Will low stocks guarantee good returns?
Today's question for the Money Doctor is from 46 year old Abu Dhabi-based Indian accountant Sudhir Patel. "With markets seemingly more stable and stocks relatively cheap, is now the right time to invest?"
This is a difficult question to answer. Is it time to invest? Well there is an age old saying among investors that is "time in the market". However, it really depends on each individual's goals and, of course, risk appetite. It's fair to say that over the past month markets have performed fairly well overall, but have generally only reached the level they were at three years ago. Are markets stable and stocks cheap? Well this depends on your opinion and, if you read the financial press the consensus is mixed, with some suggesting a "double dip" scenario when it comes to the world recession, while others are far more upbeat.
As an accountant I would imagine you have a comfortable amount of spare income and are you are still relatively young in investment terms at 46. You may well be investing for retirement, university education or saving for grandchildren.
As this is for the long term, then it is highly likely you are saving a regular amount each month and in this case time in the market is particularly important as peaks and troughs can be ignored and can even work to your advantage. What has happened to you in the past and your resulting mind set may also play a part. If you have been badly burnt by the recession, then chances are you will prefer to stay in cash or low risk assets. However, these investments are unlikely to grow as quickly as shares and mutual funds if the world economy does take off again. If you do invest then I would suggest investing in a wide number of assets and consulting a qualified independent adviser.
- The writer, an independent financial advisor, analyses readers' portfolios for Emirates Business. He is Area Manager for consultants PIC, a member of the deVere Group of companies. Readers can write to him at firstname.lastname@example.org
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