Should I begin share investments in a bull market?

[SharingIsCaring]

Hi everyone

I am thinking of investing in blue chip Aussie shares but am afraid that they have hit the ceiling. Should I start investing right now or hold off until some time next year?

SharingIsCaring :dunno:

 

[tech/a]

The beauty of shares is that you can liquidate $500,000 worth NOW.

Frankly Id be happier investing in shares in a bull rather than a bear market.

This is the All Ordinaries.
Remember one of the keys to success is identifying and riding stocks which remain bullish even in bear markets.
But MORE importantly getting out of stocks that turn bearish.

But in the VERY long run just as buying Realestate Stock portfolios particularly Blue chips return Nett gains.

 

[RichKid]

I like your 'too high here' chart! Very much to the point.

 

[baglimit]

that chart looks like my driveway during the recent drought !!!!!!!
sorry about that - anyway as has been highlighted, bulls are much kinder than bears, and bulls create the liquidity needed. now for some ideas.
with the recent granting of all mighty power to the howard govt (from july 1 2005), there is some suggestion that the minority parties in the senate may wish to provide their own input on weighty issues like telstra & cross media laws etc, rather than let the coalition do it all for themselves. so dont be at all surprised to see, lets say the cross media thing, get thru the senate prior to july just so the greens & democrats can at least have a say in how it is enforced. they'd probably accept this than let the libs/nats just do it all their way. and all the talk of telstra not being till 2006 may just be a little off for the same reasons - as the minorities definitely want a say in how the funds from telstra would be allocated. so while a takeover premium of sorts has already been put into the media stocks, theres probably a lot more to go yet. and telstra would just love to say to some minnow company out their who has what they want 'hey you, heres X million tls shares, rather than XX million dollars, how about it?' of course a share issue in payment for any takeover target is impossible for telstra right now....is that pure nonsense ??

 

[Mofra]

SharingisCaring,

I was always taught that a trend is assumed to be continuing until overwhelming evidence to the contrary. Just a simple rule that has stopped me taking profits too quickly in the past.

Goodluck with your investing

 

[Fleeta]

Great advice Mofra - that is something I have learnt the hard way!

I don't think there are any signs that the market will turn yet, minor corrections may happen, but there is still plenty of value out there.

 

[kooka1956]

SharingisCaring,

I was always taught that a trend is assumed to be continuing until overwhelming evidence to the contrary. Just a simple rule that has stopped me taking profits too quickly in the past.

Goodluck with your investing

This unfortunately can be a downfall, just remember 1987 when stocks fell by over 40% in one day . Most people were happy to let their profits ride and were caught by being too greedy .Leave some profits to the next person.
As to investing in the current bull market . The past two weeks has seen an incredible ride and this year asx is up about 20% . This may very well continue but I would be inclined to think that a gentle adjustment in asx will happen because of the current speed upwards . Dabble a bit now but hold some money back should prices fall in the next month or so .
If you had bought at the peak of the property boom about this time last year , you would be down on your capital some 10 to 15% .
The same thing can happen to shares , even though blue chips will eventualy recoup their losses and gradualy increase over the period of time. Regards KOOKA

 

[Mofra]

Kooka,

Thanks for the reply, seems like an interesting point to discuss. As I understand your post, you are reluctant to buy anything in an uptrend? I find I tend to agree with most investing & trading literature available (my original post was a bastardised Martin Pring rule) and the adage of stocks trending sideways 70% of the time seems a good rule of thumb. Often the end of an uptrend is not signalled by a sharp fall, but a consolidation or a gentle retraction. This is often the point in which I exit or at least reconsider my position.
Stealing a small profit when available seems to be an intuitively based decision, but unfortunately trading is a counter-intuitive activity.

Would you mind posting your methods for determining an exit point? It seems to be one of the more difficult areas of trading and its always interesting to gain another perspective.

Cheers

 

[markrmau]

Would you mind posting your methods for determining an exit point?

