There is a belief that to invest in S&P/ASX 200 Index (ASX: JXO) shares you need to be a part of the ‘rich person’s game’ and that it’s out of reach for the average Joe on the street.

It’s easy to understand why. In popular culture, the only investors we hear about are rich scoundrels. Think about it: Gordon Gekko, Jordan Belfort… these guys were hardly model citizens.

Up until recent years, it was quite difficult to start investing. You had to find a stockbroker, pay them through the nose, and try and find winners in the pages of your daily newspaper.

Now, it’s a different world. You can literally buy shares in under a minute through an online broker, all without having to pay usurious brokerage fees and commissions. Anyone can access a company’s annual report with the click of a button and read 100 different investor’s opinions about a share without leaving their desk.

This might not have been great for the finance industry, but it has undoubtedly been for the average Australian. Democracy has come to the share market.

Why it’s important to invest in ASX 200 shares

But with this power has come responsibility. In days of yore, investing wasn’t really necessary. The government promised to fund everyone over 65s retirement through the Age Pension. Sure, you could top this up with some cash. But with a bank account or term deposit typically paying real interest rates, you didn’t really need to ‘take a punt’ on the share market.

As comfortable as that world might sound, we live in a different one today. With interest rates at close to zero, cash instruments like term deposits don’t really cut the mustard as a real investment anymore. Job security is more or less a thing of the past. Most of us won’t be working with a single employer for our whole lives. And the Age Pension has moved from a ‘universal income’ to a ‘safety net’. Considering our ageing population, I have severe doubts over its long-term viability.

That’s why, in my view, investing is no longer optional. And investing in ASX 200 shares are a great place to start. Now, there are other ways of building wealth, such as property. But ASX shares have several advantages making them an ideal pathway for wealth creation in my opinion.

You can start with as little as $500, for one.

Shares are liquid, which means (unlike a house) you can buy and sell them easily for another.

And many shares will pay you tax-advantaged income (in the form of fully franked dividends) along the way.

So if you haven’t already started to invest in 2020, why not take the plunge? Your future self will undoubtedly thank you for not putting it off. And in this brave new world we live in, I don’t think any of us can afford not to.

More reading

• These ASX shares could defy the market sell-off this morning
• Is the Woodside Petroleum share price cheap today?
• 5 things to watch on the ASX 200 on Wednesday
• Why you should be buying the dip in ASX gold stocks
• Why the CSL share price continues to trail the ASX 200

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why you can’t afford not to invest in ASX 200 shares in 2020 appeared first on Motley Fool Australia.

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The Harvey Norman Holdings Limited (ASX: HVN) share price is trading flat on Wednesday after releasing a sales update.

At the time of writing the retail giant’s shares are changing hands for $3.55.

What did Harvey Norman announce?

Today’s update reveals that Harvey Norman’s Australian business has been on form during the pandemic.

During the crisis, only two franchised stores in Tasmania were closed for two weeks due to a mandated closure of the region by the Tasmanian State Government.

All other Australian franchised stores remained open. This was because, like supermarkets, Harvey Norman was seen as an essential service by the Australian Government during the crisis.

In light of this and increasing demand for many of its products, as of 31 May 2020, the Harvey Norman franchise network has delivered a 17.5% increase in sales in the second half.

This compares to just a 0.1% increase in sales during the first half and means that its year to date sales are up 7.4% on the prior corresponding period.

What about the rest of the business?

Things weren’t quite as positive for its overseas operations, where the vast majority of its stores were forced to close for certain periods during the pandemic.

In Australian dollar terms, New Zealand company operated sales are down 7.3% during the second half. It was a similar story in Slovenia and Croatia, with sales down 5.5% half to date.

Things were much worse in Northern Ireland and Singapore. Second half sales were down 38.2% and 21.7%, respectively, as of 31 May.

Positively, its Ireland and Malaysia stores were still growing their sales. Ireland sales are up 25.4% during the second half and Malaysia sales are up 1.3%.

Special dividend.

In April, Harvey Norman revoked its decision to pay shareholders a 12 cents per share interim dividend due to the pandemic.

