Recent events on the stock market have been enough to send most private investors into a spin. Just a fortnight ago, the FTSE 100 index saw its biggest one-day drop since 2001. Two days later came its biggest daily rise since 2003.

Ups and downs such as these can be bewildering, and the temptation is to sell up when the market has fallen. But acting at the wrong time can have devastating effects if it causes investors to crystallise their losses.

According to fund management group Fidelity, £1,000 invested in the UK stock market in January 1993 would now be worth £3,452. But investors who missed the 40 top-performing days in the market during that period would have ended up with just £985. To underline the difficulty of timing the market, many of those top-performing days came immediately after a big drop in share prices, just as happened last month.

Of course, investors may get their timing right. With hindsight, someone investing in the UK stock market on the day that British and American forces invaded Iraq in March 2003 would now be sitting on a 62 per cent gain. But over the previous three years, the market halved (from 6,930 points to 3,597), and making gains during periods such as that are very difficult. Few achieve it, even among the experts.

View Story at The Independent

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