Category: Stock Market

There are a growing number of exchange-traded funds (ETFs) to choose from on the Australian share market.

This means that whether you are a growth investor or an income-focused investor, there is likely to be an ETF out there for you.

With that in mind, let’s now take a look at three ASX ETFs that could be top options for income investors in July. They are as follows:

BetaShares S&P 500 Yield Maximiser (ASX: UMAX)

The BetaShares S&P 500 Yield Maximiser could be an ASX ETF to buy for passive income.

This fund has been created to give investors access to the top 500 companies listed on Wall Street. This includes many of the largest companies in the world such as Apple, Exxon Mobil, Johnson & Johnson, and Walmart.

And while the S&P 500 index itself only has a very modest average dividend yield, this ETF’s actively managed covered call strategy means it has been able to pay out significantly more.

For example, its units currently trade with a trailing 4.7% distribution yield.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

A more traditional option for income investors to look at is the Vanguard Australian Shares High Yield ETF.

This popular ETF gathers together a group of ASX dividend shares that brokers are forecasting to provide big dividend yields. Importantly, it does this with diversity in mind and doesn’t just load up on banks and miners. Vanguard limits how much it invests in any particular industry or company.

Among its ~70 holdings are dividend payers such as BHP Group Ltd (ASX: BHP), Coles Group Ltd (ASX: COL), Commonwealth Bank of Australia (ASX: CBA), Transurban Group (ASX: TCL), and Wesfarmers Ltd (ASX: WES).

The Vanguard Australian Shares High Yield ETF currently trades with a dividend yield of 4.9%.

Vanguard Australian Shares Index ETF (ASX: VAS)

A third ASX ETF that could be a good source of passive income is the Vanguard Australian Shares Index ETF.

This ETF has been designed to track the local ASX 300 index. This means that you will be owning a slice of Australia’s leading 300 listed companies.

And while not all these companies are dividend payers, there are plenty in the fund that are. Among this diverse group of shares are companies such as Lovisa Holdings Ltd (ASX: LOV), Macquarie Group Ltd (ASX: MQG), and Woodside Energy Group Ltd (ASX: WDS).

At present, this ETF trades with an attractive dividend yield of 3.7%.

The post Buy these ASX ETFs in July for passive income appeared first on The Motley Fool Australia.

More reading

• Is the FY25 outlook compelling for the Vanguard Australian Shares Index ETF (VAS)?
• 3 top ASX ETFs to buy in July
• What kind of return could I expect by investing $200 monthly into ASX shares?
• What is the average return of the Vanguard Australian Shares Index ETF (VAS)?
• Top ASX passive income shares to buy before June 30

Motley Fool contributor James Mickleboro has positions in Lovisa and Woodside Energy Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Lovisa, Macquarie Group, Transurban Group, Walmart, and Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Johnson & Johnson. The Motley Fool Australia has positions in and has recommended BetaShares S&P 500 Yield Maximiser Fund, Coles Group, Macquarie Group, and Wesfarmers. The Motley Fool Australia has recommended Apple, Lovisa, and Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Coles Group Ltd (ASX: COL) shares are a popular option for investors.

Unfortunately, though, the supermarket giant hasn’t been a great investment over the last 12 months.

During this time, the Coles share price has lost approximately 7% of its value.

This compares unfavourably to an 8% gain by the ASX 200 index over the same period.

But could things be different over the next 12 months? Let’s see what a $10,000 investment in the company’s shares could become.

$10,000 invested in Coles shares

With the Coles share price currently fetching $17.20, if you were to invest $10,000 (and a further $10.40), you would end up owning 582 units.

According to a recent note out of Morgans, its analysts think these units could be worth a lot more than you paid for them.

The broker currently has an add rating and $18.95 price target on Coles’ shares, which implies potential upside of 10.2% from current levels.

This means that if your shares were to rise to this level, they would have a market value of $11,028.90.

Commenting on its bullish view on the stock, the broker said:

In our view, the ongoing scrutiny on the supermarkets has affected short term sentiment in the sector, which we believe creates a good buying opportunity in COL. While Liquor sales remain soft, we expect the core Supermarkets division (~92% of earnings) to continue to be supported by further improvement in product availability, reduction in total loss, greater in-home consumption due to cost-of-living pressures, and population growth.

