The United States financial markets have enjoyed an extremely buoyant run in the past year, which has inevitably led to concerns that the bears could be lurking close by.
But that does not mean the opportunities are over, according to Mr Tom Gardner, co-founder and chief executive of investment newsletter Motley Fool.
In fact, he believes that "whenever things seem to be falling apart, that's always a good time to buy".
"Conversely, it's not as attractive a time to buy when everything is stable. The general feeling now is that the US market is stable. That would cause me on average to be more nervous," he told The Sunday Times in a phone interview last week.
Mr Gardner noted that every market, including Singapore, tends to see a 10 per cent decline at some point each year, going by historical data. "During the financial crisis in 2008, 2009, the market fell 50 per cent, but the combination from the rebound from that huge decline and all the quantitative easing... has really stabilised the market ever since and we haven't had that many declines," he said.
"But I would not be surprised to see the US market fall because it has done so well. It would be unusual to me if a huge decline doesn't happen in the next 12 months."
The Dow Jones Industrial Average, for instance, has shot up 10.3 per cent this year, and a dazzling 21.1 per cent in the past 12 months.
Another tell-tale sign would be in the amount of money sitting on the sidelines waiting to be invested - now at its lowest level since the last financial crisis, noted Mr Gardner.
"Unfortunately, a lot of investors get nervous over this, but it's a natural process. Every investor should be trained to know that it happens and they shouldn't be nervous."
Mr Gardner goes on to point out that small firms tend to do better than large companies over long periods, by as much as four percentage points a year. "That's a very important point to note right now, because larger companies have outperformed small companies in the last five years or so - but the world has changed dramatically and that (trend) should reverse," he said.
"US market investors should train themselves to look for smaller companies because they have not done as well in the last five or 10 years and they have more room to grow."
Mr Gardner said that building an investment portfolio around big, established names like Google, Amazon, or Facebook is likely to yield average returns of around 5 to 7 per cent a year, or 4 to 6 per cent after taking inflation into account.
This yield could be higher if smaller companies with credible growth prospects were included in the picture. He cited two companies that illustrate the sort of businesses he favours today: iRobot Corp, known for its Roomba robotic vacuum cleaners, and Canada-based e-commerce platform Shopify.
"A good rule of thumb is to ask ourselves what we think is going to be more relevant five to 10 years from now. We should all be looking and training ourselves to see if there are other software applications and tools that are being developed that can simplify our daily lives," he said.
"It could be very tempting to invest in what has already been shown to work, what we're familiar with, but we have to imagine where the world is going."
That said, a fundamental piece of advice for those looking to pick up bargains in the market? "If you can't invest for at least three years, you shouldn't invest there at all," said Mr Gardner.
He noted that the stock market tends to ultimately rise more than it falls. But when it falls, it does so at a faster rate than it rises. "The declines can be very sharp. If you have to sell, or if you're hoping for rewards after three months, that's like picking up coins in front of a steamroller."
• Tom Gardner is the co-founder of The Motley Fool, an investment newsletter catering to individual investors in countries including the United States, Britain and Singapore. He will be one of the speakers at ShareInvestor's annual event, the Invest Fair, held at Suntec Singapore Hall 401 and 402 on Aug 5 and 6. Invest Fair is the largest investment exhibition in Singapore.
