Is now really a good time to start investing in shares?
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0luke1983 postedPersonally I think that it is and am putting my money where my mouth is - with regular amounts being drip-fed into an ethical tracker fund..
Wait a few minutes, however and you'll no doubt have a gang of posters coming along to say that we haven't reached a market bottom and that my advice is foolish (not 'Foolish')!
Opinion from the quality press and a range of investing websites would seem to suggest that a lot of quality companies are now undervalued slightly in terms of share prices.
I suppose it boils down to whether you want to lock in this value now and hope that some of the market stimulus initiatives will start to take effect in the mid term, or whether you want to believe the doomsayers and hope for even greater falls than we've already seen.
Posted on 24 March 2009 |
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1Birtles posted
It depends on your situation. If you've got a five year time horizon then my answer is an emphatic yes!
You will probably never catch the bottom. Maybe it came in the last few weeks, maybe the stock market will fall further? If anyone claims to know then they do not know.
People are often too focussed on whether the value of the things they buy are going up or going down.
I know many people who bought houses because they were going up in value. Look where this has left them. A much better measure would have been whether houses were cheap in the light of history. On this measure buying any time after 2003-04 looked like a bad idea.
The latest craze has been in buying government bonds. In light of history these are far too expensive but poeple have again been focussed on their prices going up, so they buy them.
Shares are cheap. They are producing dividends higher than the interest on virtually all savings accounts and bonds. This has never happened before.
Buy them now when they are extremely cheap. If they get cheaper buy more and be happy that you are getting even better value for your money.
Old on to them. Sell them only when they are extremely over valued.
Over the long run you will do very very well.
Posted on 24 March 2009 | Love 0 loves
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878MikeGG1 posted
If you have at least 5 years before you need the money then buy shares. The yields are historically high so there is room for them to move uo.
But we may not have hit the bottom. The problem with timing that is that it will already be passed before we know it has occurred.
If you are just starting with shares then buying Trackers would be a good place to begin. Try Legal & General or Fidelity All-Share Trackers to get a good spread for safety.
Once you have a good holding then you start individual holdings. one company at a time.
Posted on 24 March 2009 | Love 0 loves
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0guykguard posted
Three refreshing and balanced answers to an excellent question.
I agree: relative to other asset classes like property, and relative to historical share values, buying shares now must be a wise investment because they are relatively so cheap.
However, I'm assuming that you know your way around stockmarkets. If not, here are two handy tips.
First, you can only lose money on the stockmarket if you sell a share for less than you paid to acquire it. Second, few investors go bankrupt selling shares for more than they paid for them. Dumb, I know, but, surprisingly, "not many people know that".
I'm thinking of investing in a sterling-denominated S&P 500 tracker fund. I like facts to support my very tentative judgement.
On my desk I have a ten-year graph of the S&P 500 index. At about 820 today the S&P 500 is at or around its lowest point in these ten years. It last dipped below 800 in March 2003: by August 2008 it stood at about 1540! That was equivalent to an annual rate of return of about 15%!
By any standards, the S&P 500 is cheap. At present valuations of America's 500 largest publicly owned companies, an investment in the US economy is probably a wise choice. Much the same argument can be used for investing in the FTSE 100. I did so, in October 2008, which was three months too early, maybe more. Dumb!
Good luck!
Posted on 24 March 2009 | Love 0 loves
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49peepobaby posted
No. We're still in a phase where all asset classes are falling in value relative to cash and we're still going to see huge corporate losses announced in Q1 2010 so no chance of a bottom yet. And if world trade declines come through as expected, it will get far worse through 2010 rather than better. The second order effects are what will be most powerful since they'll hit what remains of earnings and growth - the things which drive stock values.
Posted on 24 March 2009 | Love 0 loves
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1Birtles posted
Peepobaby has an excellent point. I agree that the economy is going to get itself in to more of a hole but that does not necessarily mean that the stock market will follow since this may have already been priced in to the current share prices. The point is only valid if Peepobaby thinks the market has not taken such prospects in to consideration
Posted on 25 March 2009 | Love 0 loves
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49peepobaby posted
I don't think the markets are being driven by rational consideration at the moment. If they had been, the UK would have sold its bonds today and the future price of oil wouldn't be massively higher than the current price.
I more and more favour Asian markets when you're looking for growth because they are more free and mark down more realistically. They get quickly to fair value. The problem with Western markets is that they're overvalued, dominated by boring investment institutions, and may never drop to what I would view as fair value. So the investment returns are limited if you invest today. Thats because even if UK markets depend on the world economy, they're already overpriced and it'll take a while before they reach fair value, by which time you would have made morer by investing directly in the better bits of the world economy.
I wouldn't disagree with someone investing in Asian equities/indices because that's where the home and export growth will be over the next 10 years and their government policies and stimulus plans are smarter and more directed than Western ones. Its still not the best moment though.
Posted on 26 March 2009 | Love 0 loves
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