Author: therawinformant

If you’re looking for a way to beat low interest rates, then the ASX dividend shares listed below could be worth considering.

I believe both dividend shares could be great options for income investors due to their generous yields and strong businesses. Here’s why I would buy them:

BHP Group Ltd (ASX: BHP)

If you don’t have exposure to the resources sector, then you might want to get it with an investment in BHP. I think BHP is the best option in the sector due to its diverse, world class, and low cost operations. The mining giant also has a number of growth opportunities, particularly in oil, that I believe could create value for shareholders in the coming years.

In the meantime, BHP looks well-positioned to deliver very strong free cash flows again in FY 2021 thanks to favourable iron ore and copper prices. The good news is that given the strength of its balance sheet, I expect the majority of its cash flow to be returned to shareholders. Based on the latest BHP share price, I estimate that it offers investors a fully franked forward ~4.5% yield.

Telstra Corporation Ltd (ASX: TLS)

Another dividend share to consider buying is this beaten down telco giant. While the sizeable decline in the Telstra share price this year is disappointing for shareholders, I think it is a buying opportunity for non-shareholders. Especially if the company shifts its dividend policy to a free cash flow-based one and maintains its dividend. 

In addition to this, after several years of profit declines, I believe a return to growth is on the horizon in the next couple of years. This is due to its T22 strategy, the easing NBN headwinds, and 5G internet. I expect the latter to be a big boost to mobile revenues once there is an iPhone that supports it. At present I still expect the company to pay a 16 cents per share dividend in FY 2021. Based on this and the current Telstra share price, it offers investors a fully franked 5.6% dividend yield.

More reading

• 2 unloved ASX 200 shares I would buy now
• 2 ASX dividend shares with yields over 8%
• 2 ASX shares I would recommend to a beginner investor
• Why the Telstra (ASX:TLS) share price could be under pressure in 2021
• Where to invest your Telstra (ASX:TLS) dividends

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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.

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A very strong finish on Friday led to the S&P/ASX 200 Index (ASX: XJO) charging notably higher last week. The benchmark index climbed 1.7% over the period to end it at 5,964.9 points.

Another busy five days is expected next week. To keep you informed, I have picked out five things to watch:

ASX futures pointing higher.

The latest SPI futures are pointing to the ASX 200 opening the week 21 points higher on Monday. This follows a very positive end to the week on Wall Street. On Friday night the Dow Jones rose 1.3%, the S&P 500 climbed 1.6%, and the Nasdaq stormed a sizeable 2.25% higher. The latter could be good news for tech shares such as Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO).

Annual general meeting season kicks off.

This week is the start of annual general meeting (AGM) season. As most companies traditionally provide trading updates at these meetings, investors should soon be able to gain an insight into how different sides of the economy are performing during the pandemic. Holding an AGM next will be stock exchange operator ASX Ltd (ASX: ASX) on Wednesday.

Mesoblast remestemcel-L FDA decision.

The Mesoblast limited (ASX: MSB) share price will be on watch next week. Last month the Oncologic Drugs Advisory Committee of the United States Food and Drug Administration (FDA) voted that the available data supports the efficacy of its remestemcel-L (RYONCIL) product in paediatric patients with steroid-refractory acute graft versus host disease. A final decision will be made by the FDA in the United States on Wednesday evening (Australia time). If approved, Mesoblast plans to launch RYONCIL in the United States in 2020.

Shares going ex-dividend.

A number of shares are due to go ex-dividend next week and could trade lower. This includes mining services company NRW Holdings Limited (ASX: NWH) on Monday, property company Cromwell Property Group (ASX: CMW) on Tuesday, and Perenti Global Ltd (ASX: PRN) on Friday.

Billions of dollars of dividends on the way.

It is going to be a bumper week of dividend payments for Australian investors. A large number of companies are due to pay their dividends over the next five days. This includes dividend favourites such as banking giants Australia and New Zealand Banking GrpLtd (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA) on Wednesday. Elsewhere, supermarket operator Coles Group Ltd (ASX: COL) is paying its dividend on Tuesday and iron ore producer Fortescue Metals Group Limited (ASX: FMG) is rewarding its shareholders on Friday.

