ADVERTORIAL
This year marks 30 years since Margaret Thatcher came to power as prime minister, and one of the lasting legacies of her premiership was to popularise the culture of share ownership among the British people.

She launched a privatisation policy involving the public utilities, with British Telecom the first to be floated in 1984. Its sale did, more than anything else, lay the basis for a share-owning popular capitalism in Britain. Two million people, 25 per cent of whom had never been shareholders before, bought shares in the flotation. The privatisation of British Gas followed. This time, 4.5 million people invested in the shares and a new generation of equity investors was established. (Source: The Downing Street Years, by Margaret Thatcher)

In the same year as the BT flotation, the FTSE 100 Index – the most widely used UK stock market indicator – was launched, and a look at the index’s highs and lows in the ensuing 25 years emphasises the importance of taking a long-term view when it comes to successful investing in equity markets.

FTSE indices are used extensively by investors worldwide for investment analysis, performance measurement and asset allocation. However, the FTSE 100 Index did not get off to the most auspicious of starts, registering an all-time low of 978.7 in July 1984. Since then, there have been various peaks and troughs, including an all-time high of 6930.2 at the very end of 1999. (Source: FTSE 100 Index Historical Data)

This decade has seen troughs right from the start, with the dot-com bubble burst, followed by the impact of 9/11. The index then climbed throughout the middle years, until the credit crisis and global recession caused it to fall and record 2008 as the worst year in its history. (Source: Sky News website 31/12/08)

Since March, the index has rallied. Whether the rally is sustained or represents the first sign of the end of a bear market and the beginning of a new bull market is a little early to say. No one can ever say with any certainty what the markets will do in the short term. What the FTSE 100 Index does show over its 25 year history, however, is that successful investment can only ever be achieved by treating the discipline as a medium- to long-term exercise.

The whole point of investment is to put money aside to meet medium- to long-term objectives, such as providing security, an income for retirement or money to leave to the children. History shows that a simple investment strategy, involving the good habit of regular saving for the longer term, is one that never fails.

Only two prices should ever matter to the investor – the price you buy at and the price you sell at. What happens in between really doesn’t matter, and as difficult and unsettling as it can be at times of market volatility, investors should always try to hold on to that one basic guiding principle.

Regular saving as part of a long-term investment strategy offers a flexible, affordable solution for many people. And by keeping some of their wealth liquid in the form of cash deposits or short-term government securities, investors should not be forced into realising investments at what might be an unfavourable time.

Additionally, investors should look at a diversification strategy so that they don’t have all their eggs in one basket. Spreading assets while focussing on long-term returns is generally a recipe for stock market success in any economic environment. It is not a case of ploughing in large sums of money in one go, but investing wisely and consistently. 

Drip feeding into the market is the perfect solution for people who want to invest but are unsure of when to do it, and it removes the uncertainty of putting a large sum of money into the market all at once.

Remember, it is the time in the market that is by far the most important consideration, not any attempts at timing the market – a strategy fraught with danger.

Whatever investment route you choose, be it a lump sum investment or regular contributions, the key is to seek specialist advice from a wealth expert and make sure you get the money into funds that will be managed for your benefit over the long term. Then forget about them. 

If you follow these simple rules you are in a strong position to build up a substantial portfolio of investments in the long run.

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