Personal Finance: Crash or no crash, leap on board

No-nonsense investment news from the authors of Motley Fool

ONE OF the questions often asked on the Motley Fool's message boards is: "I'd like to invest in the share market, but I keep reading that it is too high. Should I wait until after the crash?"

This question was particularly pertinent this week. On Wednesday the FT-SE 100 index fell 184 points, or 3 per cent in a day. These headline numbers scare not only the novice investor but also the experienced traders.

Greed and panic drive the market both up and down, and both these emotions were evident on Wednesday. It is on occasions like this that the individual investor has an advantage over the City experts. We don't sit there staring at computer screens, transfixed as the index falls, not knowing whether to buy, sell or hold.

Unlike the Wise who work in the City, we Fools have time on our side. A Fool's investment perspective should be measured in years, and plenty of them. We suggest you shouldn't invest any money in the share market that you will need within five years. The longer you push that investing time-scale out, the more time you have got for the miracle of compound interest to take effect. Remember - time is the friend of the long-term investor.

Those who wait for the crash are likely to miss the recovery as well, in the same way that some people have missed one of the greatest bull markets in the century waiting for a crash. The best way to enjoy the long-term benefits of the share market is to remain invested throughout.

Share of the week

During Wednesday's mini-bloodbath, the retail group Dixons released its interim results. Unlike other notable high street chains (for instance, Marks & Spencer), the owner of PC World, Currys and The Link saw like- for-like sales increase by 3 per cent over Christmas. Of more interest to investors was the stunning growth of its internet business, Freeserve. Launched just 16 weeks ago, the country's first free-access internet service provider (ISP) has attracted 900,000 registered accounts, of which more than 700,000 are active. Although a direct comparison cannot be made, AOL, which has been established in the UK for several years, says it has 550,000 members.

With the valuation of many of the US internet shares heading into the stratosphere, investors might just be wondering whether Dixons may be the UK equivalent.

You may be wondering how Freeserve makes its money. Most of its income will come via its share of telephone call charges, which it splits with Energis, the telecoms company spun off from National Grid. In the future, if the US models are anything to go by, Freeserve will hope to be able to generate significant revenue by charging premium rates to advertisers who will be keen to get a placement on its popular home page. Finally, its somewhat infamous helpline charges callers pounds 1 per minute.

Before diving into Dixons shares, investors should be reminded that Freeserve is a tiny, tiny part of the Dixons empire. Sales and profits from its traditional high street stores will far outweigh those of the ISP business. Also, having seen how quickly and relatively easily Dixons has been able to sign up customers, competitors will no doubt be circling.

But in the internet world, being the first player counts for a lot and Dixons, with its ready-made distribution system (pick up a Freeserve disk in stores) has the jump on the opposition.

Visit Motley Fool at www.fool.co.uk

Name that company

The first five correct answers out of the hat each week win a super de luxe, black "FOOL" baseball cap.

This transport company has been one of the real high-flyers of the stock market. It has seen its shares grow at a compounded rate of 51 per cent per annum over the past three years. Now a diversified bus, train, road, and airport operator it has a reputation for excellent deal-making, the latest being a partnership with Virgin Rail. It has also been known to have the odd union battle and their rail service has been run a touch behind schedule at times. What is the name of this company and who is its chairman? E-mail your answer to UKColumn@fool.com or send it by post to Motley Fool Trivia, The Independent on Sunday, 1 Canada Square, Canary Wharf, E14 5DL.

Last week's answer: Sir Clive Thompson, chief executive of Rentokil Initial.

ask the fool

Stockbroking accounts

Q: What is the difference between the various stockbroking accounts? - AH, London

A: Broadly, there are three types. First are execution-only stockbrokers, who will do nothing more than buy and sell shares for you. These are the cheapest. Then there are advisory accounts in which a broker will make recommendations as to what you may consider buying or selling. Finally, a discretionary broker will manage your entire portfolio for you.

We advocate that individuals learn to manage their own money, so we prefer the first kind of broker. In the US, there has been a large reduction in the fees that discount brokers charge and an explosion in the number of these brokers which allow trading on the internet. Look for something similar to happen here soon.

my dimmest investment

Send us either your dimmest or smartest investment story in 100 words or less and if we publish it, you'll get a free copy of the 'Motley Fool UK Investment Guide'. E-mail to UKColumn@fool.com or snail mail to Motley Fool Trivia, Independent On Sunday, 1 Canada Square, Canary Wharf, E14 5DL.

Being a football fan, I was easily swayed into buying into a football fund and blithely sent off pounds 5,000. The fund has consistently under-performed and the units now stand at 80 per cent of their original value. CB, East Sussex

The Fool responds: As a fan, you obviously know about football and it's a good idea to buy what you know. But just knowing about an area of business doesn't mean that any investment in that field is a good one.

Always look carefully at any unit or investment trust's past performance.

PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
News
people
Life and Style
techApp to start sending headlines, TV clips and ads to your phone
Arts and Entertainment
Taylor Swift crawls through the legs of twerking dancers in her 'Shake It Off' music video
musicEarl Sweatshirt thinks so
Life and Style
tech
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.

iJobs Job Widget
iJobs Money & Business

Planning Manager (Training, Learning and Development) - London

£35000 - £38000 per annum + benefits: Ashdown Group: A highly successful, glob...

Asset Finance Solicitor

Highly Competitive Salary: Austen Lloyd: CITY - ASSET FINANCE - An outstanding...

HR Analyst - Banking - Bristol - £350-£400

£350 - £400 per day: Orgtel: HR Analyst - Banking - Bristol - £350 - £400 per ...

Techincal Accountant-Insurance-Bank-£550/day

£475 - £550 per day + competitive: Orgtel: Senior Technical Accountant-Insuran...

Day In a Page

Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?
Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

'I want to have contact with the audience, not iPhones'

Kate Bush asks fans not to take photos at her London gigs
Under-35s have rated gardening in their top five favourite leisure activities, but why?

Young at hort

Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

Beyond a joke

Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

Sadly though, the Lawrence of Arabia star is not around to lend his own critique
Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

A wild night out

Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

Comic Sans for Cancer exhibition

It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

Besiktas vs Arsenal

Five things we learnt from the Champions League first-leg tie
Rory McIlroy a smash hit on the US talk show circuit

Rory McIlroy a smash hit on the US talk show circuit

As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
Boy racer Max Verstappen stays relaxed over step up to Formula One

Boy racer Max Verstappen stays relaxed over step up to F1

The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
Fear brings the enemies of Isis together at last

Fear brings the enemies of Isis together at last

But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment