The Analyst: Cash to spare? Then jump in and buy

Many investors expend great effort trying to predict which way stock markets will move from one day to the next. I believe they are worrying themselves unnecessarily; in my opinion, "time in the market" and not "timing the market" is the best philosophy.

Statistics from the fund manager Fidelity show that missing just the 20 biggest daily market rises over the past 15 years would have cut your returns in half. Ironically, these best days often happen during the toughest periods. For example, on 12 March 2003, the UK market fell by more than 4 per cent, but the next day it rose by more than 5 per cent.

This is not the time to let fear rule your decisions. I have seen words such as "crash" and "disaster" used in the media recently, but my advice is to step back from the emotion and look at fundamentals. Those with some cash to spare can now buy many shares or funds 10 per cent cheaper than they could a month ago; perhaps you should treat it as a summer sale.

So what has caused the recent market problems? Much of the blame has been levelled at US sub-prime mortgages – loans to people on low (or no) incomes – which have seen a sharp rise in defaults.

The resulting difficulties are an example of how everything is connected in the modern global economy. Financial institutions across the world have taken on a share of these loans, so the damage has been spread over a wide area. Total losses are estimated at about $250bn, but in the context of world money markets, that is actually not a large sum. The problem comes because institutions have borrowed on the back of these loans, and now need to sell other investments in order to meet their liabilities. In a short space of time, the atmosphere of the market has gone from confidence to uncertainty.

A similar problem was encountered in 1998, when markets faced the twin problems of a major hedge-fund collapse and the Russian government being unable to pay back its debts.

In my opinion, the current situation is nothing like as serious as that. Most stock markets look cheap by historic standards. In the UK, the largest companies seem particularly good value; they have healthy cash balances and strong earnings, but have been overlooked by investors for five years. I won't attempt to predict the bottom of this current shakeout, but I would suggest that markets remain attractive on a long-term view, and I suggest that investors consider buying on the weak days.

I am also a great advocate of drip-feeding money into markets. The obvious way is to set up a monthly savings plan, taking the emotion out of investing. Your pension is probably already being invested this way and regular payments are an excellent way of saving for children or grandchildren.

But which funds are worth attention? In the UK, I would look especially at funds investing in larger companies, such as Schroder UK Alpha Plus, Artemis Capital and M&G UK Select.

On the equity income side, I would stick to the big guns such as Invesco Perpetual Income, Artemis Income or Jupiter Income.

The financial sectors have taken a pummelling in recent weeks, but I think they will also recover the fastest. For that reason, I believe the Jupiter Financial Opportunities Fund could be a good choice.

The manager was expecting some difficulty and had a large chunk of the portfolio in cash – and I'm sure he will be putting it to good use on the market's weak days. For Asia and emerging markets, I believe that Aberdeen, First State and Melchior are among the best ports of call. Elsewhere, European funds from Cazenove and Artemis could also be on your shopping list, while in America my picks are the Legg Mason US Equity and M&G American funds.

I will be covering many of these funds in greater detail in future columns. They are all run by managers with considerable experience, who are used to seeing downturns in the market and won't panic or over-react.

Often, the most difficult thing to do in this situation is to be patient. However, long-term investors with cash ready to invest should be rubbing their hands with glee at this opportunity to pick up quality investments at bargain prices.

Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent

cash@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
people
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film Ridley Scott reveals truth behind casting decisions of Exodus
News
people
Sport
footballArsenal 2 Borussia Dortmund 0: And they can still top the group
PROMOTED VIDEO
Arts and Entertainment
An unseen image of Kurt Cobain at home featured in the film 'Kurt Cobain: Montage of Heck'
filmThe singers widow and former bandmates have approved project
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
Arts and Entertainment
George Mpanga has been shortlisted for the Critics’ Choice prize
music
News
Albert Camus (left) and Jean-Paul Sartre fell out in 1952 and did not speak again before Camus’s death
people
Arts and Entertainment
Roisin, James and Sanjay in the boardroom
tvReview: This week's failing project manager had to go
News
Ed Miliband visiting the Holocaust museum in Jerusalem. The Labour leader has spoken more openly of his heritage recently
newsAttacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But are the barbs more sinister?
Arts and Entertainment
'Felfie' (2014) by Alison Jackson
photographyNew exhibition shows how female creatives are changing the way women are portrayed in advertising
News
i100
Life and Style
Fright night: the board game dates back to at least 1890
life
Environment
The vaquita is being killed by fishermen trying to catch the totoaba fish, which is prized in China
environmentJust 97 of the 'world's cutest' sea mammals remain
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

    £16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

    h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

    £35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

    Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

    £Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

    Citifocus Ltd: Operational Risk Analyst

    £Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

    Day In a Page

    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
    Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

    Sol Campbell cries foul at Labour's mansion tax

    The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
    Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

    Sarkozy returns

    The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
    Is the criticism of Ed Miliband a coded form of anti-Semitism?

    Is the criticism of Miliband anti-Semitic?

    Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
    Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

    Ouija boards are the must-have festive gift

    Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
    There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

    In pictures: There's a Good Girl exhibition

    The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
    UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

    UK firm Biscuiteers is giving cookies a makeover

    It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
    Can SkySaga capture the Minecraft magic?

    Can SkySaga capture the Minecraft magic?

    It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
    The King's School is way ahead of the pack when it comes to using the latest classroom technology

    Staying connected: The King's School

    The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
    Christmas 2014: 23 best women's perfumes

    Festively fragrant: the best women's perfumes

    Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
    Arsenal vs Borussia Dortmund: Alex Oxlade-Chamberlain celebrates century with trademark display of speed and intuition

    Arsenal vs Borussia Dortmund

    The Ox celebrates century with trademark display of speed and intuition
    Billy Joe Saunders vs Chris Eubank Jnr: When two worlds collide

    When two worlds collide

    Traveller Billy Joe Saunders did not have a pampered public-school upbringing - unlike Saturday’s opponent Chris Eubank Jnr
    Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

    Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

    Our partner charities help veterans on the brink – and get them back on their feet
    Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

    Putin’s far-right ambition

    Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
    Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

    Escape to Moominland

    What was the inspiration for Finland's most famous family?