Upbeat investors undaunted by a downbeat market
One in 10 people (11%) have not been put off investing during the credit crunch, according to a new study by Fool.co.uk. They will capitalise on cuts in interest rates by ploughing more money into the stock market.However, one in six people (16%) will spend more, two in five (44%) will save more and one in three (31%) plan to reduce debts.
Three times as many men (14%) as women (5%) are actively investing
One in three women (37%) is paying off debt
One in six people (16%) plans to spend more
Choosing to invest in shares when the stock market is on the ropes is debatable. After all, the last decade has apparently debunked the idea that shares always beat cash. The FTSE 100 is 17% lower today than in 19972.
However, few people ever shovel a lump sum into the stock market at a single point in time never to buy shares again. And even during two of the worst recessions in history, shares have soundly beaten cash3, provided money is dripped into the market at regular intervals.
Between the Great Depression and World War II, the returns from regularly buying shares were twice that of cash. And between the Oil Crisis and the Dotcom Bust, steady investing in shares was three times better than leaving the money in the bank.
David Kuo, financial expert at Fool.co.uk, says: "It is only natural to react to recent events, and the credit crunch is bound to worry anyone who is thinking about investing in shares. Consequently, almost half of us prefer the comfort of holding cash instead.
"But measuring returns based on two distant points in time does not reflect the true way that many of us invest in shares. It's more common to invest small amounts on a regular basis, and to do so over a number of decades.
"Trying to time the right moment to invest in shares is not easy. Those who try will get it wrong more often than not.
"Instead investing regularly helps to smooth out peaks and troughs in the stock market. Remember it's time in the market that's important, not timing the market."