George Lo, the Geneva-based chief investment officer of Lloyds TSB Bank, may spend most of his time devising investment strategies for high-net-worth individuals; but he believes investing is for everyone.
'Rationally thinking, as soon as anyone has a dollar to spare they should consider investing it,' Dr Lo says. 'There is overwhelming statistical evidence that the bulk of performance does not come from stock selection, but from asset allocation and different asset classes, between geographical markets, and currencies.'
And how does one assess an appropriate risk level? It is a personal decision, Dr Lo says, adding that investors are generally better served by heading further out on the risk spectrum than you might imagine.
He says most investors are far too conservative, their outlook obscured by short-term volatility. For example, many people will say that stocks are always riskier than bonds. This may be true for a short-term investment, but not for long-term investing.
Since 1926, the stock market has produced annual positive returns about 70 per cent of the time. With this in mind, he says investors should learn that losses in the stock market are inevitable.
Investors who panic and sell their long-term investments short could easily find themselves buying back into the same stock funds a few years later only to discover that they have to pay more because they have increased in value.