Is now a good time to invest in equities?
This is the perpetual worry for investors, who struggle to pick a time when equity market valuations are ‘good’ or even just ‘fair’.
According to the latest CFA UK Valuations Index, investors are increasingly concerned that developed market equities are ‘overvalued’.
The Index is based on the responses of 584 analysts and investors towards the end of last month.
It found that 55% of Chartered Financial Analysts currently think developed market equities are overvalued. This is up from 49% in May.
33% believe developed market equities are fair value and 9% said they are very overvalued.
Respondents were a little more optimistic about the valuations of emerging market equities; 50% said they are currently undervalued, compared to 57% the previous month.
7% said they thought emerging market equities are very undervalued and 28% claimed them as being fair value.
Do these opinions matter to investors?
It’s a fundamental rule of investing that you cannot accurately and consistently time the investment markets. It is therefore better to be in the market for the long-term, rather than risk missing gains and being exposed to falls by dipping in and out at various times.
Views on whether different equities might represent fair value or not could be used to create a short-term tactical adjustment to a strategic asset allocation model for long-term.
They are just as well added to the wider body of material which seeks to inform investment decisions.
Focus instead on defining your goals as an investor, creating the right asset allocation model to meet those goals and populating that model with suitable funds or stocks.
