Category: Stock Market

With over 2,000 companies listed on the ASX, it can be hard to know what to invest in. Especially since most investors have specific needs. So which ASX shares should parents looking to invest early on their children’s behalf buy today?

Unless you watch the share market and have been investing for a while, you are probably looking for a ‘set and forget’ investment. In other words, you want to buy shares in a company that doesn’t require you to constantly keep up to date with its reports. You want something that can be a consistent grower but is on the safer side of the risk profile.

For these reasons, I would start by looking within the S&P/ASX 200 Index (ASX: XJO). In fact, I would start by looking at the below companies as I believe they make great candidates if you’re looking to invest today on your children’s behalf.

Washington H. Soul Pattinson and Co Ltd (ASX: SOL)

I would be hard-pressed not to recommend an investment house like ‘Soul Patts’ as a candidate for a child’s portfolio. It has been listed and paying dividends for over 100 years.

Additionally, it has far outperformed the All Ordinaries (ASX: XAO) since 2000. Soul Patts’ managing director, Todd Barlow, recently commented: “Over the last 20 years to 31 January 2020, an investment in WHSP with dividends reinvested has increased by 11.1 times while the Index has increased just 4.2 times.”

Soul Patts makes its money through a diverse range of investments – from stakes in ASX shares such as TPG Telecom Ltd (ASX: TPM), coal miner New Hope Corporation Limited (ASX: NHC) and building supplies manufacturer Brickworks Limited (ASX: BKW), to investments in unlisted equity, real estate and credit.

If there was a downside, it would be that Soul Patts does not currently offer a dividend reinvestment plan. This would mean, depending on the size of the investment, you would have to manually reinvest the dividend payments periodically (if you’re so inclined).

Altium Limited (ASX: ALU)

Altium is a bit more of a growth story when compared to Soul Patts. It does currently pay a small dividend, however, which will likely increase long term. But its return is likely to be more skewed towards capital growth, which I think is ideal when trying to grow a portfolio long term as you are not required to pay any capital gains tax until the shares are sold. 

Altium has grown strongly recently, pushing it well into the ASX 200. The demand for its software has been growing and it is currently aiming to achieve 100,000 Altium Designer subscribers by 2025.

In addition, Altium recently noted that it is “operationally and commercially well positioned, with electronic design anticipated to be relatively resilient to weather the prevailing and unfolding market conditions”. This gives me confidence in the short term, with a tailwind provided by the Internet of Things boom and its growing market share giving me confidence for the longer term.

Foolish takeaway

I would be happy to purchase both of these companies for a child’s portfolio with a long-term view. Alternatively, if you’re looking for something requiring less ‘thought’, an investment in the BetaShares Australia 200 ETF (ASX: A200) is an option. This gives you a portion of each of the largest 200 ASX-listed companies and has a dividend reinvestment plan.

More reading

• Are rental yields better than dividend yields?
• These were the best performing ASX 200 shares last week
• How to earn $50,000 of passive income with ASX shares
• ASX shares can help millennials retire before their parents
• 2 ASX shares for a first-time investor

Motley Fool contributor Michael Tonon owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Altium. 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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The coronavirus pandemic has changed consumer behaviour in 2020 and beyond. Social distancing and isolation measures have shut down dine-in restaurants and deterred people from going shopping. As a result, instead of eating out or heading to the shops, consumers have opted for more convenient and, at times, cheaper alternatives.  

Here’s how e-commerce is revolutionising the food sector and the ASX shares that could benefit.

ASX supermarkets focussing on e-commerce

In early March, ASX supermarkets like Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) saw unprecedented demand as consumers flocked to panic buy essentials. Some shoppers looked to bypass physically going to busy supermarkets and utilised online grocery delivery. Due to the demand, Coles and Woolworths were forced to shut down their online services.

With in-store sales starting to level out, both Coles and Woolworths have re-opened their online delivery and ‘click and collect’ services. According to the supermarket giants, the coronavirus pandemic has seen a surge in consumers adopting online grocery shopping.

