Now Is A Good Time To Start Saving For Investments
Now is the best time to start saving as much as you can for investing in the coming months.
The economy is a strange beast, but one that is fairly predictable over the mid-to-long term. There is a well-known cycle to most economies that you can use to your advantage. It is known as the Economic Clock.
The cycle runs something like this:
Rising Interest Rates - Falling Share Price - Falling Commodity Prices - Falling Inflation - Static Property Values - Falling Interest Rates - Rising Share Prices - Rising Commodity Prices - Rising Inflation - Rising Property Values - (Back to Rising Interest Rate) - and so on…
At the moment, as you are probably aware, Australia has experienced rising interest rates for the last couple of years now and their has been falling share prices over the last few months. The next stage Australia should experience is, according to the cycle above, a fall in commodity prices and then a fall in inflation.
Given that our inflation is still quite high and their is fear of it rising even further, I would estimate that Australia is somewhere between falling share prices and falling commodity prices. Given that the cycle spans approximately 5-7 years, means that over the coming months and years we should see a drop in commodity prices, falling inflation, static property values and then (finally!) falling interest rates.
This is the time where you should be saving as much as you can. Why? Because the next stage after falling interest rates is rising stock prices. And you want to have as much money as you can to invest in the stock market before this rise in share prices takes effect.
As to exactly when all this will take place is still anyone’s guess but the cycle is quite reliable on a macro level. Of course micro-economic factors play their part and the cycle doesn’t always run smoothly, but it is a fairly good predictor of what is to come.
I plan on using this time before the next share market boom to save as much as I can to invest so I can take maximum advantage of this economic cycle. Also, it would be a good time to educate yourself a little more on how the share market works and the best way to invest your money.
Have you had any thoughts on investing lately?
Image credit: PPDIGITAL
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