Author: therawinformant

With many savings accounts offering base interest rates of just 0.05% at present, I think investors are better off looking to the share market for a source of income.

But which ASX dividend shares should you buy? Three top ASX dividend shares I would buy are listed below:

BWP Trust (ASX: BWP)

The first ASX dividend share to consider buying is BWP Trust. It is the largest owner of Bunnings Warehouse sites in Australia and has a total of 68 locations leased to the hardware giant. Given the quality of the Bunnings brand and its positive growth outlook, I believe it is a great tenant to have. Furthermore, I feel the risk of rental defaults or stores closures in the near term is very low. In light of this, I feel BWP is in a position to continue growing its income and distribution at a solid rate for the foreseeable future. Based on the latest BWP share price, I estimate that it offers investors a generous 4.7% FY 2021 distribution yield.

Rio Tinto Limited (ASX: RIO)

Another ASX dividend share to consider buying is this mining giant. I believe Rio Tinto is well-placed to deliver bumper free cash flows thanks to its strong iron ore production and the high prices the steel making ingredient is commanding. Positively, due to the strength of Rio Tinto’s balance sheet, I expect almost all of its free cash flow will be returned to shareholders in the near term. In light of this and based on the current Rio Tinto share price, I estimate that it currently offer a forward fully franked dividend yield of at least 5%.

Rural Funds Group (ASX: RFF)

A final dividend share to buy is Rural Funds. It is a leading agriculture-focused property company with a collection of quality assets leased to some of the biggest names in the industry. Another attraction for me is its long term tenancies. These have been designed to allow the company to consistently increase its distribution at a solid rate each year over the long term. For example, in FY 2020 it plans to pay 10.85 cents per share and in FY 2021 it intends to pay shareholders 11.28 cents per share. Based on the current Rural Funds share price, the latter equates to a generous 5.5% yield.

More reading

• Will the iron ore price crash by the end of 2020?
• 4 trends to invest in before August earnings season
• 2 of the best ASX dividend shares to buy now
• BHP’s share price tumbles with this other ASX miner after being hit by broker downgrades
• I would buy Coles and these ASX dividend shares right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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 Beat low interest rates on savings accounts with these ASX dividend shares appeared first on Motley Fool Australia.

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With a new month upon us, I think it could be a good time to take a look at your portfolio and see if it needs some adjustments.

If you’re looking for some growth shares to buy, then the three listed below could be great options in August. Here’s why I like them:

Altium Limited (ASX: ALU)

Altium is a printed circuit board (PCB) design software provider which I think would be a great long term option for investors. As PCBs are found inside almost all connected devices, I believe Altium is a great way to gain exposure to the Internet of Things boom. A boom which I expect to accelerate when 5G internet becomes the norm. The explosive speeds of 5G internet should allow more and more everyday devices to connect to the internet, which could lead to an increase in licenses for its award-winning Altium Designer software. The launch of its cloud-based Altium 365 offering also looks likely to be a key driver of growth in the coming years.

Appen Ltd (ASX: APX)

I think this global leader in the development of high-quality, human-annotated training data for machine learning and artificial intelligence would also be a great long-term investment option. Appen has been growing at an impressively strong rate in recent years thanks to the growth in machine learning and artificial intelligence and its leadership position in data annotation. As this market is expected to continue growing materially over the next decade, I feel Appen is well-placed to continue its strong form long into the future.

ResMed Inc. (ASX: RMD)

Another growth share to consider buying in August is ResMed. I’m a big fan of this sleep treatment products developer and believe its shares could provide outsized returns for investors over the next decade. This is thanks to the quality of its products and its growing addressable market. In respect to the latter, management estimates that there are 1 billion people impacted by sleep apnoea worldwide. However, the vast majority of these sufferers are currently undiagnosed and could be at risk of life-threatening conditions. I expect the growing education around sleep disorders to lead to more diagnoses and support ResMed’s growth over the coming years.

More reading

• Here are easy ways to diversify your ASX portfolio
• Brokers name 3 ASX 200 shares to buy right now
• ASX 200 sinks 1%: IAG cancels final dividend, tech shares tumble, IGO jumps
• 5 things to watch on the ASX 200 on Friday
• Why I would buy Appen and these ASX tech shares right now

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 owns shares of Appen Ltd. 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.

The post 3 fantastic ASX growth shares to buy in August appeared first on Motley Fool Australia.

