Old School Investing

Monday, 19th April 2021 07:50 - by Moosh

Despite being an active participant in the stock market for 12 years, the last two years I have gone back to basics and experimented with a cost average buying method. This is simply buying shares in the same company on a regular basis for the long term, typically 6 months to 3 years.

Once I have had a thorough look at the long term fundamentals of a company, I decide how much capital I want to allocate to it and then split it into a number of tranches to buy over a specific timeframe, the tranche value being the same at any price.

For example, to buy £3600 in company A over 3 years comes to 36 buys of £100 per month. Timeframe, buy frequency, and tranche size is scalable/adjustable according to your own investment risk and needs.

Many investors ignore regular buying as viable because they see multiple commissions as a major obstacle. From experience, I don’t see it as a problem. I also, perversely, look forward to buying future tranches at higher prices! This is a massive turnaround psychologically given that I began with the mentality of most traders.

However, the last year especially has demonstrated that I can gradually build a holding in a logical manner, keeping the long term goal in mind, and I sleep much better at night because of it. I make profit from cost averaging investments more often than I do from single point buys, so based on that evidence I am happy to continue with what works for me.

Ultimately, investing is an investment in time. Regular investing satisfies this notion.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.