Wealthy investors turn to the sharemarket

The rich always like to go against the tide.

When the economy is flying, they typically take the view that prices have become too high and good buying opportunities are few and far between. When a downturn hits, cashed up investors and entrepreneurs like to wait for the bottom of the market and then go looking for bargains.

While I’m not brave enough to declare that we’ve reached the bottom of the downturn just yet – I think unemployment still has a long way to climb, for one thing – I think we can take heart from the fact that wealthy investors are starting to quietly come back into investment markets, looking for bargains.

Today in our regular Rich Secrets feature I look at how some of our super-rich entrepreneurs are targeting the commercial property sector, swooping on office buildings around the country at discounted prices.

This morning a survey from Datamonitor shows high net worth individuals (HNWIs) are set to pour money into the sharemarket.

A survey of wealth managers who look after these well-off clients found that 90% of these managers expect clients to be demanding direct equity investments in the next two years. The mangers say clients will eventually have parked 25% of their fortunes in shares by 2011.

“If the stock market continues to rally this year we should see a wave of new investment from HNWIs. While many will have learnt lessons from the equity crash, ultimately this will not discourage them” David Lalich, wealth analyst at Datamonitor says.

“These are typically opportunistic individuals that want exposure to the best opportunities for growth in the market.”

There’s a simple reason for targeting this sector, of course – share prices have been knocked about so much in the last 12 months that many companies now look very cheap.

But before you blindly follow the rich into the market, take a second to read today’s feature from Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors. He looks at the 12 myths and mistakes of investing and points out some pitfalls to avoid.