More reading

• 3 five-star ASX 200 shares to buy in October
• Looking for ASX dividend shares to buy? Try these
• How to turn $20,000 into over $200,000 in 10 years with ASX shares
• When to save cash and when to invest in ASX shares
• ASX 200 finishes the week with a bang

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO and COLESGROUP DEF SET. 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.

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While some shares have smashed the market in 2020, not all of them have fared so well.

Two ASX shares that have significantly underperformed the market this year are listed below.

Here’s why I would think these unloved shares could now be in the buy zone:

Lendlease Group (ASX: LLC)

The Lendlease share price is down a disappointing 42% from its 52-week high. I think this has left the international property and infrastructure company’s shares trading at a very attractive level for investors. Especially now the worst is arguably behind the company following the divestment of its engineering business.

Another big positive is Lendlease’s recent strategy announcement. As I mentioned here last week, this strategy is shifting both its earnings mix and business model towards that of industrial property giant Goodman Group (ASX: GMG). Given the exceptional success of Goodman over the last decade, this can only be a good thing. Furthermore, it could support a re-rating of its shares in the near future if its earnings growth becomes more consistent. This could make it a great option for patient investors.

Telstra Corporation Ltd (ASX: TLS)

Another ASX share which has fallen out of favour this year is this telco giant. The Telstra share price is down 27% from its 52-week high and hovering just above its 52-week low. This decline has been driven by concerns that another dividend cut is coming in FY 2021 after its guidance fell short of expectations due to the pandemic. However, I’m optimistic that a dividend cut can be avoided if Telstra shifts its dividend policy to a free cash flow-based one.

In light of this, I think investors should focus more on the long term, which is becoming increasingly positive. This is thanks to rational competition in the industry, its cost cutting, the easing NBN headwind, and the arrival of 5G. Combined, I believe a return to growth might not be far away, which could make Telstra an unloved share to buy.

More reading

• 2 ASX dividend shares with yields over 8%
• Why the Telstra (ASX:TLS) share price could be under pressure in 2021
• Where to invest your Telstra (ASX:TLS) dividends
• Is Lendlease (ASX:LLC) the new Goodman Group (ASX:GMG)?
• Forget term deposits and buy Coles (ASX:COL) and this ASX dividend share

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. 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.

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It’s a choice that’s plagued generations of homeowners – pay off the mortgage faster or use the extra cash to invest in ASX shares? It’s a devilishly vexing choice, as there are good reasons to go down either path. But I think the current investing environment we are navigating through in 2020 has tilted the playing field in one firm direction. Let’s dive in.

Mortgage…

So, the family home is the largest asset of many Aussie families. And it’s normally a great asset to own. Paying a mortgage instead of paying rent builds your long-term equity. And a paid-off house lends security, certainty and the ‘my-home-is-my-castle’ effect. No one can evict you, ask you to move or tell you to mow your lawn.

But mortgage interest is not normally tax-deductible in Australia (at least on the family home). That means that by making extra payments on your mortgage above the minimum instalments, you are effectively getting a return on your investment of whatever your mortgage interest rate is. If you have a 2.5% mortgage (increasingly common in our era of record low interest rates), then you are effectively getting a 2.5% per annum return on extra repayments. That looks pretty decent against what you can get from a term deposit or a savings account right now.

However, it doesn’t look as good when you consider the alternative. See, investing in anything is an exercise in opportunity cost. When you invest $1,000 in option A, you give up the opportunity to invest that $1,000 in option B.

Or ASX shares

Let’s take a simple ASX share investment as an alternative. The Vanguard Australian Shares Index ETF (ASX: VAS) is an index exchange-traded fund (ETF) that holds a basket of shares representing the largest 300 Australian public companies. It most of the Aussie companies you’d know, from Commonwealth Bank of Australia (ASX: CBA) to Woolworths Group Ltd (ASX: WOW), Telstra Corporation Ltd (ASX: TLS) and even Afterpay Ltd (ASX: APT).

It’s one of the easiest shares you can own because it simply tracks the Australian share market over time and automatically adjusts itself so it always holds large shares in the largest ASX companies.

