17 October 2008
With the share market reaching three year lows, many first time stock market investors are asking ‘Is now the best time to buy shares?’.
This is a logical question and one that most of us have heard throughout our lives and reflects saying “buy low, sell high”.
Many inexperienced investors are thinking, this has to be the bottom or near the bottom, so why not buy now? There can only be an upside to this, can’t there?
One of the first tips to investing is not investing in something that you don’t understand.
Before jumping into the share market it is important to get an understanding of how it works. One of the best ways to do this is to speak to a Stockbroker. A Stockbroker buys and sells shares on the Stockmarket for you. Buying shares is one way of becoming part owner in a business. In return you share the profits of that business.
Before you act on a ‘hot’ tip from a friend, you should understand what that company does. Some basic things to look for are;
- Does the company have a history of making a profit?
- Does the company anticipate making steady profits in the future?
- How does the company make profits?
- Has the company paid dividends in the past and will it be able to maintain the payment of dividends into the future?
The short to medium outlook on our economy is relatively unsure.
The government is spending some of the budget surplus and the Reserve Bank of Australia has reduced interest rates to help stimulate the economy. It will take some time to see the effect of these measures.
In the short to medium term it is anticipated that the market will remain volatile, meaning that it will rise on the reporting of good news and fall on any further reports of bad news. For this reason it is important to understand your investment decision before rushing into anything.
Sensible investing is about accumulation. It means investing regular amounts over the long term. It is impossible to pick the very bottom of the market cycle. If you invest gradually over a long period you will average out your cost and provide a better grounding for success.
