Day: 26 September 2021

The Insurance Australia Group Ltd (ASX: IAG) share price has been under pressure this month. Shares in the Aussie insurer are down 10.8% in the past month to their current $4.80 valuation.

So, what’s driving the company’s share price right now and what lies ahead for shareholders in 2021?

Why the IAG share price is down 10% in September

One recent ASX announcement appears to have triggered the recent share price slide for the Aussie insurer.

On September 6, IAG reported CMC Hospitality had filed an application to start a representative proceeding against the company in the Federal Court of Australia.

While IAG was unsure of the exact details of the proceeding, it noted the application “appears to relate to insureds who hold policies with CGU and business interruption losses related to COVID-19“.

CGU refers to CGU Insurance Limited, an intermediary-based insurance company under the IAG umbrella.

News of the court proceedings hit the IAG share price hard. That downward momentum has continued throughout September and seen the insurer’s shares slump 10% lower.

At the heart of the proceedings is COVID-19-related business losses. As lockdowns continue to roll on across Australia, businesses have been looking to their insurance policies for downside protection.

IAG said it is one of several insurers that will be part of “an industry test case” in the Federal Court. That test case will help determine what insurers must cover in relation to business interruption claims.

For its part, IAG said it will follow the court’s final ruling and resolve claims as quickly as possible once this has been determined.

The IAG share price has continued to slide throughout September. The broad market sell-off in the S&P/ASX 200 Index (ASX: XJO) last week also didn’t help boost the insurer’s value any higher.

What’s next for IAG?

The Federal Court rulings loom as a key factor for the IAG share price in the short term. The court will ultimately play a part in what IAG’s downside exposure is for business interruption claims which, in the era of COVID-19, would likely be significant.

The post The IAG (ASX:IAG) share price is down 10% so far in September. What’s next? appeared first on The Motley Fool Australia.

More reading

• How has the IAG (ASX:IAG) share price been performing since reporting results?
• Why Adbri, AusNet, IAG, & Premier Investments shares are falling
• Here’s why ASX 200 insurers are underperforming the market this Wednesday
• IAG (ASX:IAG) share price slumps 2% amid earthquake payout concerns
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It certainly hasn’t been a good three months for the Rio Tinto Limited (ASX: RIO) share price.

During this time, the mining giant’s shares have lost 20% of their value.

This means Rio Tinto’s shares have now given back all their year to date gains and some more.

Why is the Rio Tinto share price sinking?

Investors have been selling down the Rio Tinto share price over the last three months due to significant weakness in the iron ore price.

For example, last week the spot benchmark iron ore price dropped below US$100 a tonne before rebounding to close the week at US$111.33 a tonne.

This compares very unfavourably to the price the steel making ingredient was commanding in May. At that point, the spot price was up as high as US$230 a tonne.

While nobody thought that iron ore’s bull run was sustainable and declines were expected, few were expecting such a swift and sharp pullback.

This has led to material revisions to earnings and dividend forecasts by analysts for the mining giant, which has ultimately weighed on broker valuations for the Rio Tinto share price.

Is this a buying opportunity?

According to a recent note out of Goldman Sachs, its analysts see a lot of value in Rio Tinto’s shares now.

The broker currently has a buy rating and $147.50 price target on its shares. Which, based on the current Rio Tinto share price, implies potential upside of 48% over the next 12 months.

In addition, Goldman is forecasting some huge dividends from the miner in the near term. It currently expects fully franked yields of ~16% in FY 2022, ~17% in FY 2022, and ~15% in FY 2023.

This is based on the broker’s average iron ore price forecasts (from 19 September) of US$189 a tonne in 2021, US$160 a tonne in 2022, and US$120 a tonne in 2023.

The post Here’s why the Rio Tinto (ASX:RIO) share price is down 20% in 3 months appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• Is this ASX 200 miner one of the best value shares to buy today
• Top broker sees Rio Tinto (ASX:RIO) share price sliding another 13%
• Iron ore price surges 17% as Evergrande fears ease further
• Bank of America flags more headwinds for ASX 200 iron ore shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The AMP Ltd (ASX: AMP) share price is in focus this morning as the financial services company’s latest legal battle hits headlines.