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Although it can be tempting to construct a portfolio filled to the brim with high growth tech shares, it is worth remembering that having too much exposure to one particular sector can be a very bad thing for a portfolio.

The travel sector is a prime example of why this is the case. Over the past few years the travel sector has been a great place to invest. The likes of Corporate Travel Management Ltd (ASX: CTD) and Webjet Limited (ASX: WEB) had generated mouth-watering returns for investors over the last five years, prior to the pandemic.

But then out of nowhere their business models were broken, through no fault of their own, and their shares are now trading at levels not seen since 2015. That’s five years of gains gone in the blink of an eye.

If you had a portfolio with significant weighting to the travel sector, you would be severely underwater right now compared to those with more balanced portfolios.

How can you diversify?

Buying companies with limited correlations is one way to diversify.

For example, the drivers of growth for electronic design company Altium Limited (ASX: ALU) and supermarket giant Coles Group Ltd (ASX: COL) are unrelated.

Given their positive outlooks, building a portfolio around these two could be a good start.

Alternatively, you could diversify your portfolio very quickly by investing in exchange traded funds.

The Betashares Nasdaq 100 ETF (ASX: NDQ) is one of my favourite exchange traded funds. It gives investors exposure to 100 of the largest, non-financial businesses on the NASDAQ exchange.

These include countless household names such as Amazon, Apple, Costco, Netflix, Starbucks, and Google parent, Alphabet. Though, given its high weighting to the technology sector, you might want to balance it out with other shares or exchange traded funds.

Another to consider is the iShares Global Healthcare ETF (ASX: IXJ). This exchange traded fund gives investors access to many of the biggest healthcare companies in the world.

This includes CSL Ltd (ASX: CSL), Johnson & Johnson, Novartis, Ramsay Health Care Limited (ASX: RHC), and Sanofi. I think it could generate strong returns for investors over the next decade due to the increasing demand for healthcare services because of ageing populations and increased chronic disease burden.

Overall, I feel if you follow these steps, you’ll maximise your returns over the long run and lower the risk of shock events wiping out your gains.

More reading

• 5 steps to start investing in ASX shares
• How to become a millionaire with ASX shares starting with $0
• Why I would buy Ramsay and this ASX blue chip share
• A top ASX dividend share to buy next week
• Fed up of dividend cancellations? Buy these safe ASX dividend shares

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 BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS and Ramsay Health Care 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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ASX defence shares have attracted global attention as international tensions increase. The Prime Minister recently said we are entering a world that is more uncertain than it was in February. Accordingly, Australia has announced a range of spending initiatives to better secure our country’s defences over the next decade. Furthermore, we are also seeing additional defence spending activity elsewhere around the world.

One example is the Japanese Memorandum of Understanding that formalises Australia and Japan’s plans to work more closely together on space and defence sectors. A second example is the US$50 million in funding from the United States government to Austal Limited (ASX: ASB). This is to maintain, protect, and expand US domestic production of steel shipbuilding capabilities for capital projects over the next 24 months. Consequently, we are seeing a mini-boom in ASX defence shares. On that note, let’s take a look at three defence shares that have done very well recently.

3 surging ASX defence shares 

DroneShield Ltd (ASX: DRO)

DroneSheild has made two strong announcements this week, taking its market capitalisation to $40.39 million. The company specialises in drone security technology and is a world leader in the field. Earlier this week, it announced new contracts with both the US defence forces and the European Ministry of Defence. This builds upon an already expansive client list which also includes the European Union Police.

Dronesheild saw its share price rise by 33.33% across this week. However, it is still down by over 40% in year to date trading due to the coronavirus market crash. I think this ASX defence share is likely to see an increased level of sales due to the proven capability of its product.

Orbital Corporation Ltd. (ASX: OEC)

Orbital has enjoyed a share price increase of only 0.79% this week. However, over the past month the share price has risen by approximately 73%. The company provides propulsion systems for small unmanned aircraft or drones. In the past month, the company had a visit from the Minister for Defence, the Hon Linda Reynolds, reminding the market that Orbital is already an accomplished defence contractor.

In addition, this ASX defence share received a new contract with Northrop Grumman to design and develop a hybrid propulsion system. This will combine an electric motor with the company’s flight-proven engine. The company has a current valuation of $99.31 million.

