Time to buy in

Published in the Financial Review, August 2008 by David Potts

The sharemarket’s unprecedented volatility in recent months has made wealth protection a key factor for investors in all stocks.

Wealth Within’s Dale Gillham, whose data goes back to 1912, says this is the worst period he has ever seen. ‘There have been three major pullbacks of over 10 percent since August [2007],’ he says.

MLC investment strategist Brian Barker believes that despite the volatility, ‘you need some exposure to the sharemarket because ultimately wealth is built by businesses.’ AMP Capital

Investors’ Shane Oliver notes the average rebound from a bear market bottom is 32 percent in 12 months, and that waiting ‘until the outlook is clearer means missing out on the best part.’

Strategy Steps director Assyat David says people tend to go to extremes and shift too much to cash and miss the inevitable upturn. So judgement is important.

Commonwealth Bank of Australia’s Moghseen Jadwat says during times of volatility ‘like now you can pick up good premiums for writing [that is, selling] put or call options.’

Price averaging is another recommended strategy, but as Aberdeen Asset Management Asia’s Hugh Young says, volatility has made earnings difficult to predict by whatever method.

When it comes to shares, though, Clime Asset Management stands by the tried and true method: ‘Sell when the prospects are no longer bright or the price is too high.

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