AMP and its Charter Financial Planning business are being sued by Centurion Wealth Advisors. Centurion is reportedly alleging AMP breached the terms of buyout contract.

The AMP share price closed Friday’s session trading at 98.5 cents after gaining 2% over the course of the day.

Let’s take a closer look at today’s news out of AMP.

AMP taken to Federal Court

The AMP share price is on watch this morning after news of its latest lawsuit broke.

According to the Australian Financial Review (ARF), Centurion believes AMP breached the terms of a buyout agreement signed in 2015.

Centurion’s claims were lodged to the Federal Court of Australia on 17 September 2021.

The AFR has reported Centurion’s founder and managing director, William Nelson, worked for AMP before taking a loan from the company to open Centurion. He then signed an agreement to sell the business to AMP when he retired.

Then, in 2019, AMP allegedly changed the terms of its buyback agreements, leaving some previously offered purchase values slashed by nearly 40%.

According to the AFR, Centurion is claiming AMP’s Charter Financial Planning noted the changes wouldn’t affect businesses that lodged their buyout notices by November 2019 and exited their businesses by May 2021.

And that’s just what Centurion asserts it did. But AMP allegedly changed the buyout contract’s terms in December 2019, adding extra restrictions on payouts. Centurion is also arguing AMP told it that Nelson had delayed the buyout agreement.

As a result, AMP allegedly reduced its payout for Centurion from around $955,471 to just $300,000.

AMP is yet to file a defence to the allegations that hit headlines this morning.

AMP share price snapshot

The AMP share price, and the company itself, has struggled through the last few years, and 2021 has been no different.

It has fallen 36% since the start of 2021. It is also 27% lower than it was this time last year.

The post AMP (ASX:AMP) share price on watch amid latest legal battle appeared first on The Motley Fool Australia.

More reading

• These 3 ASX 200 shares are topping trading volumes today
• AMP (ASX:AMP) share price climbs 6% in first upwards move in 2 weeks
• How has the AMP (ASX:AMP) share price been performing since reporting results?
• Here are the ASX 200’s most active shares this Tuesday
• Just when you thought the AMP (ASX:AMP) share price couldn’t sink any lower…

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Newcrest Mining Ltd (ASX: NCM) share price is one constituent of the S&P/ASX 200 Index (ASX: XJO) under pressure right now. Newcrest is one of Australia’s largest gold and copper miners with an $18.9 billion market capitalisation.

However, shares in the Aussie miner are down more than 3% in the past week to $23.09 per share. That means the company’s shares are sitting just 0.4% above their 52-week low of $23.01 per share, set on Friday afternoon.

So, what’s happening to one of the largest ASX gold producers right now and what should investors be watching?

Why the Newcrest share price is sliding to a 52-week low

As with all resources shares, it’s important to look at the dynamics driving the underlying commodity. For Newcrest, that means looking at what is happening with gold prices right now.

Perhaps unsurprisingly, gold is struggling at the moment and that’s showing in the Newcrest share price. Global gold prices have been falling in recent weeks as investors turn away from the traditional safe-haven asset.

Fears of the US Federal Reserve’s tapering program (that is, removing significant stimulus from the market) combined with dwindling inflation fears, have meant gold prices have struggled in recent weeks. Gold is often seen as a good hedge against inflation and very much a defensive asset.

Investors have been increasingly turning to US Treasuries and the US dollar as an alternative to gold. That has been reflected in the recent declines in the Newcrest share price.

The recent slide to a new 52-week low comes amid a disappointing year for shareholders. 2020 was a good year for ASX gold shares with prices soaring to record highs and the outlook remaining strong heading into 2021.

That hasn’t proved to be the case, however, with the Newcrest share price sliding 10.4% lower in the year to date.

Foolish takeaway

The Newcrest share price slipped to a new 52-week low on Friday afternoon before kicking marginally higher to close the week at $23.09 per share.

