When to Invest in Gold, Stocks and Shares and Property

Published / Last Updated on 24/02/2024

Investment timing is impossible.  No one can time the market as there are so many unforeseen and market shock events that affect any asset that you may wish to invest in.

We all know and understand the basic rule of ‘buy low, sell high’ but in reality, the only thing you can do in terms of market timing is make ‘educated guesses’.  By educated guesswork, we mean that you use the normal rules of economics and the economic cycle to build reasoned arguments as to why it may be a good time to invest or alter the weighting of your portfolio (big or small) to reflect what a normal economic cycle can reasonably be forecast to do.

When to invest in Gold

By gold, we do not mean precious metals mining shares, we mean physical gold.  As you may already know, gold and precious metals used to be the backbone of a country’s currency.

See   What is Money?

Gold was a safe haven for central banks to support their currency, so you should always look at gold and precious metals as a safe haven investment.  It is a tangible asset (i.e., it is a physical item, that you can handle and trade with).  Demand for Gold increases when there is economic and/or geopolitical uncertainty.  Even RAF pilots and SAS forces (behind enemy lines) carry gold sovereigns for survival and bargaining in times of war.

You should do the same in times of geopolitical uncertainty.

Between 2014 and 2019, gold prices flatlined between $1,100 and $1,400 per ounce and then with covid-19 lockdowns in 2020 and the global economy shutting down, gold rocketed to $2,117, it then fell back to around $1,600 in 2021 as we opened up and vaccinations started.  Russia invade Ukraine in early 2022 and gold climbed again to 2,095, then to fall back to 1,742 later in 2022.  In December 2023, gold set another year high of $2,135.39 per ounce as fears for conflict between NATO and Russia escalated.

Buy gold when you see just the slightest hint of economic or geopolitical tension.

When to invest in Stock Markets

Buy low, sell high, we all know the rule, but it is impossible to call the market.  For stock markets, we go back to the educated guess work principle.

When investing in shares, you are investing in businesses,  You own a share of the company and therefore benefit from capital growth of the business as well as dividend income when profits are distributed.  It therefore stands to reason that you should invest in companies where their sector is set to grow or in countries where their economies are growing faster than others.

The world’s most famous investor, Warren Buffet, buys for value and generally holds.  Buy low and hold.

We suggest when:

  • An economy is in recession, that is the time to buy.  Warrant Buffet:  “Be greedy when others are fearful”.
  • When circumstances dictate, look at sectors that may benefit from certain traits of the economy – e.g., the energy crisis meant oil and gas firms made huge profits.  When interest and mortgage rates went up, banks and lending companies make more money.
  • When the economy is slowing down, look for potential government stimulus as this is designed to kickstart the economy.
  • When interest rates fall, the costs of servicing business debt falls and profits will rise.
  • When you see headlines like ‘market correction’ and ‘market crash’, that is the time to buy in.
  • Equally, the reverse of all the above statements is true too.  When you see ‘market high’ and ‘record high’, is that the time to look to other markets?  When you see the economy ‘over heating’ expect interest rate increases to cool it down, meaning company profits will fall and your stock market value will fall.

Timing is impossible, so look for trends and do not think of technicalities.  Think about human nature and how people spend money (or not).  If you are nervous for your money and your security then so are many others, confidence will push markets up or down as company profits rise or fall.

You should also research consensus views of the future of markets. 

  • There will always be commentors that have negative sentiment and others that have positive sentiment.
  • There will always be economies that are in the ascendency and those slowing down.
  • There will always be sectors that benefit or suffer at different times from inflation increases/decreases or interest rate increases/decreases.

If all else fails with stock markets, keep it simple:  buy low, hold, and sell when you have had some growth (we usually use 10% as a benchmark for this).  If markets fall 10% we buy and if markets increase 10% or more, we sell and switch to other sectors or funds.  KISS principle:  Keep It Simple Stupid.

When to invest in Property

Mark Twain said: “Buy land they aren’t making it anymore” and the truth then is still the truth today.

  • The UK is an island nation with a dense population.  The population is set to expand by another 4-5 million people in the next 10 years.
  • There is a housing shortage.  The government is not building anywhere near the number of homes it needs to.
  • The government often offers stimulus for property not just to help first time buyers onto the property ladder but also for revenue:
    • Higher prices mean higher stamp duty revenues.
    • Higher prices mean higher capital gains tax revenues.
    • Higher prices mean higher inheritance tax revenues.
    • Higher prices mean higher equity shares when government equity deposit loans are paid back.
  • Property prices are linked to wages which in turn are linked to inflation.
    • When inflation rises, interest rates rise pushing property prices temporarily back but then wages rise pushing property prices even further.
    • When inflation falls, interest rates fall and both property and mortgages become more affordable.

The UK property market is also attractive to international investors and when the £ is weak, it makes it an even more affordable as well a solid long-term investment for rents and growth.

Our view on property is to not even think about timing when you buy property.  If you find a property that you like and can afford it and it delivers what you need in terms of a home, rental income or capital growth potential then do not wait.

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