Is there a ‘best’ time in the market cycle to start buying shares?

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With lots of chatter about stock market turbulence and the FTSE 100 repeatedly hitting new all-time highs this year, now could seem like an intimidating time to start buying shares.

It may seem more tempting to wait until the market bottoms out, then swoop in and scoop up great shares at bargain prices.

In principle, that sounds like a great idea to me.

In practice though, I see a couple of possible problems – and pretty big ones at that.

Market timing is impossible

One is that nobody – absolutely nobody – will know for sure when the market has bottomed out.

Lots of people will have an opinion. With hindsight, some of them may turn out to have been well-founded.

But it simply is not possible to call a market bottom accurately with absolute confidence.

Sometimes, a stock market looks like it cannot fall any further – and then it does exactly that!

Sitting on the sidelines can have an opportunity cost

Waiting for what seem like the perfect time to start buying shares also risks missing out on some great, lucrative periods of rising prices.

Someone could decide to wait until the market gets back to a certain point before starting to buy shares, only to then sit on their hands for years or even decades.

An approach for all seasons

That explains why, in my view, there is no such thing as a good or bad time to start buying shares. Although there may be a ‘best’ time, it is not knowable at the time.

Rather, whether a given time is good or bad depends on exactly which shares someone will buy.

For example, over the long term, Bunzl (LSE: BNZL) has performed strongly. Its recent performance has been less exciting, though. Over five years, the FTSE 100 firm’s share price has fallen 14%.

The dividend yield of 3.4% offers some compensation and is slightly higher than the FTSE 100 average. But given that the index has moved up 64% over the past five years, Bunzl’s share price performance looks woeful.

It now sells for 15 times earnings. That does not look expensive to me for a company with Bunzl’s proven business model and economies of scale.

Then again, the price has not fallen without reason. Inflation has eaten into profit margins and threatens to do so in future. Tariffs pose a similar risk.

However, demand for catering peripherals like bags and cutlery is likely to stay strong, no matter what happens in the wider economy. That ought to mean that Bunzl can keep its sales volumes at a strong level.

It has a playbook of growth through acquiring smaller companies in a fragmented industry, helping it build economies of scale. I think that could potentially help it keep doing well.

I plan to hang onto my Bunzl shares, in the hope of long-term price appreciation.

At the current price, I think it is a share investors should consider.

The post Is there a ‘best’ time in the market cycle to start buying shares? appeared first on The Motley Fool UK.

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C Ruane has positions in Bunzl Plc. The Motley Fool UK has recommended Bunzl Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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