Safe harbours? #investments
Last weeks election is all over now and we have to consider the political consequences. We also have to watch out for bubbles in the market. Interest rates are still ridiculously low and so many investors are happy to get a low return even from the stock market. Some safe shares are priced too high as a result.
The same is true of bonds, prices soared as interest rates dropped. Now what will happen as interest rates rise and inflation picks up? Inflation helps the government, they can inflate away their debts. Higher interest rates and inflation will actually help the economy and get the government out of debt. At the moment the economy is actually starved of cash, making it more competitive, as we have seen with the major supermarkets.
The main shares to watch are those considered ‘safe harbours’, the poor returns will have investors selling when interest rates start to creep up. Private investors will assess risks and stick with the stock market, but hedge funds and pension funds will look for better returns on their capital.
Those ‘safe harbours’ won’t be considered so safe after all. Already many are looking to switch their investments from the ‘safe’ FTSE 100 to the less ‘safe’ FTSE 250, where returns are higher.
I had a cheap dealing day this week and so decided to buy, until it came to the day and that final decision. Then doubts came into my mind and I decided to stick with what I had. I couldn’t find anything to buy that would make my portfolio more diverse.
I’m pleased to see RSA insurance doing a little better this week. I hope to get into the black that one soon. That would leave me with just one that is making a loss, Graphene Nanochem which I think will soar once a lot of their research and testing comes to fruition.
House builders are doing well, with demand for new homes outstripping supply. Taylor Wimpey looks like becoming a multi-bagger for me and they pay quite good dividends too. I’m still very hopeful that Solo Oil will soar after they become a producer, rather than an explorer. They have several discoveries about to become productive.
I bought Tesco at the height of their troubles and they are giving me a good return and still edge up slowly. Premier Foods and Balfour Beatty are edging up nicely too.
The problem with the AIM market is that some companies are high risk, but will soar if they strike oil or get a good contract. The spread between the bid and ask price can be as much as 10% or more, so you make an immediate loss on many of them. The spread does indicate the risk to a certain extent. The market makers give some shares a high spread to increase their profits, taking into account the increased risk. High spreads can also temper demand when there is a rush to buy.
What will I buy next? I have no idea really. I think the oil price will go up again soon, so maybe a FTSE 250 oil company like Premier Oil could be a good investment. Even BP would be a safe bet now. They have had their troubles and were hit by the lower oil price, so could be fairly safe in the long term.
That’s it for this week, you can subscribe to this blog using the widget in the sidebar or you can follow me on Twitter for updates. You can also share your ideas in the comments box.