IS NOW THE TIME TO BAIL OUT OF STOCK MARKET?
Q I invested in shares through a fund six years ago and have done well. I’m worried that the market may be about to crash. Should I bail out now and take my profits?
A That’s a very relevant question. Share prices around the world are at record-breaking levels. No one can say exactly when the market will turn.
However, to help with your decision, ask yourself what type of investor you are: are you a risk-taking, well-informed investor who wants to buy and sell to maximise profits? Or are you, like most novice investors, the type who salts money away for a long period of time, prepared to sit out the highs and lows of the market?
If you’re the former, or you need the money in the short or medium term, then now, or soon, is the time to think about selling. As Warren Buffett once said, investors should be ‘fearful when others are greedy and greedy when others are fearful.’ And now the greed is running low and fear is starting to set in.
‘Bears’ (ie, investors inclined to sell) say nobody ever lost money taking a profit. They point out that the six-year uninterrupted rise in share prices has been matched only twice before in history – both prior to massive crashes in 1929 and 2000.
They might also point out that Donald Trump, Brexit and a spate of worrying EU elections are creating untold uncertainty. Over a quarter of analysts even believe the euro could break up this year – with Italy the most likely to exit.
The French elections could even see a new far-right president keen to take France out of the euro. If any of those things happen, shares will fall.
However, not everyone is that worried. Nobel-prize-winning economist Robert Shiller described current share levels as ‘high enough to worry about’ but not alarmingly so.
‘Bulls’ (who favour buying) point out that share valuations (based on prices relative to profits) actually hit close-totoday’s levels in 1997 – and grew by another 70% over three years before crashing in 2000. The bears who panicked in 1997 and sold out had to sit on their hands and watch as prices rocketed for three years. They would have been somewhat mollified when the crash finally arrived but would have been still out of pocket afterwards.
Shares rise fairly reliably over the very long term but can fall sharply in the short and medium terms.
If you can wait for long enough, even after a crash, the chances are you will gain eventually – as this is what has happened throughout history.
If you are an active investor who plays the market or if you can’t afford to wait that long, then cash in your gains. You may avoid short-term losses but could miss out on gains in the long and short term if you don’t get back in at the right moment. Major stock market rises usually occur over very short periods.
Q ApplePay was launched in Ireland recently. How does it work?
A You link your credit card or bank account to an app on an Apple device and use it to ‘swipe’ a payment through in a shop where the system is in place. You’ll need an iPhone 6 or above, an iWatch or an iPad. So far KBC and Ulster bank accounts can be linked to ApplePay, with other banks likely to follow suit. Most major credit cards are accepted.
Apple says its fingerprint-based security is failsafe. But it does add another layer of technology, in addition to your bank account, for hackers to target.
Q My son and daughter will be executors of my will. We all pay property tax. Will my children be liable to further tax when they dispose of our property after our demise?
A They won’t have to pay any additional tax. However, the executor of a will would be responsible for paying property tax due on the property bequeathed by you from the proceeds of the estate.