Saturday, October 25, 2008

Is it time to invest in the stock market?

With the FTSE/JSE All Share Index falling from its peak of 33,310 on 22 May to 18,459 yesterday (24 October 2008), equating to a fall of 44.6% in percentage terms, the stock market certainly has been a horrible place, with most individual and institutional investors losing quite a lot of money. And it looks like the market could fall further before it starts to recover.

However, I think it's time to get into the market. From the fundamental point of view, the market starts to show great value, with many solid companies trading at very low PE's. From the technical analysis, statistical indicators indicate the market is very oversold, and positive divergence has been in place for some time. I think right now it offers once in every five years opportunity to buy into the market at cyclical lows.

The strategy for investors who invest in unit trusts:

- if you have been invested in money market funds, you should consider switching part of it to domestic equity funds;
- if you have been invested in offshore bond funds, offshore cash funds or offshore asset allocation funds, you should consider taking advantage of the current rand weakness, by cashing in on the handsome returns on these offshore funds and switching them to domestic equity funds or domestic value funds.

1 comment:

Life Insurance Today said...

I don't think now is the right time to invest in the JSE not the way the world is falling to financial crises I think most people are taking their money out of the stock market.