The question is always: When is the best time to get involved when it comes to shares? Now that the Dutch AEX index continues to rise, Patrick Verwijmeren, Professor of Corporate Finance at Erasmus School of Economics, answers three questions about the stock prices.
How is it possible that the AEX index is rising while the economy is not doing so well?
Verwijmeren points out here that expectations do not always accurately reflect the real economy. The real economy is about actual production and trade, whereas the AEX index is about stock prices. These prices are related to the current economy, but also carry expectations of the future, which means there can be major differences.
Is this a good time to buy stocks?
With stocks, the long-term expectation is that they will rise. However, this can take a long time due to interim fluctuations. This makes it important to invest money that you would not need in the short term. In addition, it is smart to spread a little across different shares and buy at a lower price, Verwijmeren adds.
Does the high price entail additional risks?
At the beginning of this century there was talk of an financial internetbubble. The shares become worth more than their actual value much faster. If such a bubble bursts, it can have major financial consequences. A rapid increase in the price could therefore indicate such a bubble, in case of panic the price could quickly fall again.