Wow doesn’t New Year come around quickly these days? It must be the aging process at work, cause the older I seem to get, the quicker we seem to get a new year!
No doubt December left investors with a bad taste in their mouth, and a strong desire for a reversal of those pesky downward spiralling markets. Sadly, any short term predictions of a miraculous boom I think, will probably have to wait untill the second half of 2019.
It’s becoming increasingly apparent that the macro environmental factors shaping share markets are not likely to end soon. And even though Donald Trump is espousing market recovery once the trade issues with China have re- solved, his confidence and, dare I say it, market savvy, leaves a lot to be desired.
Sadly for him, I think his Presidency is going to be remembered by his lies, false- hoods and make-believe, rather than any positive contribution to US or global society. But his Presidency does provide a very valuable lesson; never ever, elect a real estate salesman into a position of power!
But for the long term investor there’s certainly a silver lining to falling markets. And that’s the opportunity to add to portfolios at good prices.
Now I am certainly not advocating rushing in with every last bit of available cash you can muster. Rather, to nibble away at positions in companies that you’ve re- searched and suit your portfolio objectives.
There are a lot of very nicely priced blue-chip shares making themselves apparent across most global markets. And even the great Warren Buffett expressed a desire towards grabbing more Apple shares but was waiting for a price drop. His wish has certainly come true.
Market falls like the one we are currently experiencing happen very quickly. So stay nimble and believe in your investment plan so as to take full advantage of the prevailing conditions. Otherwise you will be spending the next leg up of a bull market “wishing you had”, rather than “glad you did!”
And remember in periods of market turmoil, its fear driving prices more so than company fundamentals. This means good companies are being sacrificed in the rush for the exits. And often the “baby gets thrown out with the bathwater’ rather than shareholders enacting any form of reasoned exit strategy.
Additionally, fund managers are very, very short termed in their investment horizons, contrary to what’s claimed in their marketing paraphernalia. And as a result these share holding behemoths are very quick to liquidate positions at the slightest prospect of their quarterly performance figures being affected. (Or more likely, quarterly bonuses being affected)
So opportunities are abounding for the long term investor, who will be well re- warded in 12 months time and beyond for quality purchases made during the current market turmoil.
Now the same can’t be said for property with a market collapse being experienced in Australia and other parts of the globe. Property has a very slow cycle from bottom to top, and once peaked has a long time till there’s any semblance of recovery. This provides plenty of time to create misery for those investors whose asset selection through the boom may have been wanting.
Even in boom times investors need to have conducted some thorough research into an investment property. ‘Dogs’ sold to gullible investors who fail to do their due diligence during boom times, will begin to look more and more ‘mangy’ during a bust.
And you wouldn’t believe how many times I have seen the financial aftermath created by exuberant property buyers who splurged un-researched, on numerous houses during boom times. With the only ‘rule’ arming newbie investors being “you can never lose money on property” Well I’ve ‘gotta’ tell you, you can.
Why? Well poor geographic selection for starters. The most famous of all real estate catch phrases isn’t ‘position, position, position’ for no reason. Buying away from major cities may present affordable entry into the market, but unfortunately if no one wants to live there, you’re asking for real trouble when you want to sell. And never compare prices against those of a large city because they will never catch up, ever!
And what about the glossed over maintenance and repair issues deemed minor when a raging property boom forms the backdrop of decision making. Many times I have seen large expenditures on repairs turn a profitable deal into a loss – all because the market has unexpectedly fallen.
And then there are the ‘off the plan’ unit purchases which are the investment vehicle of choice for uninitiated investors. If there was ever a ticking time bomb of financial misery, it’s these bad boys.
Outlaying borrowed money on a yet to be commenced final product is tantamount to financial Russian roulette. Not only is there a risk that the completed building may not meet expectations, but your builder could go broke during the process.
This leaves the investor with a financial commitment to something that has no realistic chance of progressing. Take a look here at what huge problems can be- fall an investor with an off the plan purchase. It will certainly shock you.
In general, it would seem that setting a financial course for 2019 is going to be a bit on the tricky side. But long-term investors always work with the prevailing investment environment and make decisions accordingly.
It would, therefore, be prudent advice to stay well versed on current geopolitical and macroeconomic events. Capitalise on opportunities and sit on the sidelines when appropriate.
And always remember Sir John Templeton’s advice, who suggested the four most dangerous words for any investor were ‘this time it’s different’ because it won’t be.
Thanks for reading, I look forward to seeing you again. Homepage.
