if ever. If you invest at the right time you can do very well quite quickly.

The lessons to be learned are that you should be cautious about investing if you think the market is peaking. You should be cautious if you think you will need to withdraw that investment in a hurry as it may be a very bad time for you to sell if the market has dropped.

If you think the market has bottomed that may be a good time to invest and if you can leave the money invested for an indefinite period without worrying to much about it then it may be an excellent time to invest.

The most important lesson of all is that there is no certainty about it. Investing in stocks and shares is a gamble and you should heed the advice that, ‘The Price Of A Stock May Rise Or Fall’. Be aware of it and remember that the only certain things in life are death and taxes.

You can find some good general information about stocks and shares and investing at Basic Investing

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

The charity organisation the Citizens Advice Bureau which advises people on their rights has joined forces with the youth centred site ‘Youthnet‘ to promote a campaign aimed at young people and inteded to help them understand and deal with financial matters.
The intention is to advise 16-25 ear olds using podcasts, audio content and via mobile phones and help them understand various financial terms such as APR to enable them to deal sensibly with financial matters.
We have had a whole generation of children growing up with the idea that credit is almost free and if you run out of money you can just get another credit card.
This campaign is very welcome and will hopefully prevent many of our children growing up to become the slaves to debt.
There is a survey to be carried out to establish what 16-25 year olds need and want when it comes to advice about financial matters which can be found on the Citizens Advice or Youthnet Websites.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

The 125% mortgage has finally been killed off. Birmingham Midshires was the last lender to offer such mortgages and it announced it would no longer offer such mortgages.
There has always been a lot of debate about such loans. They meant that people taking them on were already owing more money than their house was worth from the moment they moved in. Now with house prices stagnating, at best, there was a very real risk that people could end up owing much more than the house was worth with very large repayments to be found each month.
Encouraging people to borrow more than they need is a very dubious practice at best and in the present climate it would seem to be a good thing that these 125% mortgages will no longer be made available to tempt the careless into the black hole of debt.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)