| .
The
FTSE 100 index currently
stands at around
the 4,200 mark,
give or take a few
points, which is
up about 6.6% on
its starting level
for 2003.
I'm
now going to make
a stock market prediction...
The
stock market will
go up.
There
you have it. An
unashamed prediction
from the Motley
Fool. I'll repeat
it...the stock market
will go up.
By
now, you've probably
realised my prediction
is missing one vitally
important piece
of data - the timescale.
My prediction is
that from today's
level of 4,200,
the FTSE 100 will
trade above 4,200
in five, ten, fifteen
and twenty years
from now. My gut
feel is that it
will also trade
higher than 4,200
in two to three
years' time, but
over that time period,
I can't be sure.
What
To Do Now
I'm
assuming that my
startling prediction
doesn't actually
help many people
decide how to tackle
the stock market
now. After all,
it's largely repeating
the standard Motley
Fool line since
we first set up
shop in the UK six
years ago. [It was
our sixth birthday
last week - happy
birthday to us!]
Over the long term,
we have always believed,
and still believe
the same today,
that history will
be repeated: the
stock market will
continue to rise
inexorably.
Give
that, what should
you do now?
1.
Get a stock-market
strategy
This
is by far the most
important step.
Work out what you
want to get out
of the stock market.
I suspect for most
people it is a return
greater than that
available elsewhere,
whether through
savings accounts,
property, bonds,
gilts, under the
bed or any other
potential home for
your money.
I
would suggest a
strategy suitable
for most people
would be to make
money slowly from
the stock market.
Some people may
have the time and
skill to make money
quickly from the
stock market, but
they are few and
far between.
Given
that, we suggest
that, for most people,
investing monthly
into a low-cost
index-tracking fund
is the best way
to make money slowly
from the stock market.
An alternative strategy
put forward at the
Motley Fool is the
high yield portfolio
- again, making
money slowly is
the aim of the game,
while enjoying a
decent income.
Having
said that, if your
strategy is to buy
high-risk but potentially
high-return smaller
company shares and
this is working
for you, that's
fine. But see below.
2.
Change your stock-market
strategy, if required
If
you are constantly
losing money through
investing, you're
probably doing something
wrong. You may have
lost money chasing
tech shares higher
in the Great Internet
Bubble. You may
have lost money
because you bought
high-charging, low-performing
funds. If you are
losing money, you
probably should
change your strategy.
Controversially,
I'm going to put
forward one losing
stock-market strategy
that you shouldn't
change: investing
regularly into an
index-tracking fund.
And by regularly,
I mean every month,
month on month,
whatever the stock-market
conditions. Did
you stop investing
in an index tracker
during the great
stock-market slump
of the last three
years? You didn't
stick to your strategy,
and it may have
cost you plenty
in the long run.
3.
Stick to your stock-market
strategy
Most
people lose money
because they don't
stick to their strategy.
They chop and change,
depending on which
way the stock-market
wind is blowing
at the time. They
chased tech shares
higher in 1999,
they chased them
lower during 2001.
That strategy didn't
work. So, they chased
so-called value
shares. Having no
experience at that
strategy, they lost
more money. Today's
strategy? Maybe
penny shares - one
that rarely works
over the long term.
Bottom
line is that you
should get a strategy
that works for you,
make sure it works
for you, then stick
to it through thick
and thin.
As
for my strategy,
it's a variation
of the Indexing
Plus a Few concept.
I continue to invest
monthly in a low-cost
index-tracking fund,
while searching
for, and investing
in, undervalued,
unloved, out-of
favour companies.
I call the latter
part of my strategy
the "random
value strategy".
I've got a strategy,
reviewed the strategy
(it's working),
and I'm sticking
with it, through
thick and thin.
Next:
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fund | Get a cheap
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