In order to accommodate the expected change in consumer behaviour, Woolworths recently doubled its capacity for online grocery deliveries as the company expects $3 billion in e-commerce sales next year. The company has also hired an additional 5,000 third-party couriers to strengthen its current fleet of 800 delivery trucks in order to service more delivery orders.

Direct to consumer meal subscriptions

Subscription-based meal-kit providers such as Marley Spoon AG (ASX: MMM) have also seen a surge in consumer demand during the coronavirus pandemic. Marley Spoon, which delivers fresh ingredients directly to consumers, reported unprecedented demand, forcing the company to scale up its operations and expand its global workforce.

Marley Spoon currently operates in 3 primary regions; Australia, the US and Europe. The company recently completed a $16.6 million capital raising in order to strengthen its balance sheet and fund continued global expansion.

In an update to the market earlier this month, Marley Spoon revealed it had delivered 7.5 million meals in the first quarter of 2020 and reported its first-ever positive cash flow since its IPO.

The company also saw a 46% increase in revenue for the first quarter, with growth accelerated by the coronavirus pandemic. As a result, Marley Spoon expects to have an accelerated path to profitability and expects to achieve positive operating earnings before interest, tax, depreciation and amortisation (EBITDA) in the second quarter of 2020.

Foolish takeaway

In addition to supermarkets and subscription services, traditional takeaway operators like Domino’s Pizza Enterprises Ltd (ASX: DMP) have also reported a material surge in online demand. As a result, the company has been hiring team members in order to support the change in consumer demand.  

In my opinion, the coronavirus pandemic has irreversibly changed consumer behaviour and demand for certain goods and services. As long-term investors, this provides us with the opportunity to identify and capitalise on the trends that will become normal in the future.

I think investors should think of further shares and themes that could prosper post-pandemic and wait for positive price action before making an investment decision.

More reading

• Double your money with these high quality ASX shares
• Forget CBA and buy these top ASX dividend shares
• 4 top ASX 200 shares for blue chip investors
• 3 top ASX dividend shares you can buy today for income
• Negative interest rates coming? Here’s what it would mean for ASX shares

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended Domino’s Pizza Enterprises 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 shares can help millennials retire before their parents.

There are a lot of people out there that have not been building up their retirement nest enough to be able to retire comfortably at 65, perhaps not even by 70.

I don’t know every family tree out there. If you’re a millennial who has parents who are about to retire in 2021 I’m not sure I can help. But the younger millennials – those born in the mid 1990s – have the potential to beat their parents to retirement if they work hard at it. I think ASX shares are key.

Why are ASX shares the answer?

I believe that most asset classes offer very little potential for long-term wealth growth. Cash and bonds offer very little return due to the RBA’s ultra low interest rate.

I think capital city property could be permanently changed by the coronavirus crisis. More people may decide to rent than buy with cheaper rental prices (lowering demand for property buying). Immigration could be low for a long time. Interest rates can’t really go any lower. People may want to avoid big cities and live in small regional areas.

ASX shares on the other hand are great for millennials to invest in. The purchase costs are very low (think how expensive stamp duty and other buying fees are). You can start with as little as $500, whereas you need a huge cash deposit for a property. Most of those property return calculations don’t include the costs of purchasing. Think of other costs of negative gearing, the loss of money when the property is vacant and so on. These usually aren’t included either.

Plenty of millennial parents may be invested in the wrong assets at the moment.

Which investments would be good ideas?

Not every ASX share investment is a good idea. Expensive and poor performing investment managers are drains on your potential wealth. Plenty of people just own mature, low-growth businesses like Commonwealth Bank of Australia (ASX: CBA), Telstra Corporation Ltd (ASX: TLS) and Woolworths Group Ltd (ASX: WOW). These probably won’t do much over the 2020s. 