Since its inception in 2009, this VAS ETF has returned an average of 8.4% per annum. That means that if you instead invested those extra mortgage repayments into VAS instead, you’d be getting an effective return of 8.4% per year, instead of 2.5%. Of course, that assumes VAS continues to average at 8.4%, which isn’t guaranteed.

That difference can be worth a lot. According to MoneySmart’s compound interest calculator, if you invest $10,000 and get a 2.5% return over 20 years, you’ll end up with $16,479 at the end. But if instead you manage an 8.4% return, you’ll instead have $53,342 for your efforts.

Foolish takeaway

Of course, these numbers are all hypothetical. But the logic behind them is sound, in my view. I think you’re almost always better off investing any surplus cash you might have into ASX shares rather than your mortgage. But if having a paid-off roof over your head as soon as possible is important to you, then there’s nothing wrong with just focusing on your home as well. There’s a lot of value in a good night’s sleep! Have the thought and discussion though, it’s a worthwhile conversation to hold, at the least.

More reading

• Buy Fortescue and this ASX dividend share for a source of income
• The 3 best ETFs for passive investing
• How to make $1 million from ASX shares
• Is a passive ASX investing strategy for you?
• 3 simple ways to save more cash to buy ASX shares today!

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO and Woolworths Limited. 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’re better off investing in ASX shares in 2020 than paying off the mortgage faster appeared first on Motley Fool Australia.

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One of the most successful investors in the modern era is the Oracle of Omaha, Warren Buffett.

Over the last few decades the legendary investor’s Berkshire Hathaway business has consistently generated market-beating returns for shareholders.

For example, at the end of last year, Berkshire Hathaway had recorded an annual average return of 20.5% since it began trading in 1965.

This means that even if you had just invested a modest $1,000 into the company in 1965, you would be sitting on a vast fortune today.

Based on a return of 20.5% per annum, that $1,000 investment would have grown to be worth a mammoth $23.6 million at the end of 2019.

How is this possible?

Mr Buffett hasn’t achieved this by taking moonshots on speculative companies like BrainChip Holdings Ltd (ASX: BRN) or Novonix Ltd (ASX: NVX). He has achieved it by using a relatively simple investment strategy – buy and hold investing.

The Berkshire Hathaway boss looks to buy shares in companies with strong business models, competitive advantages, talented management teams, and positive long-term outlooks.

He then holds onto them for a long period of time (unless the investment thesis breaks) and lets the power of compounding do the rest.

How can you replicate his success?

There’s nothing to stop readers from following in Warren Buffett’s footsteps and investing this way. All you need to do is look for those quality companies that you can invest in with a long term view.

The good news is that there are a good number of companies on the All Ordinaries Index (ASX: XAO) which I believe have the potential to generate strong returns for investors over the next decade and beyond.

For example, electronic design software company Altium Limited (ASX: ALU) looks well-positioned for growth. This is thanks to its exposure to the rapidly growing internet of things and artificial intelligence markets.

Another company that could grow strongly over the next decade and beyond is Cochlear Limited (ASX: COH). Ageing populations look set to drive increasing demand for its implantable hearing devices over the 2020s.

Finally, Pushpay Holdings Ltd (ASX: PPH) is a donation management and community engagement platform. It stands to benefit greatly from the shift to a cashless society and the digitisation of churches. As a result, I think it could be a long term market beater.

More reading

• $3,000 invested in these 3 ASX shares could make you a fortune over the next 10 years
• 3 five-star ASX 200 shares to buy in October
• Why Atlas Arteria, Cochlear, Telix, & Treasury Wine shares are dropping lower
• The Aussie dollar at a critical juncture and could turn fortunes for these ASX stocks
• Should you buy Appen (ASX:APX) and Pushpay (ASX:PPH) shares after the tech selloff?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and PUSHPAY FPO NZX. The Motley Fool Australia has recommended Cochlear Ltd. and PUSHPAY FPO NZX. 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.

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I think that ASX shares can do a great job of growing your wealth. I’m not expecting to be able to turn $3,000 into $3 million. However, I think the three ideas in this article could deliver much stronger returns than the market over the next decade.

