The world economy has entered a new era. The big system has now adapted to the new realities of the post-credit crunch financial system and while scandals and panics will continue to punctuate the future, the system is no longer looking into an acute abyss.
Sadly we won’t be in the vanguard of the resultant boom, as the UK is hogtied by regressive governance, but coat-tailing a world boom is much better than taking the brunt of a financial crunch.
Catching this tide will be very lucrative. A bull market makes everyone a genius so it’s going to be easier to make money. The key will be to get to the party early and that means being aggressive now.
This benign change is already present in the stock market and this is set to break new records for years to come. Again, there will be plenty of bumps and corrections but three or four years from now current levels will look low, perhaps very low.
There are many reasons for this, but the main one is that asset prices will react to the monetisation of debt that is underway. As government debts are diluted away, anything with a hard value will rebase. Woe betide anyone holding cash or passive savings.
Those riding the trend – which will amount to an asset bubble – will do extremely well as the macroeconomic move required for rebalancing the public sector debt mountain will shift resources into hard assets like equities as a haven.
How can you take advantage of this if you’re a stock market novice? The simplest thing to do is what your grandparents would have advised, buy blue chip stocks.
You could do a lot worse than buy and forget random members of the FTSE 100, but of course investors want to be more active than that, so which blue chips should a beginner buy?
What you should do is get a list of the biggest companies on the FTSE and start at the top. Look at the dividend, think about the brand and decide if you like the company and the yearly pay-out.
Vodafone is the second biggest and has a 5 per cent dividend. How can you say no to that? Shell is fourth and pays out 4.8 per cent, while British Tobacco has a 3.9 per cent dividend. By the time we get to Astrazenica and its 5.7 per cent dividend we are only on No 15 and we already have four great brands paying out a large yearly income stream.
This is the best way to get going, a low risk way to jump into the market and get acclimatised.
There is plenty of time to learn the more esoteric aspects of the market if you want to stray off into the badlands of high risk. However, if you simply want to ride the coming bull market, all you need to buy is big, boring stocks with large dividends and sit on them.
In 1898 the first book to feature a stock chart was published – The Game in Wall Street. Its investment hint No 4 was: “Greed and impatience are the causes of most of the losses in Wall Street.”
It was true then and it’s true now. As such, to get on all you need is to do to the opposite.
• Clem Chambers is chief executive of stocks and shares website ADVFN. www.advfn.com