It’s growth that will make the biggest difference. Individual ASX shares like A2 Milk Company Ltd (ASX: A2M), Pushpay Holdings Ltd (ASX: PPH), Brickworks Limited (ASX: BKW), Bubs Australia Ltd (ASX: BUB) and Altium Limited (ASX: ALU) are names that I think could be much bigger businesses in five years.

There are some listed fund managers that I think have a very good strategy. Does their style mean they’re likely to produce strong returns over the long-term? Some ideas are: WAM Microcap Limited (ASX: WMI), MFF Capital Investments Ltd (ASX: MFF), Magellan Global Trust (ASX: MGG) and PM Capital Global Opportunities Fund Ltd (ASX: PGF).

Many millennials find the easiest way to invest in shares on the ASX is in low cost exchange-traded funds (ETFs). Some examples are: BetaShares Australia 200 ETF (ASX: A200), iShares S&P 500 ETF (ASX: IVV) and Vanguard MSCI Index International Shares ETF (ASX: VGS).

How fast could a millennial retire?

I’m not sure how much your finances would be able to invest. But let’s say you make it a big goal in you’re life and you’re able to achieve returns of 10% a month with ASX shares. According to Moneysmart if you were aiming for $1 million in 20 years (to beat your parents) you’d have to invest around $1,325 a month. Obviously if you invested more, or made better returns, then you could return quicker.

I think that’s entirely possible for two-adult household who diligently saved and invested each month.

More reading

• Should you invest in ASX shares for income?
• 2 ASX shares for a first-time investor
• Are these China-exposed ASX shares in danger in 2020?
• If you invested $10,000 in the Altium IPO, this is how much you’d have now
• 2 ASX 50 shares to buy for your retirement portfolio

Tristan Harrison owns shares of Altium, Magellan Flagship Fund Ltd, MAGLOBTRST UNITS, PM Capital Global Opportunities Fund Ltd, and WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO. The Motley Fool Australia owns shares of and has recommended Brickworks, PUSHPAY FPO NZX, and Telstra Limited. The Motley Fool Australia owns shares of A2 Milk and Altium. The Motley Fool Australia has recommended BUBS AUST FPO and Vanguard MSCI Index International Shares ETF. 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 easy to lose sight of the buy and hold investment strategy when markets are volatile. In the March bear market, everyone felt like they were Warren Buffett. Never mind the fact they may have been relatively indifferent investors in February, right throughout 2019 or in the years prior.

All of a sudden passive investors became active. Everyone was looking for bargains, but did it really pay off?

Why a buy and hold investment strategy is best

Let’s be clear: day trading is just gambling on ASX shares. If you buy Afterpay Ltd (ASX: APT) shares and hold them for a day or two, you may see some gains. However, I think a lot of those gains would be lost to transaction fees and taxes. 

In contrast, a buy and hold investment strategy makes sense. You’re not just buying ASX shares, you’re investing in high-quality companies for the long-term. That means understanding the companies you own and believing in their long-term success. The CSL Limited (ASX: CSL) share price could go up or down this week, but I believe it will go up over time.

A recent article in the Australian Financial Review (AFR) highlighted this increase in active investing resulting from COVID-19. The article references ASIC data from February and March indicating an increase in the level of retail investors’ trading. Everyone was ducking in and out of ASX shares like Webjet Limited (ASX: WEB) as valuations soared and crashed. But this represents a form of market timing (which doesn’t work!). Many speculators would have been burned while buy and hold investors rode the market down and back up again in April and May.

Furthermore, I think day trading is pretty stressful. If I’m sitting at my desk watching ASX share prices all day, I’d probably get pretty twitchy! In contrast, you can live relatively stress-free if you buy and hold a diverse portfolio of ASX shares. If you have spread your risk through a number of quality ASX shares or even a simple ETF like Vanguard Australian Shares Index ETF (ASX: VAS), you can, for the most part, sit back and relax.

