| 15 Dec 2008 |
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Regular Investment in Stocks Helps Individual Weather Financial Crisis
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DUBAI - The best way for individuals to weather the current global economic storm, say Dubai-based financial experts, is to invest regularly in stock markets rather than trying to wait-out perceived downturns.
Experts recommend that, by investing through a process called 'dollar-cost-averaging', people can devote a fixed amount of money each month which will provide long-term growth.
The dollar-cost-averaging approach advocates investing the same amount of money each month regardless of a stock's share price - buying more shares when the price is low, and fewer shares when they are high.
"People are running away from regional and international capital markets at the moment, but the weak prices provide a real opportunity," said Nigel Watson, Sales and Marketing Director, Nexus Group. "Sensible fixed-amount investments will allow investors to save for the future, while off-setting major moves in the markets. Equity investing has always historically rewarded the patient investor."
History has shown that global stock markets recover strongly after an economic downturn. During the great depression, share prices fell 71 per cent, but rose 148 per cent in three years after, and at the start of 2000 prices fell 40 per cent, only to gain 67 per cent three years later.
Speaking at an education seminar for investors and economists in Bahrain, Watson said: "It is important to look past the negative media reporting and asses the wonderful opportunities equity markets are offering at vastly discounted prices."
Watson added: "Economies across the Middle East and Asian sub-continent are considered as emerging markets that still offer some of the most exciting opportunities on the planet."
With GCC markets still in their infancy stage, experts believe that the most important factor investors need to focus on, given the current economic climate, is the time spent on investments and not just the timing of investing.
An excellent example of the benefits of equity investments is demonstrated through a report studying returns on UK assets investments since 1979. Despite major economic downturns in the UK, the study indicates an approximate 2,800 index point rise on equity investments from 1979 to date.
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