Keep calm and carry on investing with pound-cost averaging

Pound-cost averaging is a simple strategy to overcome fear and make sure you capitalise on a crisis.

Nanking Road, downtown Shanghai in 1930 © G
Shanghai before the revolution: a rare time that buying through a crisis wouldn’t have been wise © getty
(Image credit: Nanking Road, downtown Shanghai in 1930 © G)

Most crises ultimately turn out to be outstanding times to invest. There are obvious exceptions to this rule: buying shares in St. Petersburg in 1917 or Shanghai in 1949 in the hope that the situation would improve did not work out. But assuming that the entire economic and political system in which you live is not going to be turned upside down – in which case the best investment may be some gold and a ticket to somewhere far afield – people usually look back in admiration at those who kept calm and bought at the bottom.

There are two barriers to being one of these investors. The first is identifying when you’ve hit the bottom. The second – which is often underestimated – is the sheer psychological difficulty of investing when all the news is bad, other investors are selling and everything is telling you to do so as well. There is no easy answer to either of these problems, but pound-cost averaging is one of the simplest strategies we can use.

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Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.