The question of timing

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Question: With Charlie’s Platinum Asset Management and Crown recommendations to take advantage of the US recovery, I am holding back, being patient, waiting for the correction Feb-May. Then I want to strike. Is this a good idea or should I buy in the small dips? What other stocks do you recommend to take advantage of the weakening Aussie dollar?

Answer (By Paul Rickard): James Dunn covered this area quite extensively the other week.

A lot of the stocks that I would recommend, such as CSL, Amcor and Brambles, have already moved. The other way to approach it is through ETFs, which give exposure to the broader market. iShares IVV (which tracks the S&P 500) is probably my pick.

In terms of your strategy, I can’t disagree with being patient and looking to buy in the dips. However, it is a lot easier to do this if you have some part of your position already set. The old investment adage is “the trend is your friend”. Sometimes there is more risk in trying to finesse/time the market than there is in just paying up and getting with the trend. Very few investors can get the timing right on an ongoing basis.

Question 2: I’m interested in your views on market timing because even though you might say that investors should buy dips in market, not everyone is in a position to do so, as they may already be fully invested and not have the cash available to do so (other than borrowing on margin). A significant dip in the market is known after the event and so advice on when to sell may be more telling than when to buy, for many investors, because they cannot simply add more to their portfolios easily.

Answer 2 (By Paul Rickard): I think “timing” is an interesting issue. I play it from the perspective of a long term investor, who is prepared to carry some pain – so if an opportunity does come, they can either invest some more money into the market, or if already fully invested, they don’t make the mistake of cutting at the wrong time.

Obviously, the biggest risk is not being invested at all. I try to help with both the trend, and for those who already have an exposure and can be patient, the timing.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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