When is the best time to start investing? Some people wait their whole lives wondering — without ever making a move.
The reality is that, without the benefit of hindsight, it can be hard to know for sure when is a good moment to start. But by taking a long-term approach, I do not worry about whether I buy a share at its cheapest point. Instead, I try to find attractively-priced investments where I hope that the quality of the business in question will mean its value increases substantially over the long run.
If I did not already own shares and was considering when to start investing, I think 2023 could turn out to be a promising starting point.
Today’s price for tomorrow’s world
The economy is not in good shape and things could get worse next year. It may be some years before we start to see a healthy economy firing on all cylinders once more.
But — perhaps surprisingly — I think this can make it a great time to start investing. Right now, some shares have seen their prices marked down as investors fret about short-term challenges to their business performance. In some cases at least, I think the long-term investment case remains largely unchanged.
As an example, consider Apple. Over the past year, its shares have fallen 17%.
In the next few years, I do see risks for Apple. Supply chain problems could hurt sales, as might reduced disposable income in many markets. Meanwhile, inflation may eat into profitability. But in the long term, has much changed? I think Apple’s competitive advantages – from its walled ecosystem of products and services to its iconic brand – remain as attractive as ever.
An economic downturn can push down the price of shares in companies that, over the long run, still have attractive prospects.
Going for growth
Another reason I think 2023 could be a good year to start investing is that there has been a significant cooling towards buying growth shares. I think that could continue into next year.
In some cases, I think this is just reality catching up with what were unrealistic valuations. Even though a share has fallen a long way does not mean it cannot fall still further. For example, while Ocado has tumbled 60% in the past year, I still would not add it to my portfolio. I do not think the company’s business model is very attractive, despite its cutting-edge technology.
In other cases though, I think some investors may now be underestimating the long-term potential of certain growth shares. This could mean their valuations are attractive.
I see sizeable challenges for S4 Capital, for example. But I have been buying its shares this year because I think the company’s growth prospects are far rosier than suggested by the 68% fall in its share price over the past 12 months.
I’d start in 2023
By buying into great businesses at attractive prices, I think any time can be a good one to start investing.
I reckon 2023 might yet turn out to offer some excellent opportunities as nervous investors mark down the price of quality shares more than they deserve. From a long-term perspective, this could prove to be lucrative for me as an investor.
