After a year like 2008 you could be forgiven for thinking that investing in equities was more trouble than it’s worth. But while understandable, this view may be a dangerous one as, typically, the best time to buy them is when few other people want to own them. Don’t take our word for it .....
James Caan -
serial entrepreneur, panellist on BBC2’s Dragons’ Den and Chairman of INSYNERGY Investment Management says, "The time to invest is when everyone else is leaving the room.
Warren Buffet -
"A simple rule dictates my buying: Be fearful when othersare greedy, and be greedy when others are fearful." Warren Buffet, arguably the world’s best known investor, writing in the New York Times in October 2008, explains why he has moved a large part of his personal portfolio into US equities. He continues…"And most certainly, fear is now widespread, gripping even seasoned investors.To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now."
Anthony Bolton -
In an article for FT Money on 2nd January 2009, Anthony Bolton, long time manager of Fidelity’s hugely successful Special Situations Fund and one of the most respected commentators in the financial services industry, compares the historical pattern of bull and bear markets to the current situation, considers the indicators of investment sentiment and behaviour, and sets them against the long term (30-40 year) market valuations. Having done so he concludes…"In my experience, when all three factors confirm each other, the odds are that you are near a turning point. It won’t predict the right day, the right week or even the right month, but it might give you the right quarter. All three factors were aligned in the last quarter of 2008, making me optimistic that 2009 will be a better year for equities."
Neil Woodford -
Writing in the Telegraph.co.uk 8 Jan 2009, Neil Woodford, one of Britain’s leading fund managers who has run arguably the most popular funds in the UK fund industry for the past ten years, is quoted as suggesting that the stock market may have bottomed. He said: "With the sharp falls in the UK and global stock markets in late 2008, the UK market seems to be discounting an outlook which is at least as bad as that which I foresee. Overall UK equity market indices are now lower than 10 years ago and I think there are now good grounds for thinking the overall market has bottomed."
Crispin Odey -
In a communication to investors on 31 January 2009 describing his long term view. "We are facing the worst recession in living memory but, as an investor, I am more optimistic today than at any time for 10 years." Odey established his own company, Odey Asset Management, in 1991. Seventeen years on, OAM is one of Europe’s most respected investment houses.
Although history is not a guide to future returns, it’s interesting to look at how market falls in the past have typically been followed by relatively dramatic recoveries. Those long term investors who are brave enough to invest when the outlook is gloomy can benefit. Once the recovery arrives, it can be significant:Waiting until the news begins to improve can risk missing out on the early recovery. As Warren Buffet said in October 2008:
"Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month – or a year – from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up...... so if you wait for the robins, spring will be over."