Sam Dunn: Buying shares is not about timing but time

Shares, eh? Duplicitous buggers.

Shares, eh? Duplicitous buggers.

After months watching the FTSE 100 index of Britain's biggest companies creep up and then break through the 5,000 "psychological barrier" of market confidence in early February, you dive in and buy a job lot.

Unbelievably, the index motor then starts to splutter and slip back while your stock values sit in the doldrums for the next month or so, the dreams of a quick profit dead in the water.

Is there ever a right time to buy into the stock market?

That poser - and the rueful sentiment above - belong to reader Allan Smithson bemoaning the perils of stock market investing.

Having held off for two years and increasingly agitated at the prospect of missing out on the FTSE 100's edge back towards health, he pitched in over a month ago.

Splashing out £3,500 of savings on a basket of shares, he says he's £600 down already.

To be fair, he had spare cash to invest and was seeking a swift gain, but he wishes he had ignored the "5,000 barrier" hype and put it into a unit trust instead (spreading money across a broader range of shares).

For millions of ordinary savers and investors who don't work in the British financial services industry, knowing when to buy into the stock market is the $64,000 question.

Unlike the professionals who have banks of stock data and research at their fingertips, most armchair investors rely on their own resources - whether newspaper tips, books, friends or instinct.

Their investments are no less relevant, just less likely to be as well-informed with hard facts and rather more susceptible to sentiment.

This imbalance of affairs has delivered an infamous truism that the great British investing public are always on to a loser: they buy at the top of the market and bale out at the bottom.

Witness the sorry episode when the technology and dot-com share bubble burst in 2000 and deflated not only the market but hundreds of millions of pounds worth of investors' savings pumped into new funds.

More recently, friends and family would have queried your sanity if you had proposed investing in the stock market when the FTSE 100 stood at 3,287 in the days before the Iraq conflict in March 2003.

At the time, I spoke to at least two or three industry specialists who believed this index was on track to head as far south as 2,700 - and if it dropped any further, we'd be better off leaving the country.

Yet here we all are, nearly two years on, and the stock market is in a more buoyant state than many would ever have believed, notwithstanding the recent wobble.

So Mr Smithson's question about the best time to plough money into the stock markets is probably the wrong one. We should really ask what each of us needs the market for - not what it's doing at any one moment.

Whether we want an income for retirement, a speculative portfolio to build personal wealth, or to use up our equity individual savings account allowance, we must harness the stock market for what it does best: growth over the long term of at least 10 to 15 years to even out the roller-coaster of economic cycles.

Anything less and you'll probably sell yourself short.

s.dunn@independent.co.uk