With the problems at Merrill Lynch, AIG, and collapse of Lehmans, there will be some people who have been sitting on the sidelines in cash who may think this is a bleak enough moment to start dribbling cash into the market.
This is not one of those ‘on the one hand & on the other hand’ articles in that I spent 10% of my SMSF cash holdings today on buying 3 (fairly poorly researched) index trackers, but as someone noted to me this evening it is easy to want to get back in too quickly (the possibly apocryphal example given was that of JP Morgan who waited from 1929 to 1939 to start buying again).
The same person noted that that ASX index had now fallen from 6800 to 4799 but that the next support level was at 4200 (confession: I neither believe in or understand charting in anything but a rudimentary sense when it comes to equities).
There was some muttering about if we hit 4200 we would be in for “10 years of poor returns”.
‘Typical bear markets’ fall 25% and that is where we are now in most major markets.
So I went looking today for poor performing markets over the last couple of years where I could start to nibble at low cost index trackers, which had gone on to fall even more after the weekend’s events.
I ended up buying small holdings in 3 iShares trackers that just happen to be in Asia that have not performed very well over the last 5 years and have fallen even further over the last few days (the charts are for the underlying indices and not the tracker):
I am even tempted increasingly by the S&P500 which got to 1500 last year and is now sitting 20% lower just below 1200 (back where it was in 1998!) but wonder if there will be another US dollar fall that might be a better entry point given that I am not a US resident (the USD is up 10% against the $A in the last few weeks).
Posted under index trackers, market timing
This post was written by mike on September 16, 2008
