Martin Hawes: No time to sell the kids

When it comes to investment, I like a bargain. I am never happier than when I have lined up a group of investments that are cheap; things that are so good I could sell the kids, mortgage the dog or pawn granny's brooch to raise the cash to invest.

I am not happy at the moment: I cast my eye around the investment markets and there is nothing that stands out to me as a great deal. It is worth looking at the usual asset classes to review what is available:

* Shares strike me as fully valued. There may be some reasonable buying on the New Zealand market but most international markets seem fairly topish at the moment.

* Residential property is certainly no bargain; yields are very low and there is little value.

* Commercial property also seems to have some downside risk. It is better valued than housing but there do not seem to be any great bargains.

* Emerging markets shares look quite over-valued. While this asset class is likely to give the best returns over long periods of time, in the short run values are too high for me.

* Bonds offer adequate yields but there are risks: we could see much higher inflation in the next few years and that will mean higher interest rates. This is very negative for bond investors and you should be very cautious.

This is not a great picture for those who demand value for their investment dollars. Markets are not looking like the Boxing Day sales at present - it seems much more like buying on Christmas Eve.

The trick at times such as these is to be patient. One of the worst causes of investment loss is to buy mis-priced investments at the wrong time. Investors are supposed to buy low and sell high (or buy in gloom to sell in boom) but most people do precisely the opposite.

Their investment money burns a hole in their pockets and they become impatient, especially when all the talk is about good profits.

The place to be at present is bank deposits, even though that may not seem a great use of your money. You will just have to suffer the low returns for a while, taking comfort that your time will come.

There will be better buying, even some great bargains. I suspect that there will be a solid fall on the sharemarkets sometime this year and that will be a good entry point.

Interest rates will rise and perhaps that will give better bond yields. That same interest rate rise will lead to better property values.

In the meantime, keep your powder dry and don't put the kids up for sale just yet.


* Martin Hawes is a financial adviser. His disclosure statement can be found at www.martinhawes.com