Now is the time to buy shares

Early 2008 is a great time to be buying shares.

Sure, the market is all over the shop. But the fundamental indicators are sound and the weight of opinion is the market will continue to rise throughout 2008, even if there are some bumpy patches. Unemployment is nearly at an all time low, investor confidence is at an all time high. Rents are rising, suggesting property values will soon surge and the commercial property market is tight and getting tighter. Every month billions of dollars are paid as mandatory superannuation contributions, and they have to be invested somewhere, and the franking credit rules almost mandate it will be the Australian share market.

Australia is on India and China's doorsteps and is perfectly placed for trade and exchange: our resources sector is sitting pretty.

And have you ever met an unemployed doctor or dentist? Provided you pay your income continuance insurance premiums on time there is little chance your cash flow stream is going to dry up.

Economic history and economic theory predict the return on Australian shares will, probably, over time, be signficantly greater than the cost of funds: the 30 year average is now about 15% pa including capital gains. So on raw scores, before we consider tax, borrowing to buy shares makes sense. And when you factor in the favorable rules for capital gains, family trusts and super funds, borrowing to buy shares, or borrowing to pay deductible superannuation contributions, which are then invested in shares, makes a huge amount of sense.

Early 2008 is a great time to be buying shares.

Make an appointment to see Adrian McMaster at either our Brighton office or our Sydney office. Adrian can be contacted on 03 9592 9888 and adrian@mcmasters.com.au.

Apart from leading our financial planning practice, and being the author of the Doctors' Guide to Investing and the Doctors' Guide to Financial Planning, Adrian is a practising psychologist and runs Dover Financial Training, which trains accountants and others to be financial planners. Have a look at www.dover.com.au for more of Adrian's work. Adrian also writes a regular column for Alan Kohler's Eureka Report, which combines psychology and investment theory with quirky comments on what people do and why.