To deliver big returns I think you need to find businesses that are at least reasonably small (and have room to go), have international growth aspirations (for a large addressable market) and are priced at a reasonable valuation today.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is one of my highest-conviction ASX share ideas right now. It’s an electronic donation business which helps clients like large and medium US churches to receive money digitally.

FY20 was really strong. Total processing volume rose 39% to US$5 billion and total revenue increased by 32% to US$129.8 million. It was the year that the ASX share proved it has passed an important stage where its profits are now clearly positive and rising quickly.

The ASX share’s earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) improved by US$23.5 million to US$25.1 million. Operating cash flow improved by US$26.3 million to US$23.5 million – there was negative cashflow of US$2.8 million last year.

The Pushpay business is really scalable. In FY20 alone it grew its gross profit margin from 60% to 65%, it also increased its EBITDAF margin from 17% to 22%. That increase in profitability was just from a US$31.4 million increase in revenue. Over the long-term the ASX share is aiming for US$1 billion of revenue.

In FY21 alone Pushpay is looking to at least double its EBITDAF to US$50 million. At the current Pushpay share price it’s trading at 38x FY21’s estimated earnings.

Bubs Australia Ltd (ASX: BUB)

Bubs is a promising infant formula business, which specialises in goat milk products. FY20 was a strong year with full year revenue increasing by 32% to $62 million. Most importantly, Bubs infant formula sales rose by 58% to $30 million. Infant formula sales represented 55% of group revenue.

It’s this growth of infant formula which is the most important aspect for future growth. It’s the segment that could deliver the most growth over the coming years and it has a high gross margin of 40%. To put that in context, Bubs’ normalised gross margin improved from 21% to 24%. The higher percentage of sales that infant formula is, the more profitable that Bubs will be.

The ASX share has done well in Australia, it’s now sold across a large amount of retail stores including Coles Group Limited (ASX: COL), Woolworths Group Ltd (ASX: WOW) and Baby Bunting Group Ltd (ASX: BBN).

But it’s the international growth that excites me most. Direct sales to China increased 32% to $13 million and export markets outside of China delivered a five fold increase in sales. If international sales can keep growing strongly over the long-term then Bubs could become a much larger business.

With a share price under $0.80 and a market capitalisation under $500 million, I think the Bubs share price represents good value.

Redbubble Ltd (ASX: RBL)

In FY20 the artist-produced product store company saw marketplace revenue grow my 36% with gross profit going up 42% and operating earnings before interest, tax, depreciation and amortisation (EBITDA) rising by 141%.

The ASX share is now free cashflow positive and it ended with a closing cash balance of $58 million.

The decision to start selling masks was a clever one. It really helped the fourth quarter where marketplace revenue grew 73%, and gross profit grew by 88%.

In the first month of FY21 the ASX share’s marketplace revenue grew by 132% with similar sale levels in the first two weeks of August.

I think Redbubble is on track to deliver a strong FY21 result and may benefit from improving economies of scale over the coming years. It has a network of 37 fulfillers across 10 countries and 41 locations. Redbubble is steadily expanding its product lines, which should hopefully diversify and improve earnings.

Redbubble is an attractive way to diversify away from Australian retail sales, as less than 6% of its sales are in Australia.

The Redbubble share price still looks good value to me considering it generated $38 million of free cashflow in FY20 and and the likely future growth.

In the long-term the company is targeting revenue of $1 billion, compared to FY20’s marketplace revenue of $349 million. There is plenty of room for growth, with a much higher profit margin.

More reading

• How to be the next Warren Buffett with ASX shares
• Should you buy Appen (ASX:APX) and Pushpay (ASX:PPH) shares after the tech selloff?
• The Bubs (ASX:BUB) share price is down 42% in 12 months: Is it a buy?
• 3 top ASX tech shares to buy in 2020
• New to investing? I would invest $500 into these exciting ASX shares

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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.

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If you’re looking to make some additions to your portfolio in October, then I think the three ASX shares listed below would be great options.

I believe they are among the best on offer on the Australian share market and could generate strong returns for investors over the next decade.