Don’t forget the dividends

The supermarket giant shares a decent portion of its profits each with its shareholders in the form of dividends. Morgans expects this trend to continue for the foreseeable future.

The broker is forecasting fully franked dividends of 66 cents per share in FY 2024 and then 69 cents per share in FY 2025. Based on its current share price, this will mean dividend yields of 3.8% and 4%, respectively, for investors.

If you assume this means a final dividend of 30 cents per share for FY 2024 and an interim dividend of 38 cents per share for FY 2025, this will lead to total dividends of 68 cents per share over the next 12 months.

This means that your 582 Coles shares will pay out fully franked dividends of $395.76 if Morgans’ estimates prove accurate.

Combined with its capital gains, this boosts the value of your investment to $11,424.66, which represents a total return of approximately 14.1%.

The post How much could $10,000 invested in Coles shares be worth in a year? appeared first on The Motley Fool Australia.

More reading

• Here are 3 ASX retirement shares to buy in July
• Coles and these ASX dividend stocks could offer huge returns
• For a shot at $1,320 a year in passive income, buy 2,000 shares of this ASX stock
• Can Coles shares outperform the ASX 200 Index from here?
• 4 ASX income stocks for Aussie investors to buy now

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

If you’re wanting to strengthen your income portfolio in July with some new additions, then it could be worth looking at the ASX 200 dividend giants listed below that brokers rate as buys.

Here’s what you need to know about them:

BHP Group Ltd (ASX: BHP)

If you are not opposed to investing in the mining sector, then BHP could be worth considering.

That’s the view of analysts at Goldman Sachs, which think the Big Australian’s shares are in the buy zone right now.

They are forecasting fully franked dividends of approximately ~$2.14 per share in FY 2024 and then ~$1.90 per share in FY 2025. Based on the current BHP share price of $43.15, this equates to dividend yields of 5% and 4.4%, respectively.

Goldman has a buy rating and $49.00 price target on them.

Suncorp Group Ltd (ASX: SUN)

Goldman Sachs also thinks that insurance giant Suncorp could be a top option for income investors. It has a buy rating and $17.54 price target on the insurance giant’s shares.

The broker highlights that it is “favourably disposed to Suncorp, noting in large part the tailwinds that exist in the general insurance market.”

Goldman expects this to underpin fully franked dividends per share of 78 cents in FY 2024 and then 83 cents in FY 2025. Based on the Suncorp share price of $16.80, this will mean yields of 4.6% and 4.95%, respectively.

Telstra Group Ltd (ASX: TLS)

A third ASX 200 dividend giant that Goldman Sachs is positive on is telco giant Telstra. The broker currently has a buy and $4.25 price target on its shares.

Its analysts like the company’s low risk earnings and dividend growth over the coming years.

They are forecasting fully franked dividends of 18 cents per share in FY 2024 and then 18.5 cents per share in FY 2025. Based on the current Telstra share price of $3.61, this equates to fully franked yields of 5% and 5.1%, respectively.

Woodside Energy Group Ltd (ASX: WDS)

Finally, over at Morgans, its analysts are tipping energy giant Woodside as an ASX 200 dividend giant to buy. The broker has an add rating and $36.00 price target on its shares.

As for dividends, Morgans is forecasting fully franked dividends of $1.25 per share in FY 2024 and $1.57 per share in FY 2025. Based on the current Woodside share price of $28.25, this equates to 4.4% and 5.5% dividend yields, respectively.

The post 4 ASX 200 dividend giants to buy in July appeared first on The Motley Fool Australia.

More reading

• Here are 3 ASX retirement shares to buy in July
• Coles and these ASX dividend stocks could offer huge returns
• Buy Telstra and these ASX dividend stocks in July
• 5 things to watch on the ASX 200 on Thursday
• What is the outlook for Woodside shares in FY25?

Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Now could be the time to jump on Lynas Rare Earths Ltd (ASX: LYC) shares according to one leading broker.

That’s because it is tipping the ASX 200 mining stock to rally significantly higher from current levels over the next 12 months.

What is the broker saying about this ASX 200 mining stock?

Bell Potter was pleased to see that Lynas is expanding its product range.

