The investment opportunity of your lifetime

Apr 8, 2020 | Tony Byrne's View

I have lost count of the number of conversations I have had with clients over the last two to three weeks during the government coronavirus lockdown. Believe it or not the conversations haven’t been about withdrawing money from their investments but rather about whether or not now is a good time to invest.

Well I am sure you will know what my answer has been on each occasion. Of course! As Warren Buffet once said “Be fearful when others are greedy and greedy when others are fearful.”

The only question is whether or not we have reached the bottom yet? The answer is nobody knows. What I do know is that share prices at the time of writing are about 25%-30% cheaper than they were just a few short weeks ago. So now is definitely a good time to invest.*

Could world stock markets fall even further? Yes. Could they fall another 25%-30%? Quite possibly. Should I wait a few more weeks to invest? Maybe.

The thing to realise is that market timing is impossible to get right. Impossible. Anybody who tells you that’s not true is either lying or stupid no matter how much of an expert he or she appears to be.

The following graph illustrates my point.

As the graph illustrates it is always best to stay fully invested. Not being invested for just the 10 best days over an 11 year period reduced the annual return from 10.4% to 7.9%. The 30 best days missed reduced the return to 4.4%. The 50 best days missed reduced the return to a paltry 1.5%.

The probability of further stock market falls is quite high especially with the very large incidence of coronavirus infections and deaths in the USA which will have an inevitable knock on effect on share prices by dragging them down even further.

So if you have spare cash what should you do? I have been advising clients to invest 50% now and another 50% in 2-4 weeks’ time. Will this be perfect timing? I really don’t know. What are my odds of getting it right? No more than 50:50. What am I doing with my own spare cash? I am investing 50% now and 50% in 2-4 weeks’ time.

Why? Because though it looks likely that stock markets will fall further there could equally be some good news on coronavirus which could cause share prices to rise strongly.

So what should you do with your money that is already invested in shares? Just sit tight. Don’t sell shares. Do not put your money into cash. Do not change your attitude to investment risk. If you have any spare cash buy shares now and possibly over the next few weeks.

Remember you do not lose money unless you sell your investment at a loss when prices are low. You will have crystallised a permanent loss of capital and you will be unlikely to benefit from the rebound upwards in share prices which history has shown is as inevitable as night and day. It really is that simple.

It is my conviction that today represents the best investment opportunity of your lifetime. So go for it. Do not fear the consequences. Share prices are very cheap currently so now and the next few weeks will be the time to invest. This is definitely a Black Friday shopping event. You know it makes sense.

*The value of investments can fall as well as rise. You may not get back what you invest.This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action.


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