The post Why the Newcrest (ASX:NCM) share price is sliding to a 52-week low appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rebounds into positive territory led by energy and materials shares
• 5 things to watch on the ASX 200 on Monday
• Why ASX 200 gold shares are sinking on Friday

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Telstra Corporation Ltd (ASX: TLS) share price has been among the best performers on the S&P/ASX 200 Index (ASX: XJO) this year.

Since the start of the year, the telco giant’s shares have risen a massive 31%.

This means the Telstra share price has more than tripled the return of the ASX 200 index over the same period.

Where next for the Telstra share price?

Despite its impressive gain this year, one leading broker believes the Telstra share price can keep rising.

According to a recent note out of Goldman Sachs, its analysts have retained their buy rating and lifted their price target on the company’s shares to $4.40.

Based on the latest Telstra share price of $3.95, this implies potential upside of 11% over the next 12 months.

And with the broker expecting another 16 cents per share fully franked dividend in FY 2022, the potential return stretches to just over 15%.

What did the broker say?

Goldman was pleased with the company’s recent T25 update and notes that management is targeting strong earnings growth in the coming years.

The broker commented: “Telstra held its T25 Investor Day, with the key strategic/financial updates consistent with our prior expectations. FY25 targets for strong earnings growth were provided, implying a high degree of confidence in the outlook, given expectations for mid-single digit EBITDA growth p.a. and a similar quantum of mobile service revenue growth. However despite EBITDA being in-line with GSe, expectation for high teens EPS growth was marginally below, given D&A, interest & minorities.”

Goldman was also pleased to see its dividend policy revert back and is expecting share buybacks in the future.

It explained: “Telstra also revised its dividend policy back towards 100% of EPS, as it prioritizes growing franked dividends over time, while using the c.$600mn p.a. (c.5¢ps) of additional FCF to invest for growth or return to shareholders. On-market buybacks & un-franked dividends were highlighted, but we expect buybacks to be prioritized given the focus on growing franked dividends.”

In light of the above, the broker believes the Telstra share price is in the buy zone right now.

The post This analyst rates the Telstra (ASX:TLS) share price a buy appeared first on The Motley Fool Australia.

More reading

• How does the Telstra (ASX:TLS) dividend compare to ASX 200 shares?
• ASX 200 (ASX:XJO) midday update: Telstra buys Vita stores, Cochlear sinks
• Telstra (ASX:TLS) share price higher on Vita (ASX:VTG) deal
• How has the Telstra (ASX:TLS) share price performed since reporting results?
• Analysts name 2 ASX dividend shares to buy

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Domain Holdings Australia Ltd (ASX: DHG) share price has been on fire in 2021. Shares in the property technology and services business are up 27% this calendar year, including 10% gains since last Tuesday’s open.

So, what’s driving the Aussie property technology group’s valuation higher in 2021?

Why the Domain share price is up 10% in 4 days

It wasn’t long ago that shares in the online classifieds business were at a 3-month low. That was back on 17 August when Domain released its 2021 full-year results.

The Domain share price slipped despite reporting a 20.8% jump in earnings before interest, taxes, depreciation, and amortisation (EBITDA) to $102 million. Net profit for the digital services provider jumped 66% year over year to $37.9 million.

Domain reported strong growth across a number of its earnings segments. One big contributor was its core digital services unit which comprises residential property listings; media, developer and commercial; and agent and property data solutions segments.

Despite slipping on results day, the Domain share price has surged higher in the 6 weeks following the result. Continued strength in the Aussie property market and a record-low interest rate are certainly helping.

Domain makes money from the listings on its website. That means if the property market is hot, like it is right now, business should be booming. A hot market results from significant buying demand, and there are often sellers looking to cash in on that by listing their places for sale.

As a result, the Domain share price is now just 0.3% shy of a new 52-week high after a broad market rebound to finish last week.

Foolish takeaway

Shares in the Aussie property technology and digital services group have continued to have a strong run in 2021. Investors will be watching the property classifieds group closely when trading kicks off on Monday morning.

The post The Domain (ASX:DHG) share price is up 10% in 4 days to a 52-week high. Here’s why appeared first on The Motley Fool Australia.