When the stock comes up as a BUY on the most popular commsec stock list.

 

[Mofra]

Markrmau,

If you back test that it'd probably come up as one the more accurate methods available!

 

[kooka1956]

I am basicaly a contrarian .If you look at the chart earlier in this thread , you will find their have been several corrections in the stock market in the past 20 years , the most notable being 1987 . If you had been caught up in the hype just prior to the crash it would have taken you around 6 years to get back your capital (assuming no trading was undertaken during this time). The graph indicates a low of around 2750 beginning of last year to about 3750 now about 35% in less than 2 years , to me this is a substantial rise which needs some consolidation ,so a breather in the market is a likely possibility .
At the moment I would be taking some profits and holding that cash for reinvesting when we come off our current highs .What if the market continues to go up ? Sure I,ve missed out on some profits , but Ive covered myself somewhat if a major correction happens . As I said previously in trading ,you are not always going to be able to buy at the low in a cycle or sell at the highest , be happy with the profit you have made, leave something for the next person . Greed is not always good!!!!!

Regards KOOKA

 

[markrmau]

As far as corrections go, you also need to look at a graph of historical P/E or div yield, and you see that the major corrections usually occur when the P/E is quite expensive - say over 20. I dont think the aussie market is at this stage yet, but if you look http://www.prudentbear.com/ (the bear case) you see the american market perhaps is (although it has come off its highs).

 

[kooka1956]

As far as corrections go, you also need to look at a graph of historical P/E or div yield, and you see that the major corrections usually occur when the P/E is quite expensive - say over 20. I dont think the aussie market is at this stage yet, but if you look http://www.prudentbear.com/ (the bear case) you see the american market perhaps is (although it has come off its highs).

Good point MARKRMAU. I would also look at the average dividend yield, the lower the yield obviously means the share prices are starting to go over the top . The higher the yield , better value is to be found in the stockmarket overall . OUr sharemarket has been more realistic in the past 5 to 6 years. We used to follow the American market like sheep but more recently our sharemarket has matured somewhat .Should there be a major correction in the American market , sure we will correct , but not as dramaticaly as overseas markets as our increases have not been as broad as overseas.

Regards KOOKA

 

[baglimit]

kooka - just a couple of replies to your comments. the low of 2750 (i remember mar 03, portfolio was very sick) followed the post 9/11 highs of early 02 of 3500 ish. with most things looking sick, the govt stepped in & 'created' growth to keep most sectors ticking over while the others got themselves up, dusted themselves off and even re-invented themselves.
now all the usual economic indicators have to be taken into account when looking into why the oz market has again recovered to such a level - (while others havent) - fx, interest, inflation, growth, profits, exports, imports - the list goes on - because aust have re-developed itself into primarily a net exporter again, and a sleeping giant panda called china has finally said 'ok, my turn now', we were in a position to take on that demand for resources, which then flows thru the whole economy....i know it sounds very boring but its simply true....its not a coalition ramp either. as for the sheep comment, that IS something im very very happy to see - many examples of ignoring what wall st does and simply using those fundamentals as listed above to determine if there is value out there. breaking 3800 and still going proves it.

 

[Mofra]

Kooka,

You obviously have a system working for you which is good; I basically identified a weakness in my trading which was taking profits too early and found a solution - to wait until it stops going up before I sell. I have lost some small profit many (most?) times selling after a peak, but weighed up against selling early this works better for me. Personally, I cannot rely on "gut-feeling" to enter or exit position - I've tried and failed that way. You're right to mention the substantial rise in the past two years - given overseas market concerns (they do influence our market, regardless of how resilient our companies are) a retraction seems likely, and given discussions & comments here a rise in gold seems set to occur/continue.

I agree with baglimit about the exports to China providing a boost to the economy - but I believe it will make our market more volatile as we align ourselves with the more volatile asian markets. Remember weeks back when China mentioned it may curb domestic growth? The LME panic sold, which, as China becomes increasing important to our markets, looks set to become a semi-regular occurance on our markets.

