Is now a good time to invest in stocks and shares?

You may have heard about ‘buying low and selling high’ as an investment strategy but the markets can be too unpredictable to make this strategy feasible for most people. 

It's wise to concentrate on the performance of any investments over the medium to long-term.

So, is now a good time to invest?

We explore how taking a longer-term view is a valuable way to grow your wealth.  

Why time is on your side 

Over the last few years, inflation, volatility, and uncertainty have dominated the news.

This can make people hesitant when it comes to financial commitments. 

But the longer you invest, the more likely you’ll enjoy better returns, so you should aim to invest for at least five years. 

Markets tend to rise over the longer term, even if there are short-term fluctuations and periods of uncertainty.

So, provided you can afford to leave your investment alone, you should be equipped to weather any downturns and reap the rewards later.

Plan for a rainy day 

One vital element that should underpin your long-term strategy is an emergency fund. 

By having an easy-to-access pot of money, you can use it to cover unexpected costs or tough times during a downturn.

This will mean that you don’t have to dip into your investments to maintain your financial stability, and they will have time to recover from any short-term losses. 

Should you invest a lump sum or regularly? 

Should you invest in a single lump sum or slowly and incrementally grow your investments’ value through regular contributions?

One strategy is to spread your investments so that instead of buying at a single price, the level you invest at is averaged out over time.

This is known as pound-cost averaging, and it may protect you against the possibility of a sudden market drop just after you’ve invested.  

Pound-cost averaging can work well in a falling market, but historically, markets have followed a long-term upward trend despite periods of slower growth or contractions, so you could find yourself buying as stocks and share prices increase. 

You may see more gains if you invest a lump sum as early as possible, exposing more of your money to market changes and risk for longer. 

Overall, it’s about your ability to sustain your investment over the long term, weather any dips, and wait for the upturn.

It’s also about your personal goals and attitude to risk — a qualified financial adviser can help you build the right investment strategy. 

Where and how do you buy stocks and shares? 

So, if you’re considering investing for the long term, how do you go about it? 

The simplest way to buy shares is through an online investment platform.

Some of the biggest platforms include Fidelity, Hargreaves Lansdown, AJ Bell Youinvest and interactive investor, but high-street banks such as Barclays and HSBC also provide investment advisory services. 

When buying shares, you have two choices. You can either buy shares in individual companies or a fund that tracks an index or invests in various companies. 

The second option gives you more diversification, so you’re less reliant on the performance of a single company and less likely to suffer losses although this is not guaranteed.  

How can I take advantage of tax relief? 

You can invest tax-free using an Individual Savings Account (ISA), and there is a Stocks and Shares ISA you can use.

You can add a range of investments, and you pay no tax on the money you make from these, whether it’s dividends, interest or income. 

The annual allowance is £20,000 for the current tax year. You could split the allowance between different ISAs, as you might want a cash ISA too. 

An ISA is an efficient way of investing in stocks and shares, and you can invest a small amount each year. 

But what exactly do we mean by tax efficient? This means there is: 

• No tax to pay on your investment returns 
• No tax on dividends or interest received 
• No capital gains tax (CGT) to pay 

Why should I consider investing?

Provided you are comfortable with your financial commitments and have a contingency fund for emergencies, it's always worth considering investing in the market.

Even with risks like geopolitical instability and the cost of living crisis, prudent investment in stocks and shares can make sense long-term.  

Remember, it’s wise to keep a clear head when investing

Consider your personal goals, circumstances, needs, and risk tolerance before choosing your investment strategies.

It’s also a good idea to use your tax-free ISA allowance and discuss your options with a professional adviser to maximise your chances of growing your wealth in the long run.

Get expert financial advice

While high inflation and market volatility are creating ongoing fluctuations in the financial markets, investing in stocks and shares in 2024 can still bring you significant returns with the right strategies in place.

With markets tending to rise in the long term regardless of short-term fluctuations, maintaining a medium- to long-term investment attitude and remaining aware of your personal risk tolerance are the keys to success with stock and share investing.

Let Unbiased put you in touch with a financial adviser who can help you to identify the best stocks and share investment opportunities in line with your unique personal circumstances and financial goals.