Sun, 22 November 2009
| Index | Last | Var.(%) |
|---|---|---|
| BEL 20 | 2119.3 | 0.50 |
| DAX | 5252.45 | 1.50 |
| IBEX 30 | 10726.8 | 0.59 |
| CAC 40 | 3377.59 | 1.40 |
| FTSE 100 | 4564.5 | 0.79 |
| AEX | 276.85 | 0.95 |
| DJIA | 9096.72 | -0.13 |
| Nasdaq | 1975.51 | 0.39 |
| FTSE MIB | 20341.67 | 1.65 |
| TSX Composite | 10570.54 | -1.74 |
| ASX | 4148.9 | -0.60 |
| Hang seng | 20135.5 | -2.37 |
| Straits Times | 0.00 | |
| ISEQ 20 | 442.48 | 0.27 |
With financial markets at a 16-month low, should you now be thinking of taking advantage? Our financial advisor looks at the options during a "bear market".What an extraordinary year this has been for the financial markets, the banking sector and the global economy as a whole. Low global interest rates in recent years have helped to create a bubble in asset prices, along with materially higher lending levels, and many would say that what we have seen this year is the inevitable outcome of such free market conditions.
The western world has been living beyond its means and the bubble has burst. The fundamental fallout from the crisis has been severe, and has been felt in markets around the world. It is highly unusual that all asset classes (shares, bonds, commodities, property) move in the same direction at the same time. However, they all fell in September and October.
Time To Buy?
For anyone with a medium to long-term time horizon (i.e. not requiring access to the capital before then), there are huge buying signals flashing at the moment. It is an unfortunate feature of investment however that many people tend to panic and sell out of shares or funds when they see prices falling. Similarly investors will sometimes sit and wait on prices to move up before buying in, by which time of course they have missed most of the gains!
Most market commentators, and experienced investors such as Warren Buffet (ranked by Forbes as the richest man in the world during the first half of 2008 with an estimated net worth of $62 billion), agree that markets are now looking very cheap and that we are in the final stage of the “bottoming out” process. In fact, he wrote an excellent article about this in the New York Times (click here).
This is the usual 'happy clappy' euphemistic nonsense written by people who have no idea about what is really happening in our markets. The reality is that there is no light at the end of the tunnel as yet. In fact the Feds decision to pump another eye watering $800 billion into the markets to improve liquidity (on top of the 'this will fix it' $700 billion that went in last month) just shows that governments are about to reduce the value of national debt by reaching for the time honoured solution of printing more money. The overall effect is to increase inflation, destroy the value of money (and shares) and savings. No Craig, you are wrong. Anyone with any sense left a long time ago. There is unlikely to be any queue of lambs with deep pockets anytime soon.
Im not sure if I fully share StevieBs overly dark prognosis, there are ofcourse real reasons to be cautious though.
But short to medium term directional views aside, if you are looking for a medium to long term investment.
I believe now is not a bad time to average into the equities market. I havent held shares since 2006, until now. In the last few weeks I was able to buy AEX 223, 1995 levels in the AEX. My next long will be 200 or there abouts, or if we rally and get past Jan in good shape, what ever the market is at end of Jan.
The dutch market comparatively looks even more oversold in percentage terms than other regional indexes.
What Craig doesnt mention as most financial advisors earn their money from being paid commissions by firms that manage funds and savings plans, but Exchange Traded Index tracker Funds or ETFs are the best bet in my view to enter the market in a fully diversified manner.
You can buy the AEX Ishare which is actively traded on the AEX, it essentially acts like buying the basket of the 25 AEX listed shares. You only pay normal brokerage fees as you would buying a single share, and the costs are much much lower and its much more liquid than entering into a managed fund, which normally charges 2% annually, which is how they manage to pay financial advisors like Craig commissions on every investor they introduce.
With ETFS you also receive dividends the same way you would if you bought an individual shares. The only give up is you dont have the benefit of, or on the other hand have to pay fees to a fund manager whose job it is to stock pick and out perform the index. In this market most of them are also in ETFs and doing their best just to hug the indexs performance. They are just as clueless as everyone else.
I wouldnt say throw it all into equities now, (there are also listed ETFs which track gold, as well as various bond funds). but to average in slowly over next 12 months should work out pretty good judging by historical market performances.
got to be in it to win it.
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