The 5000 mark
The S&P/ASX200 Index has increased by 15 per cent since mid-2012 to its current level of 4720, which has focused the attention of market commentators on the “psychologically important” 5000 mark. Since the GFC, the S&P/ASX200 Index has not been able to break through 5000 despite nearing this level in early 2010 and early 2011.
At Montgomery Investment Management, we cannot stress the importance of ignoring the short-term fluctuations of the stock market. It is a fool’s game to try and “time” the market with your investments, as there is no way of forecasting or controlling where the share market will go, and waiting on the sidelines until a “psychologically important” milestone is reached can result in a lost opportunity to invest in quality companies at attractive prices. Our investment philosophy is to buy well-run businesses with bright prospects that are trading at a discount to their intrinsic value. We have no control over where the share price will go in the short-term, but over the long-term we believe that the share price will rise to reflect the company’s intrinsic value.
Short-term fluctuations of the market should have no bearing whatsoever on your investment decisions as the movement of an index has no impact on the fundamentals of quality businesses. Please don’t let the “significance” of the S&P/ASX200 Index potentially reaching the 5000 level influence your investment decisions.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
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Andrew Legget
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I am sure there is academic research out there that backs it up and people who have success with such a style, however, i will never get those that allude to how investors should wait for the market to rise before investing. The old adage which everyone knows is “buy low, sell high”, so why should we wait for prices to get higher to buy. Good luck to those who follow these type of styles, iw ish you all the best, just not for me.
As far as i am concerned, the level of the market may be great for those invested in index funds or journalists needing to report on something but it means nothing to me. I will pay a lot more attention when people start discussing the index being at its lowest point and investors in a panic and fleeing the stock market.
Forget “buy low, sell high”, i think the better saying is “buy bust, sell boom”.