More reading

• Acquisitions for Wesfarmers and Domain, Telstra plans to grow and Myer back in profit. Scott Phillips on Nine’s Late News
• Domain (ASX:DHG) share price lower despite key $60m acquisition

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Telstra Corporation Ltd (ASX: TLS) dividend has been a staple of Aussie portfolios for decades. Telstra’s famous payout policy has seen the telco regularly payout 100% of underlying profits.

In recent times, with the entry of NBN Co eating into the company’s profitability, that figure has been wound back to 70% to 90% of underlying earnings. That means the Telstra dividend is currently sitting at 2.53% as at Friday’s close.

So, how does that yield compare to other companies in the S&P/ASX 200 Index (ASX: XJO)?

How the Telstra dividend compares to ASX 200 shares

There are some monster dividends on offer among ASX 200 shares this year. A strong post-COVID rebound, the introduction of stimulus programs such as JobKeeper and significant monetary policy support have helped some Aussie companies thrive in recent months.

Fortescue Metals Group Limited (ASX: FMG) is one ASX dividend share that raised its dividend. Iron ore has been booming and Fortescue recently doubled its dividend after reporting a 117% surge in net profit after tax to US$10.3 billion.

For investors who think the 2.53% Telstra dividend is good, consider this: Fortescue shares are now trading at a 23.34% yield. As well as boosting its dividend, that yield figure has been helped by Fortescue shares slumping 38% in 2021.

Fortescue is certainly the exception rather than the rule and not necessarily a good benchmark for the Telstra dividend.

It can be hard to assess what an average dividend yield is for ASX 200 shares at the moment. One way is to consider the dividend yields on broad market exchange-traded funds (ETFs) benchmarked against the S&P/ASX 200 Index.

BetaShares Australia 200 ETF (ASX: A200) is one such ETF. It can be difficult to compare dividend yields given the number of variables affecting the breadth of companies in the ASX 200.

The October distribution for the BetaShares ETF was $0.6801 per security. A simple annualisation of that figure gives $2.7204 per security or a yield of 2.17%. That means the Telstra dividend looks to be higher based on a simple calculation against this ETF.

Foolish takeaway

The Telstra dividend appears to stack up well against the broader ASX 200 shares. The Aussie telco certainly hasn’t delivered the chunky dividends it has been known for in recent decades. However, it still represents a reliable dividend payer and a staple of many Aussie portfolios.

The post How does the Telstra (ASX:TLS) dividend compare to ASX 200 shares? appeared first on The Motley Fool Australia.

More reading

• September hasn’t been a great month so far for the ANZ (ASX:ANZ) share price
• There’s a shock coming for ASX investors: expert
• 5 things to watch on the ASX 200 on Monday
• Is this ASX 200 miner one of the best value shares to buy today
• These were the worst performers on the ASX 200 last week

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The CSL Limited (ASX: CSL) dividend ticked up a notch last earnings season due to the company outperforming its guidance. In particular, the global biotech’s CSL Behring and Seqirus business delivered robust growth in FY21.

The surging profits led the company to give back to its shareholders, reflecting its consistent dividends policy.

But let’s see how the CSL dividend stacks up against its rivals.

How does the CSL dividend stack up?

CSL is set to pay a fully franked final dividend of $1.59 per share to eligible investors on 30 September.

When combined with its interim dividend of $1.35 apiece, this brings the total FY21 dividend to $2.94, equalling FY20. It’s worth noting the board declared the first-half FY20 dividend payment (147 cents) just before the COVID-19 pandemic set in.

Based on the closing CSL share price of $312.01 last week, this gives a dividend yield of 0.94%.

What about its competitors?

The company’s main direct competitors are Spanish company Grifols (NAS: GRFS) and Japanese-owned Takeda Pharmaceutical Company (NYSE: TAK). However, as they are both not listed on the ASX, we take a look at Sonic Healthcare Ltd (ASX: SHL) and Ramsay Health Care Ltd (ASX: RHC).

By comparison, Sonic Healthcare rewarded its shareholders with a partially-franked final dividend of 55 cents per share on 22 September.

