The Bitcoin (CRYPTO: BTC) price stands at US$55,900 (AU$72,600) at the time of writing. That’s up 3.3% over the past 24 hours. However, the Bitcoin price is still down 8.7% from its all-time highs of just over US$61,520, which it reached this past Sunday.

If you’re familiar with cryptocurrencies at all, you’ll know they have a notorious history of volatility. According to data from CoinDesk, just last year you could have bought one Bitcoin for US$5,700. If you’d held onto it, you’d be sitting on a gain of 880% today.

But price swings run in the other direction too

Sticking to just the past 30 days, Bitcoin was trading for US$57,960 on 22 February. By 1 March, the price had tumbled to US$43,500. In other words, the Bitcoin price tanked 25% in only one week.

So why are more institutional investors turning to Bitcoin as a defensive asset?

Why more institutional investors are banking on Bitcoin

Governments in developed nations are spending trillions of dollars in fiscal stimulus measures to counter the economic impacts of the pandemic. And central banks are ramping up their quantitative easing (QE) programs and holding interest rates near zero. As such, many investors fear that rising inflation may be just around the corner. Indeed, US Government 10-year Treasury notes are yielding just over 1.6% today, the highest since before COVID struck.

Now, according to a survey conducted by JPMorgan, an increasing number of professional investors are turning to Bitcoin over more traditional assets like gold and inflation-linked bonds to hedge against inflation.

As reported by The Australian Financial Review on Monday:

According to a JPMorgan institutional investor survey of 174 asset managers, owners, and hedge funds responsible for more than $US15 trillion in assets, 29 per cent responded they’re positive on digital assets in that they may replace fiat money in the future. Forty-four per cent were neutral and 14 per cent negative.

Of the respondents, 26% cited the “debasement of fiat currencies as the most compelling reason to invest in Bitcoin, versus 13% of investment managers”. Increasing market dept, with more financial institutions turning to cryptocurrencies like Bitcoin was cited by another 27%.

The JPMorgan survey also revealed that 54% of the professionals who are invested in digital tokens “have an allocation less than 1 per cent, with 32 per cent having an allocation between 1 to 5 per cent; 79 per cent of all professionals declared the allocations unhedged.”

So as an ASX investor, should you invest in Bitcoin as a defensive asset against the spectre of rising inflation?

That, dear investor, is a decision you’ll need to make for yourself.

More reading

• Elon Musk reviews title and decides ‘Technoking of Tesla’ is more fitting
• Could this be the pin to pop the Bitcoin (CRYPTO:BTC) bubble?
• Bitcoin (CRYPTO:BTC) hits another record high. What’s going on?
• ASX 200 Weekly Wrap: Calm restored to the ASX 200
• The FOMO fund: Yes, it’s a real thing and it could be dangerous

Bernd Struben 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 Bitcoin. 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 Bruce Jackson.

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Earlier this month, we covered a new exchange-traded fund (ETF) set to hit the ASX boards in the ‘near future’.

That ETF was the VanEck Vectors Global Clean Energy ETF (ASX: CLNE), and it indeed listed on the ASX as of 10 March. 

And it’s been a pretty good debut so far. At the time of writing, this ETF is up 1.43% from its initial public offering (IPO) price. At one point last week, it was up almost 6%.

Investing in global, clean energy with an investment that is on the up, what’s not to like?

Well, quite a bit, says a new report from the Australian Financial Review (AFR) today.

According to the AFR, this Global Clean Energy ETF is now the most shorted share on the entire ASX. If you’re not familiar with short selling, it involves the process of borrowing shares from another investor to sell at a later date.

The ‘shorter’ makes money if the shares fall in value over this time. Put simply, shorting is betting the price of a share (or ETF in this case) will fall.

Shorting a clean energy ETF?

According to the report, 17% of this ETF’s units are being held short. That makes it the most shorted share on the ASX.

The reason? The AFR argues that it is because of “concern of a growing bubble in climate-friendly investing”. As well as a sense that “investors are piling cash into anything that looks ‘green’”.

It notes that globally, US$350 billion has been invested in ESG (environmental, social and governance criteria) assets in 2020. That’s double the previous year.

