When looking to grow an investment portfolio, I often find that investors blindly follow the herd looking for the best bang for their buck. I also find that investors are focused on income rather than capital growth from their investments, but smart investing is about the total return you receive.
Many are asking in the current COVID-19 environment where they should be investing, and, in my opinion, the answer is simple. As the renowned Warren Buffett famously states, ‘buy in doom and sell in boom’. Traditionally investors turn to property as their preferred investment, but when looking at the recent research, depending on the area where you want to invest, property prices are forecast to be flat or down.
Furthermore, in this low interest rate environment and uncertain recessionary market, property prices may be subdued for quite some time. So, is this the right time to be buying property or should you stay away?
To understand where and when you should be investing, I always recommend investors consider the investment clock or what is otherwise known as the economic clock. I say this because smart investors diversify their investments across several asset classes including property and shares among other investments.
The idea is to look for opportunities in asset classes that are underperforming and likely to move with the next phase of the economic clock. In short, you are looking to buy just before the asset begins to rise not after it has already risen.
Sadly, too many investors are indecisive when it comes to investing and jump from one investment to another hoping to get into the next best thing after it has already risen strongly.
Right now, the investment clock has ticked well past property as an asset class and, therefore, now is the time to start looking at gaining exposure in this area. In regards to the share market, many sectors have been underperforming for quite some time that may present some great buying opportunities for the astute investor.
Remember, understanding when the right time to enter an asset is very important, as you want to gain a solid return from both income and capital gains. That said, what is even more critical is knowing the right time to exit. In my experience, investors tend to hang onto poor performing asset classes or hang on way too long in the hope they will perform better. As Buffett states, ‘sell in boom and buy in doom’, which means buy when assets are priced low and sell when they are high because this way you will avoid the ugly rollercoaster ride that the majority of investors endure.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online atwww.wealthwithin.com.au