As covered here, the Lynas Malaysia business is targeting the first production of two separated heavy rare earths (HRE) products in 2025. A new process will produce separated dysprosium (Dy) and terbium (Tb) at Lynas Malaysia for the first time and will complement Lynas’ existing light rare earths product range.

Dy and Tb are both essential to the high-performance rare earth permanent magnets used in electric vehicles and high-tech applications such as micro-capacitors which are essential to all electronic devices.

Commenting on the news, the broker said:

The additional capacity is anticipated to come online in the middle of CY25 and cost ~$25m to achieve, which is within the previously announced LAMP upgrade budget. LYC currently produces a SEG (samarium, europium, gadolinium) composite, which is sold into China for separation. This additional product suite should provide a value uplift to pricing as LYC captures greater margin from the higher value Dy+Tb products.

Time to buy?

Bell Potter believes that now could be a great time to invest in the ASX 200 mining stock.

Its analysts have responded to the update by retaining their buy rating and lifting their price target to $7.80 (from $7.55).

Based on the current Lynas share price of $5.95, this implies potential upside of 31% for investors over the next 12 months.

To put that into context, a $10,000 investment would be worth approximately $13,100 if Bell Potter is on the money with its recommendation.

While the broker has reduced its earnings estimates this year to reflect weaker than expected rare earth prices, it has boosted its outer year estimates. In addition, it believes the risks are now to the upside for rare earths. The broker concludes:

We have updated our model ahead of the quarterly result, and our target price lifts slightly to $7.80/sh (previously $7.55) as our EV/EBITDA valuation increases with the rolling forward of earnings. EPS estimates reduce by 17% in FY24, 2% in FY25 and 1% in FY26. With risks mounting to the upside for rare earths we retain our Buy outlook.

The post Guess which top ASX 200 mining stock has 30%+ upside appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Lynas shares outperform on ‘exciting development’
• Down 40% in under 3 years, is the Lynas share price due a bounce?
• Buy Rio Tinto and these 4 ASX mining stocks in June

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

We would all love to retire with a $1 million nest egg. That would be more than enough to fund a comfortable retirement, at least according to the Association of Superannuation Funds of Australia (ASFA).

But sadly, most Australians today don’t have enough in superannuation to make this happen on its own. As such, the best way we can hope to get to a seven-figure nest egg by the time we reach retirement age is by investing in ASX shares outside superannuation.

So today, let’s talk about three ASX hacks you can use to hopefully get to a retirement nest egg of $1 million one day by investing in the share market.

3 ASX hacks to help get to a $1 million nest egg

Put your investing on autopilot

I think the best way to invest in ASX shares, particularly for someone who doesn’t get a thrill out of the whole process, is to automate your investing. Make a commitment to yourself to invest $100, $200 or $500 a month (or whatever you can afford) into your nest egg, and stick to it as best you can. Rain, hail or shine.

Most investors get hamstrung from time to time by thinking that, for whatever reason, the present isn’t a good time to invest. You might be expecting a stock market crash, or have read some professional investors’ predictions of an economic slowdown.

You want to avoid all of that. So make a plan and stick to it as closely as you can. Hopefully, you can even forget you’re doing it. By the time five, ten or 20 years go by, you’ll almost certainly notice some real changes to your wealth if you do so.

Reinvest your earnings and dividends

Investing in ASX shares pays dividends. Literally. Chances are that if you own ASX shares, you’ll regularly receive dividend payments. This passive income is one of the best and most obvious benefits of owning shares.

But many people treat this income as disposable and simply add it to their everyday bank accounts, where it is quickly frittered away.

This would be a big mistake. Dividends form a huge component of the overall returns we enjoy from our share market. So siphoning these away from your portfolio is kneecapping the wealth-building effects you might otherwise enjoy from investing.

As such, if you’re looking to build wealth as efficiently and effectively as possible, make sure you are always reinvesting your dividends back into ASX shares. That way, you’ll receive even higher levels of income next dividend payday, kickstarting a virtuous cycle.

You can turbocharge this ASX hack further by investing any windfall earnings you might receive. These could be a tax return or an insurance payout. Any spare cash you can direct into your ASX portfolio brings that $1 million nest egg closer.

ASX hack: Keep your investing simple

Finally, and perhaps most importantly, I think almost every ASX investor who is aiming to build a $1 million nest egg through the stock market needs to keep their investing simple.