Here’s why I rate them as five-star stocks:

Afterpay Ltd (ASX: APT)

The first five-star stock is Afterpay. This buy now pay later provider has been a very impressive performer over the last few years and appears well-positioned to become a global force in the payments industry. Especially given the surprising strength and flexibility of its business model and its global expansion plans. The company has just launched in Canada and has acquired its way onto mainland Europe. It also has its eyes firmly on the Asia market. The latter should be supported by its major shareholder, WeChat owner Tencent Holdings. And with the Afterpay share price down 21% from its high, now could be an opportune time for a long term investment.

Altium Limited (ASX: ALU)

Another five-star stock to buy is Altium. It is a leading electronic design software platform provider which has exposure to the rapidly growing Internet of Things and artificial intelligence markets. These markets are supporting the explosion of electronic devices globally and underpinning growing demand for its Altium Designer and cloud-based Altium 365 products. But Altium is more than just these products. It also has other businesses with a lot of growth potential. These include workflow solution platform NEXUS and electronic parts search engine Octopart. Combined, I believe the company is perfectly positioned to achieve its market domination target later this decade.

CSL Limited (ASX: CSL)

A final five-star stock to buy is CSL. I think the biotherapeutics giant would be a quality long term investment due to its world class CSL Behring and Seqirus businesses. This is due to their leading therapies and vaccines, growing plasma collection network, and burgeoning research and development pipeline. This pipeline contains a number of products, such as Clazakizumab, that have the potential to generate billions of dollars of sales in the future. Overall, I believe this puts CSL in a position to continue generating strong returns for investors for a long time to come.

More reading

• When to save cash and when to invest in ASX shares
• ASX 200 finishes the week with a bang
• Could these small cap ASX shares be the next Afterpay (ASX:APT) or Zip (ASX:Z1P)?
• Why the Brickworks (ASX:BKW) share price is soaring higher today
• ASX 200 up 1.5%: Big four banks rocket higher, Premier Investments delivers record profit

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.

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As I mentioned here yesterday, it is looking increasingly likely that rates will be going lower before they go higher again.

While this is good news for borrowers, it certainly isn’t for savers and income investors.

If you’re in the latter group, then you might want to consider buying one of these ASX dividend shares:

Commonwealth Bank of Australia (ASX: CBA)

The first ASX dividend share I would buy is Commonwealth Bank. Australia’s largest bank is my favourite option in the banking sector due to the quality of its operations and robust balance sheet. In respect to the latter, when it released its full year results in August, it reported a CET1 ratio of 11.6%. This is comfortably ahead of APRA’s ‘unquestionably strong’ benchmark of 10.5% and leaves it well-placed to navigate the current crisis. Another positive is the recent relaxing of responsible lending rules, which I expect to be a major boost to its lending this year.

Estimating what dividend Commonwealth Bank will pay in FY 2021 is tricky because of the pandemic. However, I believe something in the region of $3.00 per share is possible. Based on the latest Commonwealth Bank share price, this equates to a generous fully franked 4.5% yield.

People Infrastructure Ltd (ASX: PPE)

Another dividend share to consider buying is People Infrastructure. It is a leading workforce management company that provides innovative solutions to workforce challenges. People Infrastructure was an impressive performer in FY 2020, delivering a sizeable 34.5% increase in revenue to $374.2 million and a 53.3% lift in normalised net profit after tax and before amortisation (NPATA) to $18.4 million.

While the pandemic means trading condition will be tough in FY 2021, I’m optimistic it will continue its positive form and deliver further growth in earnings and dividends. Especially given management’s plan to look at expediting its growth with acquisitions. At present, I estimate that it will pay a 9.5 cents per share fully franked dividend in FY 2021. Based on the current People Infrastructure share price, this gives investors an attractive 3.2% forward dividend yield.

More reading

• ASX 200 finishes the week with a bang
• Are ASX bank shares a buy after lending rules eased?
• ASX 200 up 1.5%: Big four banks rocket higher, Premier Investments delivers record profit
• Why ASX bank shares are rocketing up Friday
• Westpac (ASX:WBC) share price hits 4-month low. Is it time to buy the ASX bank?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended People Infrastructure Ltd. 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.

