Market unrest now has a bright side
Published in the Courier Mail, August 2011
Despite the wild stockmarket gyrations, the message for investors is that there are bargains among the safer investment options.
But for those keen to enter the market, the major caveat is that nothing is guaranteed.
Financial planning guru Paul Clitheroe says no one really has a clue where the stockmarket is going, so the right time to invest is essentially when you have the money and the time.
"If I am such a clever guru, then why am I still working? It's because my crystal ball is cloudy, too. I know a lot of technical detail but I don't know any more about the direction of the sharemarket next week than does Joe Blow," he told The Courier-Mail.
"I look at all the big banks and they are paying 7-8 per cent dividends (including the franking credit), compared to if you have money in a term deposit paying 5.5 per cent.
"So if I buy bank shares, I will always get an income stream that is higher than the term deposit rate, which is good. I know people who have been planning to buy decent shares for 30 years but are waiting for the right time. There is no right time."
Dale Gillham, professional trader and analyst at Wealth Within, said ordinary Australians could make money despite the doom and gloom.
"When it comes to the sharemarket, Warren Buffett's famous quote is to 'be fearful when others are greedy and greedy when others are fearful'," he said.
"There is no better time to focus on making money in the share market than following a substantial pull-back like the one we are now experiencing."
He said such a move was always followed by the opportunity to buy quality stocks that had been sold down as investors liquidated their holdings.
"There is, of course, a right and wrong way to go about investing," he said. "The answer to building wealth is to do what rich people do, and this means having a simple plan or set of guiding principles so as not to make investing complex."
Mr Clitheroe said someone who won $100,000 on Lotto should see a broker before entering the market.
"But if you have $3000 in the bank and want to dip your toes in the market and buy three shares for $1000 each, then a full service broker won't be too interested in you," he said.
If you want to do your own research, use an online broker like CommSec, E*Trade, BellDirect, Macquarie and Westpac online.
Experts say the safe options are the big banks, big supermarkets and big mining companies. Investors should stick to the top 50 biggest companies on the ASX.