The report also notes that the Global Clean Energy ETF’s largest holding is Plug Power Inc (NASDAQ: PLUG). Plug Power is a company that has risen more than 1,200% over the past year but has cratered in the past week. This is reportedly due to Plug warnings it would have to “restate its financial statements” for 2018 and 2019 after “finding errors”.

According to VanEck, Plug Power is still the ETFs largest holding. It has a weighting of 9.32% in the fund.

With that in mind, it’s understandable why some investors are getting nervous over the Global Clean Energy ETF.

Contrary to some popular opinion, it’s worth noting that ‘investing’ in a company doesn’t directly result in the company receiving more money.

If more capital flows into a company, it just means investors are just paying other investors more money for the shares.

More reading

• Is the Commonwealth Bank (ASX:CBA) share price a buy or hold?
• Why the Elders (ASX:ELD) share price is outperforming the ASX today
• How much have investors made (or lost) on Zip (ASX:Z1P) shares?
• Brokers are bullish about these 3 ASX 200 shares
• Where is the Flight Centre (ASX:FLT) share price going in 2021?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Commonwealth Bank of Australia (ASX: CBA) share price is down 0.58% at time of writing. That’s right in line with the broader S&P/ASX 200 Index (ASX: XJO), down 0.51%.

Commonwealth Bank’s shares have underperformed the other big 4 banks over the past 12 months, with shares up 28% since 17 March 2020.

Australia and New Zealand Banking Grp Ltd (ASX: ANZ) leads the big 4, with the share price up 54%

National Australia Bank Ltd (ASX: NAB) comes in a close second, with shares up 51%

And the Westpac Banking Corp (ASX: WBC) share price has gained 42% in 12 months.

So is the Commonwealth Bank share price a buy or hold at today’s level?

That depends on who you ask and how far along you think the ASX 200 is on the reflation curve.

Commonwealth Bank shares a hold

Romano Sala Tenna is the portfolio manager at Katana Asset Management. And he believes that the big 4 banks, all up significantly in 2021, are fully valued. As the Australian Financial Review points out “the ASX banks index is up almost 20 per cent since the start of the year”.

That has Sala Tenna keeping a careful eye on Katana’s bank share holdings. He said:

Momentum is still there, sentiment is still there, so we are happy to hold [the big 4 banks] for the course. But once we think that sentiment and momentum changes, we will move to the door on those as well.

Commonwealth Bank shares a buy

Plato Investment Management managing director Don Hamson has a different take on Commonwealth Bank shares. And that’s all to do with its juicy dividend potential.

Out of the big 4 banks Hamson picks Commonwealth Bank as the top income investing share.

According to Hamson:

Its $1.50 dividend equates to only 67% of earnings and the bank has said its pay-out ratio is likely to be 70 to 80% this year, so a stronger second-half dividend is expected. There’s also the possibility management will use excess franking credits to undertake an off-market buyback in the coming year, which will be a lucrative opportunity for retirees in particular.

More reading

• Afterpay (ASX:APT) share price wobbles on CommBank BNPL news
• Westpac (ASX:WBC) share price lower despite Consumer and Business changes
• ASX 200 down 0.6%: Telstra upgraded, Webjet rated as a buy, Westpac update
• ASX investors still can’t get enough of GameStop (NYSE:GME) shares
• We’ll get 7.8% yield from ASX this year, says investment pro

Motley Fool contributor Bernd Struben 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 Bruce Jackson.

The post Is the Commonwealth Bank (ASX:CBA) share price a buy or hold? appeared first on The Motley Fool Australia.

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The Elders Ltd (ASX: ELD) is defying the market gloom today as it’s one of the few handful of stocks to be gaining ground.

The Elders share price jumped 2% to $12.29 in after lunch trade when the S&P/ASX 200 Index (Index:^AXJO) slumped 0.7%.

Nearly every sector is trading lower as US stocks fell overnight. But shares in the agribusiness zoomed ahead after Goldman Sachs reiterated its conviction “buy” recommendation on the ASX share.

Bumper harvests for the Elders share price

“Market conditions have strengthened across Australian Agricultural markets in the last 3 months led by a bumper winter crop harvest and strong cattle prices,” said the broker.

“Increasing grower optimism and strengthened balance sheets should support strong demand for ELD’s agribusiness products and services.”

