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Hewison Insights

Is now a good time to invest?

Chris Morcom
Partner & Wealth Adviser
16 Aug 2023

With interest rates rising, uncertainty over the future direction of economic growth, and share prices seemingly holding at close to all-time highs I am often asked whether it is a good time to invest right now. 

My answer to this question is yes. 

Trying to time when to invest is like trying to drive forwards while looking in the rear-view mirror.  The past may be interesting, but it does not predict the future. 

Rather than try to work out when to invest I advocate you invest now and let time and compounding returns work to your advantage.  Put simply, the sooner you invest the sooner you will start earning income that can be reinvested. 

For example, if you invested $1,000 into Australian Foundation Investment Company (ASX: AFI) shares in August 2015, then set aside $20 per week and invested $1,000 every August since, and reinvested dividends, you would now have an investment worth almost $40,000.  Your $18,000 of savings has more than doubled over that time. 

Investing in shares is one thing, but what about more defensive investments such as fixed interest.  Interest rates on fixed interest assets fell sharply in 2020 in response to central bank action to combat an economic slowdown resulting from the Covid pandemic.  Now that interest rates have returned to more normal settings, investors are back to earning a reasonable rate of return on their fixed interest investments.   

For example, two years ago secured first mortgage investments were earning around5-6% per annum, and now they are earning 8-9% per annum.   Term deposits in late 2020 were earning less than 1% per annum, now returns over 4% per annum are available.  Corporate credit investments have seen returns rise from low 3% per annum to over 8% per annum.  This means that investors are now being compensated more for investing in such assets, and this should see an increase in cash flow returns for diversified portfolios. 

And finally, we come to property.  In the case of commercial property, we have seen rising interest rates and low occupancy rates for some office buildings start to weigh on the value of some sectors of the commercial property market.  But that may be providing investors with an opportunity to buy quality properties at below replacement cost prices.  In such cases, investors will be able to receive a rental yield for holding a property that they have been able to acquire for a price below the cost of building that structure today.  Patient investors will be rewarded with good long term returns when they allocate capital towards assets that are being mispriced by the market. 

Successful building of wealth takes time, patience, and diligence.  Investing now gives you more time to benefit from the compounding of earnings and remaining patient allows your investments the time to perform over the longer term.  Diligently selecting and sticking to a strategy that meets your goals is the final piece in the wealth building puzzle. 

If you or any of your friends, family or colleagues are interested in building their wealth, please contact us HERE and one of our highly experienced advisers at Hewison Private Wealth will be in touch within 1 business day to discuss your circumstances and objectives. 

Disclaimer: Any information, financial product or advice provided in this website is general in nature.  It does not take into account your needs, financial situation or objectives.  Before acting on the advice, you should consider whether it is appropriate to you in light of your needs, financial situation and objectives. Past performance is not a reliable indicator of future performance. The information contained throughout the website does not take into account your needs, financial situation or objectives.  Before acting on the advice, you should consider whether it is appropriate to you in light of your needs financial situation and objectives.