The worst thing an investor can do is get ahead of themselves and invest in the wrong stocks. Nothing is more demoralising than losing all your money on a couple of bad stock picks and having to start all over again from square one.

If you have a passion for investing and picking undervalued stocks, then, by all means, go for it. But if you’re a ‘check your portfolio once a month’ kind of investor, it might be better to stick with simple, hands-off investments like index funds.

An index fund like the iShares Core S&P/ASX 200 ETF (ASX: IOZ) or even a listed investment company (LIC) like Argo Investments Ltd (ASX: ARG) are great choices for hands-off investors. They basically do the hard yards of investing for you and are perfect for putting your regular investments on autopilot.

The post 3 ASX hacks to build a $1 million retirement nest egg appeared first on The Motley Fool Australia.

More reading

• 3 lower-risk ASX shares for beginner investors
• How I’d try to turn an empty portfolio into $300k by buying cheap ASX shares, starting now

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

Fortunately for income investors, the Australian share market is one of the most generous in the world when it comes to dividends.

Year in, year out, countless ASX listed companies share a portion of their profits with their lucky shareholders.

But with so much choice, it can be hard to decide which ones to buy above others.

With that in mind, let’s take a look at three ASX dividend stocks that analysts think could be quality options for investors right now and are forecast to offer dividend yields of 5% to 7%. They are as follows:

Accent Group Ltd (ASX: AX1)

Bell Potter continues to see a lot of value in this ASX dividend stock. Accent is a footwear-focused retailer and the owner of a large number of store brands such as HypeDC, Stylerunner, and The Athlete’s Foot.

The broker currently has a buy rating and $2.50 price target on its shares.

As for income, Bell Potter is forecasting fully franked dividends per share of 13 cents in FY 2024 and then 14.6 cents in FY 2025. Based on the latest Accent share price of $1.98, this represents dividend yields of 6.5% and 7.4%, respectively.

Dexus Industria REIT (ASX: DXI)

Over at Morgans, its analysts believe that Dexus Industria could be an ASX dividend stock to buy. It is a real estate investment trust that invests in high quality industrial warehouses across Sydney, Melbourne, Brisbane, Perth and Adelaide.

Morgans currently has an add rating and $3.20 price target on its shares.

In respect to that all-important income, the broker is expecting dividends per share of 16.4 cents in FY 2024 and then 16.6 cents in FY 2025. Based on the current Dexus Industria share price of $2.84, this will mean dividend yields of 5.75% and 5.85%, respectively.

Transurban Group (ASX: TCL)

The team at Citi thinks toll road operator Transurban could an ASX dividend stock to buy right now. The broker currently has a buy rating and $15.50 price target on its shares.

Citi believes the company is positioned to provide investors with attractive dividend yields in the coming years thanks to its positive exposure to inflation.

The broker is forecasting dividends per share of 63.6 cents this year and then 65.1 cents in FY 2025. Based on the current Transurban share price of $12.32, this will mean yields of 5.15% and 5.3%, respectively.

The post 3 ASX dividend stocks to buy with 5% to 7% yields appeared first on The Motley Fool Australia.

More reading

• Why APA Group, Immutep, NAB, and Immutep shares are sinking
• 2 of the top dividend shares in Australia
• 3 ASX dividend shares to buy with 6%+ yields
• ASX passive income: Earn $1000/month
• Brokers name 3 ASX dividend shares to buy

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

On Thursday, the S&P/ASX 200 Index (ASX: XJO) was out of form and dropped into the red. The benchmark index finished 0.3% lower at 7,759.6 points.

Will the market be able to bounce back from this on Friday and end the week on a high? Here are five things to watch:

ASX 200 to rebound

The Australian share market looks set to end the week on a positive note following a decent session on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open 26 points or 0.35% higher this morning. On Wall Street, the Dow Jones was up 0.1%, the S&P 500 rose 0.1%, and the NASDAQ was 0.3% higher.

Oil prices charge higher

It looks like ASX 200 energy shares Beach Energy Ltd (ASX: BPT) and Karoon Energy Ltd (ASX: KAR) could have a good finish to the week after oil prices charged higher overnight. According to Bloomberg, the WTI crude oil price is up 1.2% to US$81.89 a barrel and the Brent crude oil price is up 1.4% to US$86.47 a barrel. Increasing tensions between Israel and Lebanon offset soft US demand.