Xtek Ltd (ASX: XTE)

Xtek is a very interesting company for me. Its share price is level for this week but up by 12.7% over the past month. The company has developed a patented technology called XTclave for curing and consolidating composite materials. Xtek has already installed an industrial sized machine in its Adelaide premises. This is large enough to support ~$40 million in revenues per year, and Xtek is also looking to install another one at its recently acquired US base.

This technology is used to produce a range of products, including; armour, lightweight tactical and human carriage equipment, robotic mechanical systems and unmanned craft. In the past 2 months, this ASX defence share has announced additional contracts with the Finnish Defence Forces and the Australian Defence Forces as well as a grant from the Australian Space Agency. 

Foolish takeaway

Australia has a good number of technologically advanced defence contractors. While most of us focus on Austal and Electro Optic Systems Holdings Limited (ASX: EOS) there are also many smaller ASX defence shares that have developed technologies other countries are willing to pay for.

More reading

• Escalating US-China tensions are sending these ASX stocks jumping higher today
• 2 fast-growing mid cap ASX shares that could be destined for big things.
• DroneShield share price soars 12% on European order
• DroneShield share price surges 25% on US Air Force contract
• Orbital share price soars by 19%

Daryl Mather owns shares of Austal Limited and Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited, Electro Optic Systems Holdings Limited, and Orbital Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings 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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While there are many cheap stocks available to buy right now, some investors may be considering other opportunities such as the housing market. Low interest rates that could persist for a prolonged period of time could mean that house prices perform relatively well in the coming years.

However, with the stock market offering greater diversification potential, lower valuations and a solid track record of recovery from bear markets, it could be a better means of improving your financial prospects.

Diversification potential

Buying a portfolio of cheap stocks is a relatively straightforward option for almost any investor due to the low cost of sharedealing. Online sharedealing has become increasingly prevalent over the past decade, and features such as regular investing opportunities mean that commission costs can be exceptionally low.

As such, reducing overall risks within a portfolio of shares is much easier than it is within the property sector. Due to the high cost of owning just one property, in terms of the amount required for a deposit, many investors may end up with a small number of houses or apartments in their portfolios. This could lead to disappointing returns should there be a problem, such as unexpected repairs, with even just one of their properties.

By contrast, a portfolio of cheap stocks could offer less risk. Even if one company reports disappointing results, this may be mitigated by strong performances from other holdings within a portfolio. This may lead to higher returns in the long run than a more concentrated portfolio of properties.

Exceptionally cheap stocks

The recent market crash means that there may be a larger number of cheap stocks available at the present time than would normally be the case. In some sectors, it is possible to buy high-quality businesses at prices that are significantly below their long-term averages. This suggests that they offer wide margins of safety, and could deliver impressive total returns in the coming years.

Meanwhile, house prices may be less attractive than stocks from a value perspective. House prices have moved higher over the past couple of decades, and may not yet reflect a changing economic outlook. As such, there may be less scope for capital growth than there is within the stock market.

Recovery prospects

Furthermore, the stock market has an excellent track record of recovery from its bear markets. In fact, it has always produced new record highs after each of its past downturns. This suggests that investors who are able to buy cheap stocks now while the wider market is at a relatively low ebb could profit from a likely recovery.

This opportunity may not necessarily be available within the housing market due to the high valuations that are currently present. Therefore, now may be the right time to buy undervalued shares, rather than seeking to build a property portfolio.

More reading

• Here are easy ways to diversify your ASX portfolio
• 3 surging ASX defence shares to buy next week
• Should fixed-interest investments be part of your ASX share portfolio?
• 5 steps to start investing in ASX shares
• Emergency funds: Are they still important?

Motley Fool contributor Peter Stephens 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.

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Should fixed-interest investments be a part of your ASX share portfolio in 2020?

A fixed-interest investment normally refers to bonds. These are an asset class entirely different from the S&P/ASX 200 Index (ASX: XJO) shares like Woolworths Group Ltd (ASX: WOW) or CSL Limited (ASX: CSL) that ASX investors would be used to. A bond is essentially a loan. When you buy a bond, you are in effect loaning the issuer money at both an agreed interest rate and a set repayment date (hence the term ‘fixed-interest’).

