We have concentrated thus far on dealing with investing in value shares for the long term portfolio. However, the last few years have highlighted how patient you have to be to do this. We have been in cash for the most part of this time as finding any company to invest in on a value basis has proved almost impossible. Now that the inevitable has occurred with the current market collapse we have been able to load our portfolio with high quality companies that we were being offered at prices representing great value. We looked at the floatation of Aston Martin and compared the (much higher) valuation being placed on the company with that of Ferrari, and wondered if that could possibly represent good value. You only need to look at the Aston Martin share price since then to get your answer.
There is another way of investing which has nothing to do with valuation and that is known (among other terms) as “Momentum Investing”. This is where you ignore valuations (in some of the available markets (currencies?) it is almost impossible to put a value on it anyway) and simply look at the price. If the price is going up you buy it, and if the price is going down you sell it. Sounds simple but like anything else it is a skill that needs to be learned. However, as with value investing this method has brought huge fortunes to those who have learned how to do it. Over the next few months we will take an in depth look at what is required in order that investing your funds in this manner may be profitable for you.