Timing the market? Get your dog to do it

After a tough year, Scarlett is unsure whether to keep investing in ETFs

QAs you would have noticed, most exchange traded funds have fallen dramatically in the past year due to post-pandemic effects and uncertain global economic and political situations. My question is whether I should contribute regular amounts into ETFs even though we are living in a gloomy economic world. My goal is to see the return in five to 10 years.

Yes, it has been a very volatile year, Scarlett, though, as I write, markets are moving higher, but who knows what will happen in the short term. We all like investing as markets rise, but the reality is that there is more value when markets have fallen.

Looking at investment markets back in my uni days, it was pretty obvious to me that you may as well get your dog to choose when to invest. This idea of picking high and low points is just complete nonsense. We have no idea, until after the fact, then we bang on about “how obvious it was”.

I love commonsense. Over hundreds of years, sharemarkets have averaged around 10%pa, including dividends, but before costs. So, call it around 8%. I agree with you that the way to access those long-term returns is to invest long term.

Then to avoid the idiocy of market timing, I just dollar-cost-average. Money goes in every month. If prices are high, I buy a lower number of shares; if prices are low,

I buy more.

How good is that? The magic of regular investment ensures you buy more when markets are low and less when they are high.

Scarlett, you and I can easily find predictions saying the market will boom, and others saying it will bust. I reckon you do what you suggest in your question: invest on a regular basis and let dollar-cost-averaging and time in the market do the heavy lifting for you.