What’s more, the broker believes Elders’ profit margins are set to expand and that it will win market share.

These factors are behind Goldman’s prediction that the company’s earnings before interest and tax will grow by 13% compound annual growth rate (CAGR) from FY21 to FY23.

Growth drivers

“The Rural Products segment (42% of FY21 group gross margin) is performing well, in our view, aided by a recovery in the summer crop and strong demand for pre-emergent chemicals as we approach the 2021 winter crop planting window,” added Goldman.

“We expect a solid performance in the Livestock Agency Services segment (28% of FY21 gross margin). Weaker volumes are more than being offset by higher livestock prices and market share gains.”

You might not think it, but Elders is also a beneficiary of the structural online shift that is being accelerated by COVID-19.

Not too old for the online revolution

The company owns 50% of the Auctions Plus platform for livestock and is well placed to facilitate the move to online livestock auctions.

Elders is on Goldman’s conviction list and the broker’s 12-month price target is $15 a share.

While agriculture is a tough space on the ASX to invest in, the 2021 outlook for the sector is bright.

Another buy idea in the sector

Favourable weather, reasonably strong commodity prices and the global economic recovery from COVID are some of the factors behind this upbeat view.

Another ASX-listed agribusinesses that are likely to benefit from these tailwinds include the Ridley Corporation Ltd (ASX: RIC) share price.

Credit Suisse upgraded the ASX share to “outperform” from “neutral” this week as the broker has greater conviction in its medium-term growth profile.

More reading

• ASX 200 down 0.6%: Telstra upgraded, Webjet rated as a buy, Westpac update
• Leading brokers just upgraded these ASX shares to “buy” today
• 2 ASX 200 shares that keep growing the dividend every year
• 5 things to watch on the ASX 200 on Wednesday
• Sneaky way ASX company can boost share price by 7%

The post Why the Elders (ASX:ELD) share price is outperforming the ASX today appeared first on The Motley Fool Australia.

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The Zip Co Ltd (ASX: Z1P) share price is having another wild ride today. Not that the current share price reflects that too clearly. At the time of writing, Zip shares are down 1.6% to $8.61 after opening at $8.71 this morning.

But Zip was also trading at $9.12 a share at one point earlier today soon after open, up by more than 3%.

But that volatility pales in comparison with what’s been happening with the Zip share price over the year to date so far. Zip started 2021 at around $5.60 a share, meaning investors are up roughly 54% since then.

But in mid-February, this company shot all the way to a new 52-week high of $14.53. That number represents a year-to-date gain of nearly 160%. But since 16 February, the company has also lost roughly 40% of its market capitalisation.

If you’re looking for a poster child for ASX volatility, it seems Zip would make a fine candidate.

So aside from this volatility, how has Zip actually performed as an investment for its shareholders? The company neither pays, nor has ever paid, a dividend, so we’ll have to go by its share price alone.

Zip shares bring both volatility and windfalls

So, bottom line, at the current Zip share price, anyone who bought shares before 25 August 2020 is likely still in the green on their investment. On 26 August, Zip hit what was then a new record high of $9.65 before retreating again going into September.

Further, anyone who purchased Zip shares between 1 September 2020 and 4 February of this year is also likely in the green on those purchases. Naturally, Zip has been volatile in between these dates but did not exceed the pricing peaks we saw on 26 August.

But of course, Zip’s biggest winners have been its long-term investors. The Zip share price is up 420% over the past two years alone, and a staggering 2,300% over the past five years. And anyone who took advantage of the market crash that was in full swing exactly a year ago is enjoying a nice 437% gain today.

But recent movements have been more unkind.

Unfortunately, anyone who purchased Zip between 5 February and today is probably ruing their decision since their investment would likely be in the red. And (as we touched on earlier), investors who bought Zip shares on 16 February would be nursing a nasty loss indeed.

As we discussed earlier this week, sometimes the best investments come with the most volatility. That has certainly been the case with Zip shares. But for those with the nerves of steel to hold on for the ride, it has (mostly) paid off handsomely.

