Sticking to a value-driven investment strategy is difficult in a market fuelled by hope and buoyant expectations. At what point should investors forego the equity market rally to prepare for a possible correction?
Author Archive | Roger Montgomery
Understanding the difference between first- and second-level thinking can make for more informed investment decisions, finding things others miss or bringing insights others don’t possess.
Pointing the crystal ball to 2017, what’s the outlook for residential property and which sectors of the sharemarket offer the most potential? There are new opportunities to buy some quality companies at reasonable prices.
Historically low bonds rates have boosted asset prices, but rates are likely to keep rising from this point. While this will cause pain over the next few years, it’s a positive longer term as higher rates mean higher returns.
We are seeing rapid one-day movements in some large stocks of 10% to 20%, especially those that were ‘priced for perfection’. What is causing this, and does it present a threat or an opportunity in a portfolio?
Disruption across many industries often makes it easier to pick the losers than the winners. Short-selling can play an important and legitimate role in an investment portfolio, although it continues to attract criticism.
The market’s fixation with whether companies are meeting, exceeding, or falling short of quarterly financial targets is inhibiting market efficiency. Investors would do better focussing on long-term prospects.
In previous cycles, bond yields provided a strong indication of the general health of the economy, but huge coordinated actions by central banks are changing that paradigm. Watch how you read the signals.
The media screams the scary headlines at times like Brexit as the share market reacts to the uncertainty. Investors need to ignore the shouting and accept with equanimity that this is the cost of participation.
Cash gives options over future lower prices, and it avoids the risk of permanent capital loss. But it comes with another risk, the loss of purchasing power, and is not a good long-term investment.
Given how difficult it is to forecast statistics such as GDP, employment or inflation, investors should ignore macroeconomics. Even if forecasts were accurate, they are not very useful for valuing shares.
It matters little if you are invested in property, shares or bonds, we have moved into a lower return environment. It’s a time for caution in a world where debt and defaults are rising.
Residential housing is the largest asset class in Australia, supporting the most debt, which explains all the talk about the potential for a housing price bubble.