We’re all painfully aware that FTSE 100 shares are suffering. The index has fallen by only a modest couple of percent over the past 12 months. But today, it’s still no higher than it was in early 2015.
Looking back at the past decade’s ups and downs, investors face a dilemma. Do we buy now, or do we wait for things to get even worse?
Warren Buffett
Ace investor Warren Buffett once said: “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.”
Should we be hoovering up as many shares as we can afford right now? And avoid trying to be too tentative in picking up a few carefully selected ones here and there?
Washtubs overflowing?
That’s the dilemma again. I reckon there are some cracking shares out there on very attractive prices. I think Lloyds Banking Group, for example, looks like a no-brainer buy at close to 40p. But I thought the same back in 2015, at 80p.
Those of us who saw dark clouds and raining gold back in 2015 might have rushed to the stock market with the biggest washtubs we had. But those washtubs are still no fuller today.
John Templeton
One of the world’s most successful fund managers, Sir John Templeton, said: “The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”
He invested a bundle in 1939 on the eve of World War II. And after an average holding period of four years, his portfolio had soared by 400%. Things might not be quite as dark as that right now, but we do have war in Europe once again.
So are we at a time of maximum pessimism now? I thought we were at one in 2015.
Dividends
Watching share price charts misses one important factor, dividends. For the past 17 years, since 2015, FTSE 100 shares have been returning around 3-4% per year in dividends. When we add that to the lack of share price price progress, we see a different picture.
Even the Lloyds shares I bought at around twice today’s price have been paying me regular dividends. And my investment in Lloyds is at close to breakeven, overall. That’s not what I aim for. But it’s better than the apparent wipeout I see if I look at the headline share price alone.
Best time?
If we wait for the very best time to do something, we’ll often never do it at all. Waiting for darker clouds and heavier golden rain? It might be sunny tomorrow. If it’s dark enough, and I see enough falling gold, that’s all I want.
Will pessimism get worse? Investors might wake up feeling optimistic next week. As long as I see significantly more pessimism than usual, that’s enough for me.
So on that score, yes, I do think now is the best time to invest in FTSE 100 shares ever. Even if there might be still better times in the future. I just wish I had a bigger washtub.