Bonds have been popular as an asset class in the past. That’s because they tend to be both less ‘risky’ and less volatile than investing in ASX shares. Investors who invest in bonds are normally happy to accept a potentially lower rate of return in exchange for this ‘safety’ and stability. The most popular type of bond is one issued by a reputable government (such as Australia or the United States). A government has the ability to print money if necessary, and thus can never really ‘go broke’. Thus, the creditor never has a real risk that the bond issuer will default on its loan.

But the investment thesis for bonds is radically different today than it was even 5 years ago. So, do fixed-interest bond investments have a place in a 2020 ASX share portfolio?

Why is the fixed-interest landscape different today?

Fixed-interest investments are a direct function of interest rates. When a government’s central bank sets a cash rate, the government will usually issue bonds with interest rates at a very similar level. For example, in July 2010, the Australian cash rate was at 4.5%. That meant any government bonds issued at that date would have had an interest rate attached to them roughly in that ballpark. A 4.5% ‘risk-free’ investment might sound pretty good. But consider this – today, instead of 4.5%, the Australian cash rate is at a record low of 0.25%.

The Reserve Bank of Australia (RBA) is actively intervening in the bond market to ensure that 3-year Australian government bonds are yielding no more than 0.25% per annum. Even a 10-year government bond is only offering an interest rate of 0.85% per annum at the time of writing. If locking your money up for a decade with a guaranteed 0.85% per annum doesn’t sound like a great deal to you, I don’t think you’d be alone.

Should you invest in bonds in 2020?

I don’t think it makes much sense to invest in bonds or fixed-interest investments in the current economic climate. The RBA has effectively told us that interest rates will likely remain at record lows for at least a number of years.

But if you do want some of the certainty and stability that bonds arguably still offer, then exchange-traded funds (ETFs) are an easy way to build a fixed-interest position into your portfolio. You could consider the Vanguard Australia Fixed Interest Index ETF (ASX: VAF) or the iShares Treasury ETF (ASX: IGB), which are 2 of the largest bond ETFs on the ASX.

More reading

• 5 steps to start investing in ASX shares
• Where to invest $100,000 into ASX shares
• These were the worst performing ASX 200 shares last week
• ASX 200 drops more than 1%, IAG falls 7.5%
• Escalating US-China tensions are sending these ASX stocks jumping higher today

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of 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.

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Getting started in the investment world can be overwhelming – there’s a constant stream of information and so much to learn. But getting started investing in ASX shares doesn’t have to be hard. We put together 5 simple steps to get you on the road to mastering your own share portfolio.

1. Figure out your goals

Understand why you’re investing. Is it to provide for retirement, save for a home deposit, or accumulate assets for the next generation? Once you know why you’re investing, you can figure out the best way to achieve your goals. 

2. Understand your risk tolerance

Investing in financial instruments comes with risk. Unforeseen outcomes can occur that damage returns or wipe out your capital entirely. Risk and return are correlated, however, so oftentimes with higher risk comes higher reward. You need to understand how much risk you are willing to take. 

3. Don’t put all your eggs in one basket 

Even when starting out, you should look to diversify your portfolio so that it contains ASX shares across a range of sectors and industries. This is because different companies perform well in different economic conditions. By spreading your capital around, you reduce overall risk. 

4. Think about what types of ASX shares work for you

This will depend on why you’re investing. If it’s to provide an income in retirement, you might look at dividend shares like AGL Energy Limited (ASX: AGL) and Fortescue Metals Group Limited (ASX: FMG). If you are looking to invest for capital appreciation you might consider high growth shares like Afterpay Ltd (ASX: APT) or Megaport Ltd (ASX: MP1). 

5. Do your research

Even if you’re investing in a blue chip company like Coles Group Ltd (ASX: COL) or Woolworths Group Ltd (ASX: WOW), it can pay to look into the company’s recent reports and announcements. This way you will know if there have been any recent events which may have impacted the share price. 

Foolish takeaway

Investing in ASX shares doesn’t have to be complicated. Taking the time to understand your actions and make considered decisions will help you make choices in line with your goals. Whether blue chip or small cap, your investing decisions should help you achieve your financial aims.  

More reading

• Should fixed-interest investments be part of your ASX share portfolio?
• 5 simple steps to financial independence
• These BNPL shares have blown up since their IPOs
• A top ASX dividend share to buy next week
• Fed up of dividend cancellations? Buy these safe ASX dividend shares

Kate O’Brien 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 MEGAPORT FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, and Woolworths Limited. The Motley Fool Australia has recommended MEGAPORT 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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