Buy Lynas shares

The Lynas Rare Earths Ltd (ASX: LYC) share price could be undervalued according to analysts at Bell Potter. In response to news that the miner is planning to produce heavy rare earth elements dysprosium (Dy) and terbium (Tb), the broker has reaffirmed its buy rating with an improved price target of $7.80. It said: “This additional product suite should provide a value uplift to pricing as LYC captures greater margin from the higher value Dy+Tb products.”

Gold price rises

ASX 200 gold shares Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a solid finish to the week after the gold price charged higher overnight. According to CNBC, the spot gold price is up 1% to US$2,337.3 an ounce. A weaker US dollar gave the precious metal a lift.

Arcadium Lithium rated neutral

Arcadium Lithium (ASX: LTM) shares have been given a neutral rating by analysts at Goldman Sachs. However, its analysts have initiated coverage with a price target of $6.50, which implies potential upside of 25% for investors. It said: “With global optionality and strong production growth on the largest lithium resource base among our coverage, Arcadium is well positioned longer-term, though we see risk to projects on execution and cashflow, on our lithium price outlook, and to consensus expectations. We initiate at Neutral with 12m PTs of US$4.30/sh & A$6.50/sh on ALTM & LTM.AX, representing ~20-30% TSR.”

The post 5 things to watch on the ASX 200 on Friday appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Macquarie names 6 ASX shares to buy in July after tax-loss selling
• Why Arcadium Lithium, Baby Bunting, Cettire, and Qualitas shares are racing higher
• 4 ASX mining shares going gangbusters while the market dives
• Should ASX 200 investors brace for another RBA interest rate hike?

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

Despite the past month’s sharp retrace, ASX uranium shares have been on fire over the past year.

Here’s what I mean.

Over the past 12 months the All Ordinaries Index (ASX: XAO) is up a solid 9%.

Now, here’s how these five leading ASX uranium shares have performed over this same time:

• Paladin Energy Ltd (ASX: PDN) shares are up 77%
• Bannerman Energy Ltd (ASX: BMN) shares are up 131%
• Deep Yellow Limited (ASX: DYL) shares are up 81%
• Boss Energy Ltd (ASX: BOE) shares are up 27%
• Alligator Energy Ltd (ASX: AGE) shares are up 49%

Boom!

And these blistering gains come after some big share price falls over the past month, spurred by a 9% retrace in uranium prices.

Here’s how these five ASX uranium shares have performed since this time last month:

• Paladin shares are down 22%
• Bannerman shares are down 19%
• Deep Yellow shares are down 20%
• Boss Energy shares are down 25%
• Alligator Energy shares are down 19%

Before you break out your tiny violin for shareholders, take another gander at the 12-month gains up top.

Of course, that’s all water under the bridge.

The question now is, what might investors expect from ASX uranium shares in FY 2025?

Can ASX uranium shares burn bright in FY 2025?

Every miner obviously faces its own specific operational issues each year.

Company specific variables include things like the weather in their mining locations, production levels, costs, how they progress with exploration and new project developments.

But the biggest common factor that will impact all ASX uranium shares in FY 2025 is the price they’ll receive for the radioactive metal they dig from the ground.

As you may be aware, uranium prices hit 16-year highs of US$106 a pound in early February. Prices have since retraced to around US$84 per pound today.

While that’s a sizeable fall, it remains well above the US$67 a pound uranium averaged in calendar year 2023. And in 2021, the average price was roughly US$30 a pound.

It’s hard to predict if and when prices will again top US$100 a pound.

But I think with the nuclear renaissance we’re witnessing among many major economies seeking carbon-free baseload power, uranium prices – and ASX uranium shares – are more likely to move higher in FY 2025 than lower.

It takes a long time to bring new mines into production, after all. Meaning global demand growth should continue to outpace supply growth for years yet.

Indeed, according to the World Nuclear Association, global uranium demand is likely to outpace global supply through to 2040.

And whether Australia moves forward with its own nascent nuclear ambitions or not, I believe the ongoing debate is at least likely to see the government move to ease the current restrictive policies on domestic uranium exploration and mining.