The full-year dividend, comprising of an interim dividend of 36 cents apiece, equates to 91 cents per share. This represents a 7.1% lift on the prior full-year dividend (FY20).

The Sonic Healthcare share price finished last week at $40.59 which gives it a dividend yield of 2.24%.

Its other competitor in the sector, Ramsay Health Care, is on track to distribute a final dividend of $1.03 per share to shareholders on 30 September. The company’s interim dividend for the FY21 period came to 48.5 cents a pop, translating to a full-year dividend of $1.515.

Calculating using the last price of $69.26 for Ramsay Health Care shares, this is a dividend yield of 2.19%. 

Comparing the CSL dividend yield against its peers may be one point to consider when investing. However, it is important to also look at the total shareholder return for the past 12 months.

As such, CSL shares have gained 5% for the period, while Sonic Healthcare and Ramsay Health Care shares have moved up 20% and 1 respectively.

Are CSL shares a buy?

A number of brokers weighed in after the company released its full-year results in mid-August.

Analysts at Jefferies slapped a “hold” rating on the CSL share price, cutting its outlook by 1.7% to $327.85. On the other hand, Morgans and Credit Suisse raised their price targets by 7.7% to $324.40 and 1.6% to $315.00 respectively.

However, the most recent broker note came from Citi which also raised its view on CSL shares by 4.8% to $325.00. Based on the current share price, this implies an upside of around 4.1% on Citi’s assessment.

CSL commands a market capitalisation of roughly $142.17 billion, making it the second-largest company on the ASX.

The post How does the CSL (ASX:CSL) dividend compare to its sector? appeared first on The Motley Fool Australia.

More reading

• Is the CSL (ASX:CSL) share price in the buy zone?
• How has the CSL (ASX:CSL) share price performed since FY21 results?
• 3 experts pick 3 ASX shares to rocket in next 12 months
• Why is the ASX All Ordinaries (ASX:XAO) struggling lately?
• The CSL (ASX:CSL) share price has had a good 6 months. Is it a buy?

Motley Fool contributor Aaron Teboneras owns shares of CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. The Motley Fool Australia has recommended Ramsay Health Care Limited and Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Australian share market is home to a good number of shares offering attractive dividend yields.

But which ones should you buy over others? Here’s are two that the team at Macquarie Group Ltd (ASX: MQG) rate highly and expect to provide big yields:

Aurizon Holdings Ltd (ASX: AZJ)

The first ASX dividend share to look at is Aurizon. It is Australia’s largest rail freight operator, transporting more than 250 million tonnes of Australian commodities each year.

The team at Macquarie are positive on the company and currently have an outperform rating and $4.27 price target on its shares. The broker believes Aurizon is well-placed with almost $1 billion in balance sheet capacity to drive its growth through acquisitions.

Macquarie is forecasting partially franked dividends of 28.1 cents per share in FY 2022 and then 29.5 cents per share in FY 2023. Based on the latest Aurizon share price of $3.69, this represents yields of 7.6% and 8%, respectively.

BHP Group Ltd (ASX: BHP)

Another ASX dividend share to look at is BHP. The Big Australian’s shares have come under significant pressure recently due to the well-documented weakness in iron ore prices. However, it is worth noting that prices are still notably higher than its production costs and its diverse operations are cushioning some of the blow.

It is for this reason that Macquarie sees the recent weakness in the BHP share price as a buying opportunity. So much so, last week it retained its outperform rating and lofty $56.00 price target on the mining giant’s shares.

Its analysts are also forecasting generous dividend payments in the coming years. Dividends per share of ~$3.70 and ~$2.90 are pencilled in for FY 2022 and FY 2023, respectively. With the BHP share price currently fetching $37.72, this will mean yields of 9.8% and 7.7% over the next two financial years.

The post Broker tips BHP (ASX:BHP) and this dividend share to provide huge yields appeared first on The Motley Fool Australia.

