As markets fall worldwide, experts are suggesting two things – first they are reminding everyone that investing is a long term business and cashing out means you will be crystallising losses. Secondly they say with share prices so low this is a buying opportunity at least for the brave.
Here This is Money reports on the market turbulence which continued this morning taking the FTSE 100 index below well below 5,000 at one stage.
Here the Telegraph quotes three market experts who are urging investors not to panic.
However, John White, head of financial management, at RSM Tenon, is advising people to get advice about pension portfolios.
He tells the Telegraph – “We have seen activity in recent weeks that will have repercussions that will require people to review their retirement planning and seriously consider the diversity of their investment portfolio. These conditions demonstrate how crucial it is that people seek advice about their retirement planning and continually review their long-term savings plans.”
The Guardian has also devoted a lot of space to market falls, though the piece was written before the latest market falls.
It quotes financial adviser AWD Chase de Vere’s Patrick Connolly saying. “I had some fixed-interest [bond] holdings in my own personal fund that I moved into a FTSE tracker this week. Markets may still go lower but I feel that in two or three years’ time we’ll be looking at the FTSE at below 5000 and thinking that was a good time to buy.” But the old stock market adage warns “don’t catch a falling knife”, or don’t invest until prices have hit a floor.”
Ray Black, an IFA who runs www.Money-minder.com, also sees a buying opportunity.
He writes: “In our May/June 2011 client newsletter, I wrote – “I find myself recommending to clients that they review their deposit funds, investment and pension portfolios to ensure they have enough cash available to take advantage of any buying opportunities that may present themselves in the short term.” – and here we are.
“With interest rates so low, inflation so high and with such volatility being seen in stock markets, you need to have an active investment strategy and the opportunity to buy quality stock at great value doesn’t come along very often and right now looks like a pretty good time to ‘stock up’ on cheap shares.
“Of course, there is every possibility that there will be even better bargains presenting themselves over the next few weeks and months but ‘waiting for the bottom’ is a higher risk strategy that rarely pays off.”
From the other side of the Atlantic, US Global Investors gives a detailed consideration of what these sorts of valuations point to.
“Investors must remember there are some good opportunities out there and we’re working relentlessly to find them. Some of the best are in great American companies, whose balance sheets are the envy of Washington, with many carrying dividend yields above the 10-year Treasury bill. Currently, the 2.28 percent yield for the S&P 500 is the highest level since July 2009.
“A similar phenomenon took place following banking crises in France, Sweden and the U.S. during the 1990s. Without the ability to tap banks for additional capital, companies moved to large positive cash-flow positions and self-financed their growth.
That is bang on. There is actually little sense in going to Banks for finance, as many orgnisations are willing to strike a different type of finance deal. After all, what really is the point in handing 7% to the banks and having to guarantee the loan to the Bank? Far better to give 3% to the company you are dealing with and sign a guarantee direct.
I think a lesser role for the banks on all lending levels can only be a good thing . After all, they do have a terribe track record ! PPI fraud, banking services to terrorists, invoice factoring (which should be outlawed)…..