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This year has seen stock markets on both sides of the pond do well. There have certainly been some bumps along the way, but the overall picture has been one of ongoing optimism among many investors. Given that, could now be the right time for someone who has not invested in the stock market before to start buying shares?
I think it could be – for a number of reasons.
Sitting out of the market can mean waiting a long time
It can be easy to think that, rather than investing at any give time, it makes sense to wait for share prices to fall before buying.
But how long ought one to wait? Markets can sometimes move broadly higher for many years at a time, or even decades. Nobody knows for sure when shares will get significantly cheaper.
That may not be a costless wait, even if shares do end up getting cheaper. For example, if I want to buy a dividend share today but end up waiting a decade to buy it when its share price is lower, I may well end up missing out on 10 years’ worth of dividends while I wait.
Buying shares, not buying the market
On top of that, there is a common misconception about an ‘expensive’ market or a ‘cheap’ market.
Normally when people use those terms, they are talking about the market overall.
For someone who wants to invest in an index tracker, that may be relevant. But if buying individual shares, how the market is doing overall may have little if any relevance.
So I think now could be as good a time as any for someone to start buying shares – depending what shares they buy.
After all, some shares can be expensive even when the market overall looks cheap. Other shares can be cheap even when the market is riding high.
I’ve been buying
For example, one share I have bought repeatedly in recent months (including again this week) is Journeo (LSE: JNEO).
The transport services company supplies such things as bus time display boards. Not exactly glamorous – but very useful.
Interim results this week showed a slight year-on-year revenue decline. The Journeo share price fell sharply.
But it still trades on a price-to-earnings ratio of 16. That may not look exactly cheap.
Digging into the interims further, though, and that market response presented a buying opportunity for my portfolio, to my mind. Journeo’s first-half revenues did not impress (although they were in line with its previous guidance), but the company looks set to grow strongly.
A recent acquisition could help that – and the company is sitting on more cash that could potentially be used to fund further expansion.
Integrating the recent acquisition could distract management, which I see as a risk.
But with a clear focus market, strong product and service offering, lots of reference clients, and sector-specific expertise, I think Journeo shares look cheap today, even though the price grew 777% in the past five years.
