The best time to buy in a high-priced market

It doesn’t matter what time of day you tune into the news, events all around the world will be positive one moment, only to be followed by a negative report moments later.

It reminds me of the story about the man who fell from the aeroplane: The good news was that he was wearing a parachute. The bad news was that it was defective.

The good news is that there was a haystack on the ground below him. The bad news is that there was a pitchfork standing upright in the haystack.

The good news is that he missed the pitchfork when he fell. The bad news is that he also missed the haystack...

Great results are released by select companies, only to be followed by reports about struggling large and well-known companies, banks and mines.

One moment, international relations seem peaceful (even Iran and North Korea are calm), then suddenly we are confronted with disturbing images of bomb attacks and shootings in Paris while Russian aeroplanes are being shot down by the Turks.

To make matters worse, we are being told of the good growth on shares over the past three years, only to read report upon report about the bubbling price-to-earnings ratios (P/E) and declining returns and dividend yields.

Surely a correction or even a collapse is imminent? In these conditions, a new investor must feel like a cow on artificial turf.

So when is a good time for new investors to invest? The short answer is now. TODAY. Why?

Previously, I warned investors against the fact that we are trading at a 20-year-high P/E while earnings are declining year-on-year.

I stand by my opinion and unfortunately my expectations remain fairly bleak. But that’s exactly what they are: expectations based on probability.

Experts cannot predict what will happen to any given share price in the future with any degree of certainty.

If we turn back the clock, however, the past supports my message that if you have the capital to invest and your allocation and risk tolerance has been determined, it will serve you to invest rather than to wait. 

This is an excerpt from an article that originally appeared in the 10 December 2015 edition of finweek. Buy and download the magazine here.