Why You Should Keep Your Money Invested Unless You Have a Need For It

by Dominique Schuh

The Australian share market has ended in the black with its first positive close in five days, as a strong bid on the banks offset weakness in the resource space. The Australian dollar has fallen more than half a US cent, dropping down to 74.64 US cents at the close of trade.

What does this mean for you?

• When the market has a run of down days, it's difficult not to wonder about "what might have been" if you'd just sold some shares when the prices were higher, with a plan to buy them back when the prices drop. This approach is fine in theory, but we would question its long-term effectiveness. You might like to ask yourself - what would I do with the money while it's not invested? Interest rates won't give you much, and a worst case scenario would be that you end up spending it, losing at least some of your investment potential.

• The rule of thumb we'd encourage is to keep your money invested unless you need it for something. History is littered with examples of where the share market has rewarded patience over panic, and it's punished investors who try to outsmart it. Warren Buffet, the world's best share picker, is leaving the majority of his estate in an index fund because he believes the returns from the overall US market will be good enough - now that says something about the long-term effectiveness of trying to trade your way to a better outcome.

If you would like to speak to a professional about an investment strategy that best suits your financial goals, call us on 07 5482 2855.