Foolish takeaway

Simply put, a buy and hold investment strategy works. If you hold your assets for less than 12 months, 100% of your gains are subject to capital gains tax (CGT). If you’re in the top tax bracket, this means you could lose 45% of your short-term trading gains.

On top of that, you pay brokerage every time you enter and exit a trade. This can quickly crush any gains you made in short-term buys like Afterpay or Nextdc Ltd (ASX: NXT).

However, investing for the long-term means your risk and returns are spread out. For me, I’d rather sleep peacefully at night with confidence in my buy and hold strategy than toss and turn over short-term ASX share bets in a volatile market.

More reading

• Should you invest in super or your ASX share portfolio?
• Are these China-exposed ASX shares in danger in 2020?
• Brokers name 3 ASX 200 shares to buy today
• Why Qantas, Webjet and these ASX travel shares are dropping lower today
• ASX 200 up 0.8%: Big four banks push higher but Xero tumbles lower

Ken Hall owns shares of Vanguard Australian Shares Index. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Webjet 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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Should you invest in ASX shares for income?

The RBA interest rate is now so low it’s almost impossible to generate meaningful income from a savings account or term deposit.

If someone has a large sum of money in the bank – millions – then a bank account may generate enough interest. But otherwise you’re eating into your capital. Long gone are the days of earning over 5% in a completely safe way.

That’s one of the main things to remember about money in the bank compared getting income from ASX shares. Bank accounts are extremely low risk. If you don’t like the idea of your capital being exposed to volatility then the share market may not be appropriate for you.

However, if you invest wisely and can just view market volatility as a short-term feature rather than a long-term problem, then investing in ASX shares for income could be a good idea .

But it could be a good idea to still hold onto some of the cash and just invest what you need to get the required income level.

The coronavirus market decline could be a good time to invest and get higher long-term dividend yields.

Here are some of the ASX shares that could be considered for income

WAM Research Limited (ASX: WAX), the listed investment company (LIC), has a grossed-up dividend yield of 11.1%. It has increased its dividend every year since the GFC.

Brickworks Limited (ASX: BKW), the diversified property business, has a grossed-up dividend yield of 6.4%. It hasn’t cut its dividend for four decades.

Duxton Water Ltd (ASX: D2O), the water entitlement business, has a forward grossed-up dividend yield of 6.3%. It has projected dividend growth for the next two years.

Rural Funds Group (ASX: RFF), the farmland real estate investment trust, has a FY21 distribution yield of 6%. It aims to increase its distribution by 4% each year.

Out of the above four ASX share ideas for income I’d probably buy Brickworks and Duxton Water first for their discounts to the assets.

More reading

• Get paid huge amounts of cash to own these ASX dividend shares
• Take advantage of ASX share market volatility
• 3 top ASX 200 shares every investor should buy
• Looking for dividend income? Try these 3 ASX shares
• 1 of my favourite dividend shares just forecast growing dividends to March 2022

Motley Fool contributor Tristan Harrison owns shares of DUXTON FPO and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended Brickworks and RURALFUNDS STAPLED. The Motley Fool Australia has recommended DUXTON 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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It’s an age-old question for Aussie investors – should I invest in super or in my ASX share portfolio? Let’s take a quick look at some of the pros and cons of investing inside and outside of super in 2020.

Why you should invest in super

One big benefit the superannuation system has going for it over and above investing in shares is that it’s tax-advantaged. Superannuation contributions are taxed at just 15% which can result in considerable tax savings for the average Aussie.

The lowest tax rate, starting at $18,201 in taxable income, is 19%. The rates then increase as you ascend the various tax brackets up to a sizeable 45% at the very top of the tree. So, as you can see, particularly if you’re in a higher tax bracket, it makes sense to invest in super. Your super account has the potential to help you to reduce your tax and increase your after-tax returns.

As well as the tax benefits, superannuation has another key advantage – size. Industry super funds have billions of dollars in assets under management which means they can invest in asset classes that aren’t available in your ASX share portfolio. Some examples include hedge funds, private equity, commercial real estate and infrastructure projects.