I suppose the hard question is do you leave stocks for cash now, wait for more signals of a retrace, or slowly switch into gold?

 

[kooka1956]

Baglimit and Moffra comments taken on board!!!!! I do rely a lot on gut feeling
but also find that charts can help when making decisions . I,m also very wary that markets can turn very quickly having worked in finance and stockbroking for around 20 years (I haven,t since 1992) and experienced 1987 and it,s roller coaster ride,but still lost a lot on a few "dead cat " bounces . Therefore most of my trading comes from experience and commonsense .This does not mean I,m 100% correct with decisions that I make .Sometimes I think it would have been easier to invest funds and let it ride,as Ive seen ANZ AND WBC at around $3 in the late eighties , and sold my 3000 CBA shares which I got in the initial float for under $10 years ago (I doubled my money ) They are now 3 times that price again . I agree gold has a lot going for it , and the Australian market is still quite solid . Regards KOOKA

 

[baglimit]

just a quick note - the china reference was to say that a large customer was established while other traditional customers struggled to get their act together. as china demand slows, it would be hoped the 'rest' will be back on the job and being good customers again. china had become a very good backup while the others are in (very slow) recovery mode.
in summary, i think theres a long way to go yet prior to any 'correction', but thats a very uneducated opinion.

 

[kooka1956]

just a quick note - the china reference was to say that a large customer was established while other traditional customers struggled to get their act together. as china demand slows, it would be hoped the 'rest' will be back on the job and being good customers again. china had become a very good backup while the others are in (very slow) recovery mode.
in summary, i think theres a long way to go yet prior to any 'correction', but thats a very uneducated opinion.

Your opinion is very much appreciated, as with all opinions on this forum. We are all here to learn and to listen to help each of us make decisions on our own diversified ways of trading .It,s good to have diversity of opinion as it makes you think just that little bit more on your next trade .Once you start getting tips from taxi drivers and bell hops , that is the time to start being a little more cautious . Those signs are,nt there at the moment . Regards KOOKA

 

[StillTrying]

Hi Kooka, just reading your post
"35% in less than 2 years , to me this is a substantial rise which needs some consolidation ,so a breather in the market is a likely possibility .
At the moment I would be taking some profits and holding that cash for reinvesting when we come off our current highs .What if the market continues to go up ? Sure I,ve missed out on some profits , but Ive covered myself somewhat if a major correction happens . As I said previously in trading ,you are not always going to be able to buy at the low in a cycle or sell at the highest , be happy with the profit you have made, leave something for the next person . Greed is not always good!!!!!"
There is no doubt everyone does it differently but I can remember several yeras ago when the market was having a continued run and I kept on saying nooooooooo its going to fall, keep your money in your pocket. When the trend is upI now beleive one should stay fully invested until the trend stops or slows , take profits in individual stcoks on the way when they show weakeness. In the last 6 months there has been a number of stocks which one has been able to buy and sell on the rise and falls. I have seen stocks which I have had that have made reasonable gains and I have sold on signs of the momentum coming to a stop only to see the stock keep going to new highs but at least one has taken a profit and most importantly put the money back into another stock which you hope is starting a new run. Make the money work while you can because when the Trend stalls or changes direction you will have plenty of time to sit on your hands as there wont be as many oppurtunities.
StillTrying

 

[baglimit]

35 % in less than 2 years would be a good pickup, if it were true. i think its actually well past that now (cant be bothered doing the maths) but a good guide would be the streettracks stock STW - up from 27.50 to 39.50 since mar 03 - they are purely a market tracker and are weighted on the asx200. ive found them invaluable in helping keep up with weightings (i let them do the work) of the asx200 and also a guide as to how & where the market is.
just my silly little thoughts for your perusal. and i'm not gonna tip nms any more. but go me lil darlin.