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Is it really the right time to invest in shares?

Emma Olsen
Money, money, money
Money, money, money  Flickr

We get advice from three finance experts who tell us whether or not now is the ideal time to be investing in shares.

ANZ Private Banker, Neville Giles, Portfolio Manager for Milford Assets, Mark Riggall, and Wealth Adviser for Pie Funds, Simon Hepple, all agree that in short, there is no definite answer.

COVID-19 has created significant upheaval in the global economy, therefore, a real impact on company revenues, meaning potential bankruptcies, said Riggall.

"Uncertainty is extremely high, so it is impossible to determine a short term-path of shares beyond knowing that we are likely to continue to have wild swings in both directions.

"In the long-term, we will find a way through...and economic growth will continue its upward trend. Some companies will fail along the way but there will be some winners whose products are more in demand as a result of this situation."

Giles said people should purchase shares when the intrinsic value is higher than the current price. 

"With the recent volatility, a lot of shares are trading at very low levels and therefore this may be an excellent opportunity to buy.

"Having said that, you do need to be cautious as several companies are going to be impacted greatly by COVID-19 and some 'cheap' companies may get even cheaper as their business models are impacted."

Investing simply to make a quick dollar could lead to disappointment.

"You must have a goal of at least five years to ensure that your downside risk is mitigated as much as possible," Hepple said.

Purchase shares when the price you pay is low or when you expect company earnings to grow strongly in the future said, Giles.

"If you could buy when everyone else was fearful or sell when everyone else was exuberant then you could make some handsome profits," said Riggall.

Economies don't grow at a uniform pace but grow faster and slower at different times in what is termed the economic or business cycle said, Riggall.

"When the price you are paying is excessive relative to the future earnings of the company, this is the worst time to invest.

"In share market bubbles, there is the tendency to pay greater amounts for the 'good' companies and this causes the price to go higher and higher. The higher the price you pay, the harder it is for the business to meet the earning expectations required to justify the price" said Giles. 

All three financial advisors agreed that educating yourself is the most important thing to do before investing in shares.

“You also need to create goals so that you can focus on what you want to achieve financially,” said Simon. 

The best thing to do if you’re wanting to look into shares is to consult with a professional in the field. Financial advisors can point you in the right direction to reach your objectives.