More reading

• 2 ASX investing strategies that could give young people an advantage
• Afterpay (ASX:APT) share price wobbles on CommBank BNPL news
• Why Lake Resources, PainChek, Z Energy, & Zip shares are rising today
• Flight Centre and Zip were some of the most traded ASX shares last week
• The Afterpay Ltd (ASX:APT) share price on watch after launch in France, Spain and Italy

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 ZIPCOLTD FPO. 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 Bruce Jackson.

The post How much have investors made (or lost) on Zip (ASX:Z1P) shares? appeared first on The Motley Fool Australia.

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These 3 ASX 200 shares have struggled to deliver shareholder value in the past few months. Big brokers have scrutinised them and believe there could be some upside as earnings momentum recovers or picks up.  

1. AGL Energy Limited (ASX: AGL) 

Ord Minnett thinks that the tides may have finally turned for the depressed AGL share price. The broker believes that there could be some significant asset restructuring from the company in the near-term, but expects the focus will be to improve the profitability of its assets.

Ord Minnett rates the AGL share price as an ‘accumulate’ with a $14.04 share price target. This would represent a significant ~40% upside to its current levels. 

2. Eagers Automotive Ltd (ASX: APE) 

In June 2020, Mercedes-Benz and Honda announced a move from a franchise-based dealership model to a new business model that uses dealers as intermediaries to sell cars from the manufacturer. 

Honda is expected to start the new business model in July 2021, while Mercedes-Benz hopes to transition by January 2022. 

Morgan Stanley believes that this transition will not impact Eagers Automotive’s profitability and that the agency model itself would not be widely adopted any time soon. It also notes that Eagers Automotive has relatively low exposure to the two brands. 

The broker retained an overweight rating for Eagers Automotive, with a $17.00 target price. 

3. Sonic Healthcare Limited (ASX: SHL)

The Australian government announced an additional $1.1 billion in funding for Australia’s health response to COVID-19 this month. This investment will support rapid pathology testing and tracing, building on the more than 14.5 million COVID tests conducted to date. 

Sonic has played a crucial role in pandemic control with over 18 million COVID tests performed to date in 60 Sonic laboratories globally. COVID-19 testing has emerged as a significant revenue and earnings contributor alongside its core medical diagnostic services. The additional funding from the Australian government means that the current $100 COVID-19 test fee will remain in place. Credit Suisse expected this fee would be reduced to $50 from 1 April. 

The broker believes that the company should see a recovery in growth rates moving into the second half of FY21. Sonic has noted that its global business has become increasingly resilient to the impacts of pandemic waves, evidenced by only a 1% decline in revenue during 1H FY21. 

Credit Suisse rates Sonic as an outperform with a $40.00 target price. 

More reading

• 3 top ASX shares rated as buys by brokers
• Why the Tilt Renewables (ASX:TLT) share price is soaring 15% today
• The Eagers (ASX:APE) share price is near all-time highs
• Goldman reaffirms its conviction buy on this ASX share on Yallourn shutdown
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Earlier today I revealed that Goldman Sachs has initiated coverage on Webjet Limited (ASX: WEB) with a buy rating and a $7.36 price target. You can read about that here.

Webjet wasn’t the only company that the broker has been looking over. It has also taken a closer look at Flight Centre Travel Group Ltd (ASX: FLT) shares.

Where next for the Flight Centre share price?

According to the note out of Goldman Sachs, the broker is less bullish on the Flight Centre share price.

Goldman has initiated coverage on the travel agent’s shares with a neutral rating and $20.00 price target.

Based on the current Flight Centre share price, this price target implies potential upside of 6.4% over the next 12 months.

Goldman commented: “FLT is undergoing a significant transformation phase, with store and cost rationalization having been fast-tracked into 2020. The group now has a greater focus on online retailing and the corporate market, which broadens its addressable market from the slow-growing legacy business. We believe FLT is likely to emerge post COVID-19 with improved profitability, and see no major balance sheet risks. However, FLT is more exposed to risks around international travel recovery in the short term. We initiate with a Neutral and a 12-month TP of A$20.”

The bear and bull cases

The aforementioned neutral rating and $20.00 price target is based on international travel recovering from mid-2021, with economies like the UK/US taking the lead, and a strengthening over 2022.

Given the uncertainties, Goldman Sachs has also developed a bull and bear case which could impact its valuation for Flight Centre.

