When is 10% not 10%?
By Ben Yearsley | 07 Aug, 2008
I might be stating the blindingly obvious here but a 10% rise in either house prices or the stock market and a 10% fall in either is not necessarily the same thing. If you buy a house that is valued at £200,000 and it rises by 10%, that house would be now worth £220,000. However, if that house now falls by 10% it will only be worth £198,000.
There are many stories about home owners being OK if they bought their property say twelve months or even two years ago, but simple mathematics tell a different story! It is very dangerous though to get too hung up on these figures being bandied around. Firstly if you are treating your house as a home rather than as an investment (as most people probably are) then short term fluctuations and movements should not matter too much.
You do also have to put the house price falls into the context of the last few years when they have risen strongly. Turning to the stock market, the situation is exactly the same. An investment that has fallen 10% will have to rise by more than that to get back to the starting level.
However, the oddities of percentages shouldn’t put us off investing for our futures. One possible way to reduce the risks of timing is through regular savings plans. By contributing monthly to an investment, you stand a good chance of averaging out market movements both up and down. One of the problems when markets fall is that investors panic and just stop investing and often then miss the bounce back up. By regular saving you take away the emotion of investing and continue investing through the bad times as well as the good. For further details of how to regularly save into the Vantage account, please click on the following link