So while buying Nextdc Ltd (ASX: NXT) shares could boost your wealth, you could potentially think even bigger if you invest in your super.

But having an ASX share portfolio is important

Despite its benefits, there are drawbacks to super. For one, it can’t be accessed until you hit preservation age which is currently between 55 and 60, depending on the year you were born. On top of this, there is exposure to regulatory risk if you choose to invest in super. For example, the government could easily make changes to the super system in the coming years in order to raise tax revenues.

Personally, I think there needs to be a balance between investing in super and ASX shares. Super is a great, long-term investment but a diversified ASX share portfolio can also pay dividends (literally!). That means investing in large-cap shares like CSL Limited (ASX: CSL) today could be just the ticket to a safe and comfortable retirement in the years to come.

Foolish takeaway

Whether you choose to invest in super or your ASX share portfolio, putting your hard-earned cash away for the long-term is the key to building wealth. This means diversified investments and consistent savings should pay off, however you choose to invest.

More reading

• Why a buy and hold strategy for ASX shares is best
• Got $5,000 to spend? Here are 5 ASX shares you can buy today
• Should you cash out of this ASX 200 rally?
• If you invested $10,000 in the Afterpay IPO, this is how much you’d have now
• If you invested $10,000 in the CSL IPO, this is how much you’d have now

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 CSL Ltd. 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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Are you currently in, or maybe nearing, retirement and looking for a way to get some extra income from shares?

I believe that investing in ASX shares that pay high dividends is a much better alternative than keeping your money in a savings account or term deposit, where the interest you earn barely covers inflation.

High dividend-paying ASX shares have got a lot of negative press lately, as some companies historically viewed as strong and consistent dividend payers, such as Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking GrpLtd (ASX: ANZ), reduced or deferred their next dividend payment.

However, it is important to remember that the coronavirus crisis is (hopefully) a once in a lifetime event, and the economy and markets are likely to begin to return to normal later this year or next year. Also, companies in some sectors are likely to see minimal or no impact on their ability to pay dividends this year.

With that in mind, here are my 2 top picks right now, both of which pay attractive dividends and appear to be less impacted by the pandemic.

Macquarie Group Ltd (ASX: MQG)

Unlike Australia’s big 4 local retail banks – Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac and ANZ – investment bank Macquarie has a much more diverse business model and doesn’t have as much exposure to the residential property market and local economy.

Macquarie recently reported an 8% decline in net profit for FY20, however, I believe this is quite a good result considering the unprecedented challenges that the local and global economy is now facing.

Macquarie recently declared a $1.80 per share final dividend, bringing its full-year FY20 dividend to a total of $4.30 per share. This was a 25% reduction on FY19’s dividend but is still equivalent to an attractive 4.09% yield on current prices.

Wesfarmers Ltd (ASX: WES)

Wesfarmers has strong product and sector diversification across a broad range of divisions. I believe this places it in a strong position to ride out the challenges posed by the coronavirus pandemic.

Wesfarmers has operations in segments like general merchandise, home improvement, and office supplies, as well as other segments such as industrial and chemicals. In particular, its Bunnings business has grown strongly over the past decade, evolving into one of Australia’s largest and most successful retailers.

In a recent market update, Wesfarmers noted that its retail businesses continue to perform well. The group is upgrading its online sales offerings to support the unprecedented increase in demand for a range of online products, such as office supplies.

On current prices, Wesfarmers shares are offering a trailing dividend yield of 4.04%, which grosses up to 5.77% with full franking.

More reading

• Why Kogan, Macquarie, Newcrest, & Santos shares are zooming higher
• Broker tips 10 ASX 200 shares for a post-coronavirus recovery
• Got $5,000 to spend? Here are 5 ASX shares you can buy today
• Losers of Virgin Australia’s potential nationalisation
• This is the best ASX big bank stock you can buy right now

Motley Fool contributor Phil Harpur owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, and Westpac Banking. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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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