Where To Invest $10k Expert Picks

PLUS The experts provide answers to some topical questions

- Ross Greenwood, Terry Ryder, Paul Clitheroe, Effie Zahos, Nerida Cole, Stephen Koukoulas, Scott Phillips, & Naomi Simson

SHARES ROSS GREENWOOD

What should my investing strategy be in the current market?

Go for defence, not attack, as the market boom reaches its peak. It’s a matter of when.

As the stock market boom has progressed, my history or my age is catching up with me. Though, unlike the cryptocurrency boom last year, there has not been a “but this time it’s different” moment in the stock market. Not yet, anyhow.

But just as inflated prices and questionable underlying assets caught up with cryptocurrency investors in a big hurry, so too will the inflated valuations on many Australian companies catch up with them.

FUTURE SHOCKS

You might also make a parallel with house prices in the major capital cities. The price increases (which average 70% from trough to peak in Sydney and more than 50% in Melbourne) eventually meant a first home buyer had to save more than $100,000 as a deposit and then to shell out 40% of their net income to manage the mortgage. The speculation in houses was aided and abetted by international buyers and owners of self-managed superannuation funds, which for the first time were capable of borrowing to buy property.

As the valuations increased and worries about first home buyers grew, the regulatory response to limit foreign buyers and to limit credit to investors were all that was needed to bring down valuations.

Consider also what Labor’s plan to change negative gearing and capital gains tax might do to the housing markets – if it is elected. This is the classic example of a policy created in one set of economic circumstances that may be implemented at an entirely different time.