“The biggest bull market of our careers”

RELATED QUOTES

SymbolPriceChange
ANZ.AX34.63+0.040
CBA.AX78.59-0.420
WES.AX44.01+0.020
WOW.AX37.64-0.290

Another day, another record high for the Dow, its fifth straight record close.

If it wasn’t SO BLOODY GOOD MAKING SO MUCH MONEY, it might get a little boring.

I’m guessing you might be able to live with such monotony, especially if you own shares like Commonwealth Bank (CBA.AX), Woolworths (CBA.AX), ANZ (ANZ.AX) and Wesfarmers (WES.AX), all of which hit another 52-week high yesterday.

Since November last year, as judged by the rise and rise of the S&P/ASX 200 index (^AXJO) (XJO.AX), investors have rarely had it so good…

Source: Google Finance

The old saying goes that markets climb a wall of worry.

Well…that’s some wall.

Regular readers will know we Fools are not ones for hyperbole or for whipping investors into a “you better buy shares NOW or forever confine yourself to the poor farm” frenzy.

Buy good companies at good prices whatever the market is our Foolish Investing mantra. And as you’ll read a little further on, we’re seeing unusually good value amongst the beaten-down, forgotten and ignored medium to small-cap sector.

“The biggest bull market of our careers”

Like Warren Buffett, we too think the risks of being OUT of the stock market are far greater than being IN, over the long-term.

The odds are SO stacked in your favour that it’s ridiculous to think of being invested anywhere else, especially term deposits, and their rapidly shrinking interest rates.

Don’t get me wrong — if you’re out of the market and/or have term deposits maturing, we’re not suggesting go ‘all-in’ the market now, despite what Richard Bernstein recently told The New York Times

“What’s amazing about this bull market is that people still don’t think it’s real. We think this could be the biggest bull market of our careers.”

Wow. I wonder what he really thinks?

Admittedly he was talking about US markets, but Australia generally follows the US lead, so if he’s anything close to being right, look out above.

Slow and steady for billionaire Warren Buffett

Slow and steady wins the investing race. Warren Buffett has been at the helm of Berkshire Hathaway for 48 years. He’s now worth over $53 billion. It’s time in the market that counts, not timing the market.

Invest regularly. Invest often. Invest when the market is up. Invest more when the market is down.

Just don’t plonk down all your cash today in the expensive ASX high-yielding blue chip stocks that have been powering this market higher and higher.

You know the companies I’m talking about…the big four banks and the big two supermarkets, and that’s just for starters.

No Fool.

Don’t be fooled into believing what has happened in the recent past will be extrapolated far into the future.

investors tend to be very good at using the past to select their investments, but this is exactly what led tech investors into trouble in the year 2000, and what caused other investors to sell in the lows of 2008 and 2009, and miss the upswing that followed.

The Big Blue Chip Bubble

History is repeating itself today, right before your very eyes.

Just take one look at the rush of investors into bank stocks even at high multiples of earnings, compounded (negatively) by low levels of growth.

Investors buying bank shares at current prices may well be consigning themselves to subpar returns long into the future.

We’re thrilled that investors are returning to the share market — it’s good for our business, and over the long-term, it should be good for your wealth.

Over the past six months we have seen the big end of the market rally very strongly, while the ASX Small Ordinaries has hardly seen any recovery at all.

Of course, it’s entirely possible that these big blue chip companies will lead the charge in the next five or 10 years…

But I very much doubt it.

What we have seen then is largely a sentiment-driven growth in share prices, most likely explained by the desire of many investors for “safety”.

Safety last

While these blue chip darlings might seem safe, I have a growing fear that buying these investments at today’s prices is much more likely to consign investors to subpar results for years to come.

There is good reason why we don’t have some of those so-called “stalwart” stocks on our Motley Fool Share Advisor scorecard – the same reason we are finding opportunities largely in the medium and small-cap space.

Put simply, that’s where the most attractive investments are to be found at the moment – as is very often the case.

For example, one small company Motley Fool Share Advisor Investment Analyst Scott Phillips has his eye on is Infomedia (IFM.AX).

Small-cap investors can access the full report (for free) by clicking here, but on the strength of their most recent interim results, and Infomedia’s improving prospects, management increased the interim dividend 23% and raised full year profit guidance to $8.5 to $9.5 million.

On things is for sure — you don’t find such massive dividend increases amongst the blue chip darlings…

The Motley Fool Share Advisor scorecard is showing some impressive gains, even if we do say so ourselves…and with hardly a blue-chip darling in sight.

In that respect our recommended stocks could be very well positioned for any rally outside of those chosen-few stocks.

But even those gains may pale into insignificance compared to what might be on offer in the small-cap space.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More Reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Motley Fool General Manager Bruce Jackson has an interest in Woolworths, ANZ, Wesfarmers and Commonwealth Bank.

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    0.9295+0.0008+0.08%
    AUDUSD=X
    0.5537+0.0002+0.04%
    AUDGBP=X
    0.6723+0.0002+0.03%
    AUDEUR=X
  • Commodities
    Commodities
    NamePriceChange% Chg