That alone could give ASX uranium shares a big boost.

The post Will the blistering rally for ASX uranium shares charge on into FY 2025? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Guess which ASX uranium stock was just upgraded to a buy rating
• ASX 200 uranium stock tumbles despite significant new production potential
• Why DroneShield, Paladin Energy, Red 5, and Synlait shares are falling
• Paladin Energy shares sink on $1.25b uranium acquisition news

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

The rate of inflation in Australia continues to be stronger than what the Reserve Bank of Australia (RBA) would like, which may have a negative knock-on effect on ASX shares. The latest monthly reading showed that inflation had accelerated back to 4%, which was stronger than expected.

The RBA’s job is to ensure that inflation stays under control, and recent inflation strength is increasing the risk of another rate rise.

A rate rise would be painful for borrowers and give households with big cash deposits another boost to their income.

What would the impact on ASX shares be? The broker Morgan Stanley has given a warning about which stocks could underperform.

Household-facing ASX shares could face troubles

According to reporting by The Australian, Morgan Stanley suggests that ASX bank shares, ASX retail shares, and ASX housing shares face the potential of underperformance, with the institution predicting an interest rate increase by the RBA in August.

There are numerous banks on the ASX including Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), Bendigo and Adelaide Bank Ltd (ASX: BEN) and Bank of Queensland Ltd (ASX: BOQ).

Housing ASX shares could include Mirvac Group (ASX: MGR), Stockland Corporation Ltd (ASX: SGP) and Brickworks Limited (ASX: BKW).

I recently covered the outlook for ASX retail shares in a separate article, though names like Harvey Norman Holdings Limited (ASX: HVN) could certainly come under scrutiny if Australian rates increased.

Morgan Stanley suggested that if the RBA makes another rate hike and also gives ‘hawkish’ commentary, it could mean weakness for the local economy. This could lead to consumers being more thrifty with their money, which could challenge second-half earnings.

The newspaper reported that the broker suggested the market’s optimistic approach to credit quality risks is shown by the valuations that ASX bank shares are currently trading at, and those multiples should be reconsidered. It also said that some indicators for housing activity are continuing “to flash”. The Australian dollar could strengthen if the RBA rate goes up because investors would be able to earn more money in the country.

What stocks would be opportunities?

Morgan Stanley Australia equity strategist Chris Nicol said, according to The Australian:

For much of this year we have seen a consensus bias to want to look through any impact from tighter monetary policy and jump any earnings gaps to the next stage of the cycle.

Should our additional rate hike call become consensus, the potential harder landing that comes with that is not priced into earnings multiples in our view and will pressure Index direction.

In terms of positioning, we retain our model portfolio sector bias of underweight banks, consumer and housing-linked stocks.

Our key overweight sectors are resources, non-bank financials, global healthcare and selected quality growth.

No specific ASX shares were mentioned as opportunities, but global healthcare could include names like Cochlear Ltd (ASX: COH), CSL Ltd (ASX: CSL) and Sonic Healthcare Ltd (ASX: SHL). Non-bank financials may refer to names like Insurance Australia Group Ltd (ASX: IAG) and Challenger Ltd (ASX: CGF) that could benefit from higher interest earnings on their bond investments.

The post Which ASX shares to buy if interest rates rise (and which to avoid) appeared first on The Motley Fool Australia.

More reading

• Why APA Group, Immutep, NAB, and Immutep shares are sinking
• Here’s when CBA and these ASX 200 bank stocks are paying their dividends
• 3 reasons I think the CBA share price may crash!
• 5 ASX 300 shares smashing new highs while the market sinks
• I think this ASX 200 stock is a tremendous bargain today

Motley Fool contributor Tristan Harrison has positions in Brickworks and Sonic Healthcare. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, CSL, and Cochlear. The Motley Fool Australia has positions in and has recommended Bendigo And Adelaide Bank, Brickworks, and Harvey Norman. The Motley Fool Australia has recommended CSL, Challenger, Cochlear, and Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) has delivered staggering, market-beating gains, but would you believe it hasn’t always been that way? You don’t have to go back far to see when it has struggled — Nvidia stock lost a full 50% of its value in 2022.

