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Saturday, February 10 2018
What can we learn from the sharemarket?

“If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.” Warren Buffett

While I’m not offering advice on what to do when it comes to share investing or where the market is going, this week’s market volatility provides a good opportunity to reflect on investment attitudes that apply across any investment class including property.

The headlines this week have been all about how many points the markets here and internationally has fallen and how many trillion dollars have been wiped off markets. All pretty dramatic stuff.

Every investor wants their investments to go up and no investor wants their investment value to go down. But you only have to look at the history of the market over the last 10 years to see that is an unrealistic expectation.

Even the biggest and best highest quality companies still decrease in value at certain points in the cycle – sometimes dramatically like during the GFC.

If you only want upside and no downside then that is going to be pretty stressful for you. And if you refer to the graph you will need to be making investment decisions every 10 minutes like Warren says. But that’s not investing that's trading.

If, however your attitude is longer term then volatility is not going to be that much of a concern. At this point if you had bought in at June 2008 you would still be ahead. But of course, that position could soon change.

If you had bought in March 2009 (bottom of the market) then the current events wouldn’t be bothering you too much at all. As would be the case for many other points along the chart.

Which also highlights another interesting point about when to buy.

When do most people choose to buy?

When the market is going up – in fact usually when the market is well past the bottom and nearing the top of the cycle.

Look at Bitcoin – most people jumped in when it started making headlines. Same deal with the Sydney property market a lot of people piled in in the last 12 months. And now it’s in decline.

There are a couple of other markets around at the moment that are grabbing the all headlines – rising prices, tight vacancies etc. I’m pretty cautious about those for similar reasons. Particularly when I look to the factors that will support longer term sustained growth.

The bottom of the market is obviously the ideal time to buy but it is near impossible to predict. A recovering and rising market is however a little bit easier to spot. It doesn’t set any records or grab any headlines but just steadily creeps up. These are the areas I am interested in.

Which makes me think of another famous quote but not from a renowned investor.

"I skate to where the puck is going to be not where it has been"
Wayne Gretzky.

If you don't know who Wayne is I'll let you Google that.

Like to get your investment plans going?

Book in for a FREE telephone appointment with me and we can discuss if this type of property would fit into your plans. Book your FREE appointment now.

I look forward to talking with you

Greg Carroll

Posted by: Greg Carroll AT 07:10 am   |  Permalink   |  Email