It appears as though things haven’t turned out as bad as it first feared. As a result, it has decided to pay a special dividend to shareholders later this month.

Harvey Norman will pay a 6 cents per share fully franked dividend on 29 June 2020. To be eligible, you will need to be a registered shareholder at the close of business on 23 June 2020.

More reading

• How to build a $20,000 passive income with ASX shares
• Can ASX 200 retail shares outperform this year?
• ASX retail shares best placed to benefit from wall of industry bankruptcies
• How to be an ASX 200 share millionaire in 15 years
• The Aussie dollar just hit an 8-week high. Here’s how it affects your ASX shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Harvey Norman share price flat on sales update and special dividend announcement appeared first on Motley Fool Australia.

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The Commonwealth Bank of Australia (ASX: CBA) share price has lagged behind the other major banks since the market turned on 22 May. Since then, CommBank’s share price has risen by 22%. While impressive, all of the remaining major banks saw increases of over 30% across the same period. This includes Australia and New Zealand Banking Group Limited (ASX: ANZ) which saw a 36% rise in its share price. Even the out of favour Westpac Banking Corp (ASX: WBC) has seen greater share price rises than the largest Aussie bank.

The Commonwealth Bank has, however, been moving forward in preparing itself for the future. This includes by selling off distracting assets not focused on its core business of banking, as well as entering the buy now, pay later market via a deal and 5% stake in Swedish company Klarna. 

So, what is holding back the CBA share price?

CommBank was the first Aussie bank to signal its intention to cut back on Covid-19 support by 30 June. Principally via assessing all claims for loan deferrals on a case by case basis, rather than automatic acceptance. This means customers with ongoing hardship as a result of the coronavirus crisis will have to contact the bank for alternative support. I believe this move is weighing heavily on the CBA share price. 

While this approach seems fiscally prudent at face value, it creates two problems. First, there are issues related to auditing.

Most loans deferred from 20 March, the date the conditions were commenced, would be 90 days overdue. After 90 days default, notices are required to be sent by auditors. A default notice demands payment of the overdue amount plus the current repayment. Debtors can apply for a hardship variation at this stage. With the other banks, when the period finishes on (say) 30 September, customers will just start paying again at that time.

Second, CommBank will likely be the first of the majors to start to see loan defaults for those customers unable to pay who do not qualify for whatever the ‘alternative’ support may be.

Commonwealth Bank is by far the largest of any Aussie bank in the mortgage market with 14.75% market share, according to a report by Australian Finance Group Ltd (ASX: AFG). Therefore, it is exposed to the greatest economic impact of both loan deferrals and potentially loan defaults. 

Alan Kohler opined in The Australian this week that the total amount of the deferred loans is equal to 90% of the market capitalisation of the big four banks. In fact, it is $224 billion across mortgages and business loans. This is a frighteningly large amount of money. Even a small percentage is a frighteningly large amount of money.

Foolish takeaway

CommBank is the country’s largest mortgage lender, a major player in business loans and the country’s largest digital payments institution. As such, Coronavirus is likely to impact the CBA share price more than the other major banks. In response, CommBank has taken the decision to stem the bleeding by cutting short its 6-month coronavirus support measures to finish on 30 June.

At the close of trading on Tuesday, Commonwealth Bank had the lowest price to earnings ratio of the big four banks. It also had the second lowest trailing 12-month dividend yield, even though dividends are presently on hold. The CBA share price remains 9.6% down year to date. 

I would recommend Commonwealth Banks shares to anyone willing to buy and hold over the medium to long term who is prepared to deal with the inevitable bad news to come as the economy normalises.

More reading

• 3 top ASX shares for growth, income, and value investors to buy today
• Is the CBA share price a buy right now?
• 5 things to watch on the ASX 200 on Wednesday
• The ASX bank dividend recovery may be better than what the market thinks
• Not keen on Westpac? Then buy these top ASX dividend shares instead

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the CBA share price is lagging its big four cohorts appeared first on Motley Fool Australia.

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