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I’m a big advocate of buy and hold investing and firmly believe it is the best way for investors to grow their wealth.

To demonstrate how successful it can be, every so often I like to pick out a number of popular ASX shares to see how much a single $20,000 investment 10 years ago would be worth today.

With that in mind, here’s how $20,000 investments in these ASX shares would have fared:

Breville Group Ltd (ASX: BRG)

The Breville share price has been an exceptionally strong performer over the last 10 years. Thanks to consistently strong earnings growth due to the increasing popularity of its appliances and its international expansion, Breville shares have thoroughly beaten the market since 2010. During this time they have generated an average total return of 26.9% per annum. This would have turned a $20,000 investment into a whopping $215,000.

Fortescue Metals Group Limited (ASX: FMG)

It hasn’t been a smooth ride over the last 10 years, but the Fortescue share price has still generated market-beating returns for investors. This is thanks largely to its performance over the last few years following a significant reduction in its costs and buoyant iron ore prices. This has led to Fortescue shares generating an average total return of 14.9% per annum over the period, which would have turned a $20,000 investment in 2010 into $80,210 today.

Resmed Inc. (ASX: RMD)

The growing prevalence and education of sleep disorders and its industry-leading solutions has led to this medical device company delivering consistently strong earnings growth over the last decade. As you might expect, this strong earnings growth has underpinned equally strong returns for its shareholders. Over the last 10 years ResMed shares have provided investors with an average total return of 21.8% per annum. This means that if you were lucky enough to have invested $20,000 into its shares 10 years ago, your investment would have grown to be worth ~$144,000 in 2020.

Foolish Takeaway.

While not all shares will generate as strong returns as the ones above, I believe if you look for companies with strong business models and positive long term outlooks you have a good chance of generating market-beating returns.

The key is to invest wisely, be patient, and let the power of compounding work its magic.

More reading

• Brokers name 3 ASX shares to buy right now
• Why I would buy Altium (ASX:ALU) and these ASX growth shares
• Top brokers name 3 ASX shares to buy today
• Why Collins Foods, ResMed, Regional Express, & Xero shares are pushing higher
• 2 ASX shares I’m never selling

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ResMed Inc. 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.

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Investors are wary of putting their money in the market right now with the S&P/ASX 200 Index (ASX: XJO) down 12.2% in 2020. ASX shares have been volatile and we’ve seen the emergence of a ‘two-speed’ market.

Some shares like Xero Limited (ASX: XRO) or Pointsbet Holdings Ltd (ASX: PBH) have been flying. Others, in sectors like travel and hospitality, have been under extreme pressure.

That means it can be a scary time to invest with so many mixed signals. Here’s a couple of things I try to remember when deciding if its time to save or time to invest in ASX shares.

When to save and when to invest in ASX shares

My view is that market timing is not a great strategy. Market timing is when you wait outside of the market and try to ‘time’ the bottom of the market.

If you’d done this successfully, you probably went all-in during the March bear market. However, the reality is that not that many investors would have done this.

Because the only thing scarier than investing in a volatile market like right now is investing when the market is in freefall like in March.

However, it doesn’t have to always be so black and white. Investing strategies are ultimately very individual and depend on many, many factors.

I usually just try and buy high-quality ASX shares whenever I have the opportunity. If you’re believing in the long-term story then what happens today or tomorrow doesn’t really matter all that much.

Sitting on cash for years and years is probably not an ideal strategy. Interest rates are extremely low and it may just get eaten away by inflation.

But for the more conservative or opportunistic types, it could be worth having a small stash of cash ready to go. That means I could still invest regularly in top ASX shares but be ready to pounce on any tactical buying opportunities.

Foolish takeaway

Investing strategies come down to the individual. Market timing rarely, if ever, works but I think having some spare cash to buy cheap ASX shares could provide some peace of mind in the short-term.

More reading

• 3 five-star ASX 200 shares to buy in October
• ASX 200 finishes the week with a bang
• Why the Brickworks (ASX:BKW) share price is soaring higher today
• ASX 200 up 1.5%: Big four banks rocket higher, Premier Investments delivers record profit
• Why this fund manager is backing ASX copper shares

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd and Xero. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. 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.

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