'Amateur' investors warned new drop is coming

Published in the Gold Coast Bulletin, September 2009

Mum-and-dad investors continued to plunge back in to the share market this week, helping boost share prices by $23.5 billion.

Despite a half-a-per-cent dip yesterday, the share market remained strong for yet another week. Since the March trough share prices have risen more than 45 per cent.

However, the tell-tale sign of more uncertainty to come continues to show up in low trading volumes.

Professional and institutional investors still appear wary of buying in large volumes because they are unwilling to commit at current price levels.

However, smaller investors are making up for lost time.

"The big players like the institutions aren't really in the market; it's more the retail investor not wanting to miss out on the bullish run," said Wealth Within founder Dale Gillham yesterday.

"They've seen prices increase lately and they want to get back in. However, most of the professionals are still holding back because we expect a pull-back again soon.

"Over the next few months the market will move sideways and down, rather than remain bullish. It's that old saying again: amateurs buy at the top and professionals buy at the bottom.

"Right now there are a lot of amateurs buying and that's what's keeping the market rising."

Small investors need to take a leaf out of the institutionals' book and ease up on buying at current prices.

Mr Gillham said he expected prices to fall by up to 15 per cent by November.

"'They could be doing harm buying at this peak. Their portfolios will suffer by buying just before the market rolls over," he said.

"Better to be buying after it has fallen over and on the way up again after this next trough."