More reading

• How can you fully invest and not sell, then buy during market corrections?
• After falling 16% in a month, is the BHP (ASX:BHP) share price now a buy?
• 5 things to watch on the ASX 200 on Monday
• Is this ASX 200 miner one of the best value shares to buy today
• The BHP (ASX:BHP) share price is down 17% in September so far. What’s next?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Aurizon Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Retail ASX investors are always told to be in it for the long term.

Trading is gambling, while ‘buy and hold’ is true investing, the experts say.

You see, a stock market will have a bad day, month or even year. But eventually, it moves in an upwards direction.

So if you can ignore the volatility and stay fully invested for the long-run, then the chances are your wealth will have grown at the end of it.

Sensible advice.

The other bits of strategy we hear are:

• Don’t sell during market corrections
• Buy bargains during market corrections

Also eminently sensible. 

If you sell when shares have plunged, all you’re doing is turn a paper loss into an actual loss — without any chance of recovery.

And if you can pluck up enough courage, buying shares during corrections is like picking up a pair of pants at the Boxing Day sales.

They’re still the same trousers, just cheaper.

But hang on a minute

This is all good and well, but how can you possibly practise all 3 of the strategies in the ‘buy and hold’ game?

If you’re fully invested, you have no spare cash to invest. And you don’t sell during a correction, so you still don’t have any cash.

So how do you buy up those bargains without any money?

The Motley Fool asked some experts as to how a retail investor can possibly carry out all 3 pieces of advice.

You really can’t do all 3

“Those are all worthy sentiments. And I think they are all good advice,” said The Motley Fool Australia chief investment officer Scott Phillips.

“But yes, they’re incompatible! But they’re incompatible in the same way that no 2 investors are the same or find themselves in the same circumstances.”

Phillips revealed that he preferred to stay fully invested, and therefore sacrifice the “buy bargains” mantra.

“I rarely have ‘extra’ cash when a crash comes. But I think that’s the right approach, given that the market tends to go up more than it goes down and, over time, continues to set new high watermarks, one after the other.”

Shaw and Partners senior investment adviser Adam Dawes takes the opposite approach.

“We always like to keep at least 10% of clients’ money in the bank for opportunities — or using a broker expression ‘Keeping your powder dry’.”

Not being invested will cost you

To Phillips, to have money lying around doing nothing is a wasted opportunity.

“To not be invested would be to bet against the tide of history, which has continued to push markets higher,” he told The Motley Fool.

“And if you’re waiting to buy on a ‘dip’, you might end up missing a 20% gain while you wait for a 5%, 10% or 15% ‘dip’ to come along!”

And it’s not like anyone knows whether they’re at the top, bottom or otherwise anyway.

“It’s hard enough to know what mood the market is in today, let alone tomorrow, or next week,” said Phillips.

“I’m not going to say it’s a waste of time trying to guess but… Ah, bugger it. I’ll just say it: It’s a waste of time.”

Beware of the bargains during market corrections

Both Dawes and Phillips agreed on one thing though.

If you’re going to buy up bargains during a market correction, you better make sure the business is sound.

“My mantra in the recovery phase or bottom of the market is ‘Don’t be a hero’,” Dawes told The Motley Fool.

“Buy good quality stocks and put them in the bottom drawer. Example: Commonwealth Bank of Australia (ASX: CBA) at $55, BHP Group Ltd (ASX: BHP) at $25. You need to look past the valley and just buy good quality business that will last the test of time.”

As for selling during a crash, aside from the obvious loss of money, Dawes also pointed out a devastating psychological effect.

“If you sell, then most clients don’t get back in as they are paralysed with fear as markets continue to recover,” he said.

“It is not wise to sell as markets always come back. March 2020 it came back within 6 months and GFC took a little longer.”

The post How can you fully invest and not sell, then buy during market corrections? appeared first on The Motley Fool Australia.

More reading

• Broker tips BHP (ASX:BHP) and this dividend share to provide huge yields
• After falling 16% in a month, is the BHP (ASX:BHP) share price now a buy?
• 5 things to watch on the ASX 200 on Monday
• Is this ASX 200 miner one of the best value shares to buy today
• Here’s why the CBA (ASX:CBA) share price has beaten the ASX 200 in the last 3 months

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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