Is Now the Time To Invest?

16 Mar

I have been asked by some, is now the time to invest? My thoughts as an IFA is the undlying markets are vulnerable and so be cautious but not too cautious. I think it is fair to say, that part of what is and has driven markets higher is investors demand for risk assets (i.e. the hunger for profits rather than the fear of losses). Many investors have jumped on to the optimists bandwagon, which has at least in the sort-term, driven markets higher.

 In my opinion, the time to be bullish on stocks and shares was a few months ago. At times like this, my belief is to do the opposite to the market and now is time to be defensive, as who is left to turn bullish and plough money into the market to drive it higher? Well, if the pressure forcing the market higher subsides, what happens next?

To be clear, there are reasons to be more cautious in both the economy and certain areas of the markets. Also, there are reasons for optimism. As a number of the fund managers have said, at some stage time does begin to heal. We are a further year through this credit crisis and some of the more systemic problems in Europe, at least in the short-term, seem to be more under control (well that is the perception anyway). Some have even suggested that there are green shoots appearing in the US. If these sustain, there are grounds for investors to be optimistic for the future.

Playing devils advocate, some equity markets are looking technically over-bought. So, becoming bullish at this point and investing in a higher risk portfolio (weighted towards equities) may not provide the required long-term returns. I would say, money can be made but care is needed and a diverse mix of asset classes would be wise. Remember when one market is rising another market is falling – so combine ad consider risk adjusted returns as higher risk does not guarantee higher returns, it just offers a wider range of possible outcomes.

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