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Edward Jones calls for immediate investment

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03/01/2008

Edward Jones says that waiting to invest until the markets become calmer may not be the best approach.

The stockbroking firm says this is because investors will almost certainly miss times when the shares move higher, as well as times when they drop. Historically, the gains are larger than the declines, and the stock market tends to trend higher.

Kate Warne, market strategist at Edward Jones, said: “Those who believe shares are likely to decline short term may want to consider investing a portion of their money today and adding the rest during the next few months.

“If you follow this strategy, it’s important to start investing with one-third to one-half of the total, so that you’ve increased your equity ownership in the event that sentiment changes quickly and pushes shares higher.”

If you are able to buy at a lower price, your return will be higher, but the advantage may be less than you think. Using hindsight, Edward Jones looked at the difference in returns between buying early in the year and the lowest price each year for 25 years.

The difference in returns over 25 years was about 0.3% annually. The difference after investing £25,000 each year for 25 years was less than 5% of the total value.

Waiting is a particularly poor strategy when considering your ISA and SIPP contributions, as investments made sooner have more time to benefit from the possibility of tax-deferred growth. Edward Jones is urging investors to consider making their contribution early each year, rather than waiting for the deadline.

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