Is now a risky time to buy shares?
Do you think it is risky investing in the stock market right now? I have wanted to start a portfolio for some time but the market seems to be heading for a fall? What is your view?
It’s always risky investing in a stock market compared to the safety of a fixed deposit at a major bank, but that’s why the typical returns from good shares can be around 10 per cent if you include dividends and capital gain from a rising share price.
In this game, you have to understand that if the return is higher, so is the risk. I always advise people to take a five- to 10-year outlook on their investments, as a minimum, and that gives you a good chance to let the magic of compound interest produce very good returns out of shares.
History generally supports this belief, but in the US over the first decade of this century, investors didn’t make much money and many lost because they had shares of questionable quality and they kept chopping and changing their investments, which meant they were often out of the market when the best days for the stock market happened.
Right now the market could fall again but on a longer-term basis, shares look like good value. Warren Buffett, the legendary US investor says when everyone is greedy he’s fearful and when everyone is fearful he’s greedy!
My best piece of investment education about the stock market is to try and have 10 to 20 stocks and build them up over time. Make sure they are good quality companies, which pay dividends. Decide to invest regularly, say every month or quarter as your savings accumulate. And if you have good companies and their share prices dive with the market, don’t be afraid to stick to your investing strategy. If your plan is good and your stocks are good, they will prove to be a sound investment.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Monday, July 25, 2011blog comments powered by Disqus