Investors who didn’t buy Nvidia stock during that down period might be kicking themselves since those steep losses were immediately followed by the artificial intelligence (AI) craze that has been fueling the stock (and the broad market) for almost two years now. But if that’s you, don’t feel too bad. Very few people understood the changes generative AI would usher in for the world.

If you do own Nvidia stock and have benefited from its incredible gains recently, you should keep in mind there’s real debate about how long its streak can go on. It’s up over 700% since the beginning of 2023, it trades at a high valuation, and the company is facing increasing competition. There’s likely to be significant pullback at some point — here’s how to keep it from upending your portfolio.

Diversification, diversification, diversification

The old adage about not putting all your eggs in one basket is well-known because it’s true. Even if you own shares in one of the best companies on the planet, which Nvidia undoubtedly is, there are no guarantees regarding its future performance. Holding just one stock, or letting it make up an outsized percentage of your portfolio, is a major risk. Even the best of companies can run into all sorts of unforeseen challenges.

With that in mind, putting your investment eggs in different baskets, so to speak, can happen in a few ways. There are layers of diversification, and the more fully diversified your portfolio is across various types of categories, the more protection it will have.

 First, there are different kinds of investments. Beyond the stock market, which includes individual stocks, exchange-traded funds (ETFs), and options, there’s real estate, bonds, cryptocurrencies, and savings accounts, among others.

Even within the stock market, there are different kinds of stocks: growth stocks, value stocks, dividend stocks, blue chips, and other classifications. You can also break stocks down by industry, geography, or market capitalization.

Diversification across these categories can protect you from a downturn in any one asset class, industry, region, etc. A good rule of thumb is to have around 25 to 30 holdings in your stock portfolio, but if that sounds overly complicated, consider a few ETFs. The most popular ones track major indexes like the S&P 500, giving you instant exposure to the hundreds of stocks within the index.

Does it make sense to sell Nvidia stock?

Some long-term investors prefer a “set it and forget it” approach to their holdings. If you buy great stocks and hold through thick and thin, you should be able to generate strong long-term gains. But even these investors need to occasionally review their portfolios to see if any adjustments are necessary to support their investing goals.

And this brings us to the dilemma for Nvidia shareholders. What happens when a stock appreciates in value and accounts for too large a portion of your overall portfolio?

Let’s say you originally allocated 5% of your portfolio to Nvidia, but because the stock has climbed so quickly, it now makes up over 25% of your holdings. This is a case where you might want to sell some Nvidia stock and redistribute those funds to bring your portfolio back into a more risk-ready allocation. It may seem counterintuitive to reduce your exposure to a great company, but such a move can be necessary to bring your portfolio in line with your investing goals.

I’ll give you two recent examples of billionaire investors making high-profile sales of excellent stocks. First, Warren Buffett recently trimmed his stake in Apple by selling an estimated $20 billion of shares in the first quarter. But investors shouldn’t mistake that for any loss of confidence in the company — it still accounts for nearly 43% of Berkshire Hathaway‘s entire portfolio. Meanwhile, Bill Ackman recently sold 10% of his position in Chipotle Mexican Grill. Even with that sale, it remains the largest position in the Pershing Square Capital portfolio at 20%.

Finally, several billionaire investors have recently sold part of their stake in Nvidia, including Citadel Advisors’ Ken Griffin, Millennium Management’s Israel Englander, and Two Sigma’s John Overdeck and David Siegel.

Nvidia’s current momentum won’t last forever. When the pullback eventually comes, it doesn’t have to roil your entire portfolio if you take the steps to diversify your holdings based on your risk tolerance and investing goals.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post One day, Nvidia stock will go down. Here’s how to keep it from hurting your portfolio appeared first on The Motley Fool Australia.

More reading

• Where will Nvidia stock be in 10 years?
• Nvidia is no longer the most valuable company in the world. Here’s what investors need to know
• Where are we in the share market cycle?
• After Nvidia’s 10-for-1 stock split, is it still a buy?
• The AI money flow: Why you can’t afford to miss stocks like Nvidia and this rising ASX 200 tech stock

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Berkshire Hathaway, Chipotle Mexican Grill, and Nvidia. The Motley Fool Australia has recommended Apple, Berkshire Hathaway, Chipotle Mexican Grill, and Nvidia. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.