B Invested

Should I invest in shares?

 

If you are wondering whether to invest in shares, it is important to weigh up all the risks involved. While it is possible to make money through the stock market, Nathan Birch from Binvested says now is not the best time.

 

Binvested in the stock market?

As our name suggests, we are all about investing – not just about property.

 

We help clients tailor investment strategies across different types of assets, with property as our main focus.

 

However, we strongly recommend you do your own research and seek advice from your own team of experts before making any financial decisions.

 

Would Nathan invest in shares?

Nathan says he traded in shares after he left his job in 2009 to focus on investing.

 

While he made some money on the stock market, he decided to stick with property as his main investment vehicle.

 

He says, he will trade in shares again, but not during this market.

 

“There are ways to make money out of shares,” he says.

 

But, at the moment, he says, there is simply too much risk involved.

 

Why wouldn’t Nathan invest in this market?

According to Nathan, the recession is likely to become a global financial depression in the not too distant future.

 

“Looking at the market at the moment, you can start to see where the volatility comes from.”

 

“The stock market’s at an all-time high and we are entering into a recession. A lot of the industries that will be affected will be attached to the liquidity and the stock markets,” he says.

 

He believes we are likely to see some major stock market crashes soon, with many companies hitting the dust.

 

Because of this, there isn’t much value in the market as it stands today, he says.

 

But, this is likely to change after the GFD has run its course.

 

Why he still likes property.

A lot of people will potentially lose huge amounts of money on the stock market when the GFD comes on full swing, says Nathan.

 

But, this could be just what the property market needs to get it going again.

 

“I think property has already copped a belting,” says Nathan.

 

“It’s going to be copping a lesser belting and looking good by the time that the stock markets get hit.” 

 

He believes that investors who pull their money from the stock market will likely choose to park their capital in property instead.

 

This increase in demand should help to bring prices back up again.

 

When would Nathan invest in shares?

“I will be buying shares again – and I’ll make it public – but just not at this point,” says Nathan.

 

So, what would the market need to look like before Nathan invested in it again?

 

He says, the trees would need to get shaken out first. There would need to be plenty of volatility and the insolvent companies would get themselves into trouble. 

 

After this occurred, Nathan says he would take action by buying good quality stocks that have a future in the next ten years. These would have a low speculation risk and would be at half the price of what they were selling for before the crash. They would also have a good, solid cashflow as a result of there being less liquidity in the market.

 

He says, it is coming to a point where it could be a good time to invest in the market, but we haven’t quite reached this yet.

 

He says, when the time is right, he will be looking for investments with a 20% yield or ones that are 80% less than what they used to sell for with a good cash in hand position.

 

There’s nothing like the real thing.

While there is money to be made on the stock market, Nathan says he still prefers physical assets to shares.

 

“I’d rather have physical metal than an ETF, I’d rather have a physical business instead of shares in a business that you can’t have any control of, and I would rather have physical real estate rather than a real estate trust.”

 

This is because it allows him control over the asset, whereas the performance of shares is at the whim of external factors.

 

Ask the experts.

Since trading in shares can cause major tax implications, it is always best to seek financial advice before pulling the trigger.

 

“You need to do your own research and speak to your own financial team.”

 

If you do not have your own financial advisor, we work very closely with the team at Dynasty Private Wealth.

 

“If you have got shares, it might be better to keep them throughout this market, because if you do sell off your shares today, you could possibly be liable to pay capital gains tax, and it could trigger a taxable event,” says Nathan.

 

Pros and cons of investing in shares.

Still undecided about investing in shares? Here are some pros and cons to consider.

 

Pros:

  • Shares are liquid and you can ditch them quickly – Eg. you could wait until tomorrow morning and hop onto your trading platform to sell them off. The money would then be in your account within 24 to 48 hours depending on your facility.

Cons:

  • They can be risky to leverage. If your investments drop below a certain margin you could be forced to sell some assets or invest further money to keep the margin at the right level. This means you may lose all of your starting capital.
  • You have no control over the value of the stock – Eg. if there is a scandal involving the CEO of a company it may affect the price of shares.
  • If a retail recession happens you don’t get disclosure – Eg. a retail outlet could have died six months ago, but you won’t know about it until the next reporting session. Then, when everyone finds out the company is dead, the stock price plummets.
  • You have no control over the running of the business – Eg. the business may be restructured and you don’t get dividends for the next year.

 

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