Hold your horses if you're thinking about the Medibank Private float.
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There's no rush because it doesn't officially close until November 14 and governments never pull the plug early on privatisations. It looks somehow unseemly.
By waiting you'll also have a better idea of how much the shares are going to cost. And better still, where the market is going.
The government has set an "indicative price range" of $1.55 to $2 although it's admitted it won't go any higher, at least for mum and dad investors.
Trouble is it isn't offering a carrot to them either unless the final price does go over $2.
Otherwise there's no discount, unlike previous privatisations. And the only benefit for policyholders is they can buy more shares if they want to. Gee, thanks.
Using the suggested price range the dividend will yield 3.5 to 4.5 per cent, or 5 to 6.4 per cent after the 30 per cent franking credit.
Remember the true price won't be revealed until a week after you've posted your cheque.
With what we have, though, Medibank is priced about 17 times its earnings. This compares with, say, a bank stock of about 13 times, with a bigger dividend to boot, so it's not cheap.
You've probably noticed the market is going through a, shall we say, sensitive phase which has made a lot of other stocks more attractive.
The way things are going the only listed rival to Medibank Private, NIB Holdings (ASX code NHF - wonder why it isn't NIB?) might offer the better value as its price falls as sellers raise funds for the float.
And don't be fooled by any claims that the bottom end of the projected price range might be a bit steep. If fund managers can bluff the government into a better deal, as well as put everybody else off, why wouldn't they?
Mind you, the Medibank side is spruiking the huge number of requests for a prospectus. That might be so but in the end is meaningless.
No, you need to judge it on its merits and whether you can cope with an increasingly volatile, and erratic, market which I'll come to.
The biggest things Medibank Private has going for it are its brand and market dominance.
Oh, and the fact it's not carrying any debt though that might change if it goes on the acquisition trail, something newly floated outfits freed of their government chains are always itching to do. The record is mixed.
Telstra botched its acquisitions while CBA proved to be street smart.
But perhaps the most unlikely selling point for Medibank is its inefficiency. It makes a decent quid all right but profitability is relative to what you pay for a stock. Others, notably its listed rival, do better.
It's estimated that Medibank makes only 3.6¢ on every dollar it gets in premiums, compared with NIB's 5 cents. And I don't think the missing 1.4¢ goes into better benefits either.
So with some slash and burn Medibank can lower its costs.
Whether health insurance is an attractive industry for investors is the question. The experience of NIB in consistently rewarding its shareholders suggests it is.
While there are tax incentives for consumers, premiums are regulated.
Less ambiguous is an ageing population requiring more medical care and ever lengthening public hospital waiting lists.
But I wouldn't get too excited because increasing demand for private hospital beds is one thing and keeping their cost down is quite another.
Besides, Medibank has lots of competitors who don't have pesky shareholders to report to.
One thing I'd say is don't let all the recent shenanigans put you off the sharemarket. It's still the best game in town because it's cheaper than property.
Home prices are at a record; the sharemarket is nowhere near its 2007 peak.
And term deposits will get you nowhere.
Sure the market will test your nerves but if you're patient and don't put everything in one stock your money will grow.
It's also safer to buy smaller amounts regularly than rushing full bore into a stock.
Known as dollar cost averaging, have a fixed outlay so you're automatically buying fewer shares when the price rises, and more when it falls. That way you're never really buying at the wrong time.
So long as you haven't picked a dud – remember what I said about having more than one stock – you'll finish up ahead. Trust me.
And since you've asked, the one thing that tells me this is no major correction is that bond yields are falling.
The biggest threat to Wall Street, and so our market in this global village, is rates rising from virtually nothing. In fact the yields on US government bonds had been rising in anticipation.
That's reversed, suggesting there's life in the old bull yet.