Bear case – Flight Centre price target $9.00

Goldman explained its bear case as follows:

“For the bear case, we assume that FY22 remains similar to FY21 and that international recovery does not begin until early FY23. This is largely in line with our macro team’s view that potential ineffectiveness of vaccines against a new strain could delay the timeline towards herd immunity by 10 months.”

Bull case – Flight Centre price target $29.05

As for the bull case, Goldman explained it as follows:

“For the bull case, we assume that international recovery is faster than expected. We assume that the activity levels to be achieved in 2HFY22 in our base case are achieved a half ahead, in 1HFY22, working off the scenario that international travel recovery follows immediately after the vulnerable populations have been vaccinated in most developed markets.”

Given the potential upside for the Flight Centre share price from the bull case, shareholders will no doubt be hoping this is the way things go over the next 12 months.

More reading

• Flight Centre and Zip were some of the most traded ASX shares last week
• Leading brokers name 3 ASX shares to sell today
• Share market on watch over AstraZeneca vaccine fears
• The Flight Centre (ASX:FLT) share price is up 40% in six months: Can it go higher?
• These are the 10 most shorted shares on the ASX

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Novatti Group Ltd (ASX: NOV) share price is sinking today despite the company announcing its collaboration with LITT.

At the time of writing, the digital banking and payments company’s shares are down 6.4% to 43.5 cents.

Based in Australia, LITT is a fintech and social hybrid app that connects people through e-commerce, advertising, and digital payments. Users can earn digital cash by watching ads put out by local businesses on their newsfeed.

Basically, the company shares its advertising revenue with its members instead of social media influencers solely making money through posting content.

What did Novatti announce?

The Novatti share price is falling despite delivering a positive update to the ASX market.

In today’s release, Novatti advised that it has added LITT to its ecosystem, creating additional revenue streams.

The company will provide LITT members with access to digital Visa Prepaid cards and instore and online payments networks. This is expected to push the interaction between social media and daily life transactions.

The collaboration will see Novatti earn revenue from project set up, transactions, and card-issuing services.

While the company did not disclose the revenue amount projected, it reminded investors that it was focusing on achieving growth. This encompasses its recently launched Lifepay and its Visa Prepaid cards which Apple Pay is now supporting.

More on LITT

LITT has more than 18,000 members and 500 local businesses in its growing portfolio.

Just last month, when Facebook banned news content in Australia, the company saw an 83% increase in new member sign-ups. Local business registering on the platform jumped 85%, highlighting a gap in the market.

Words from the managing director

Novatti’s managing director Peter Cook commented:

Novatti’s collaboration with LITT is another example of how we are creating new potential revenue opportunities by leveraging our existing digital banking and payments ecosystem.

This ecosystem has now helped propel several new and innovative businesses, including Novatti’s Digital Payments Accelerator, Lifepay, with its commercial launch last week, and now LITT.

Each of these opportunities has tapped into Novatti’s digital banking and payments ecosystem to bring an innovative new product to market quickly. They also further Novatti’s strategy of connecting to new payment networks to drive overall growth while continuing to increase Novatti’s B2C exposure.

About the Novatti share price

The Novatti share price has accelerated to more than 330% since this time last year. The company’s shares increased sharply from the middle of February after strong investor hype.

Based on the current share price, Novatti has a market capitalisation of around $98 million.

More reading

• Novatti (ASX: NOV) share price hits new record high. Here’s why

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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Goldman Sachs has taken a deep dive on the Pilbara iron ore majors, BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG).

After running the ruler on operational and production metrics, the broker is buy rated on the BHP share price while neutral rated on Rio Tinto and Fortescue. 

Lower capital intensity 

Goldman Sachs brings to our attention the significant capex expenditure required for Rio Tinto. Rio’s 2020 results confirmed that its Pilbara capex will remain above US$3 billion per annum, almost double its peers, until at least 2024. The broker believes Rio Tinto runs the risk of having the highest number of mines to replace, as well as the greatest production and capex risk from the Juukan Gorge incident. 

This incident involved the company destroying a historically and culturally significant site in Western Australia, that resulted in the departure of its chief executive and two senior executives. Goldman believes current and future heritage approvals could poise a risk to its Pilbara operations.

As a result of mine depletion issues and heritage challenges, Goldman cites that Rio Tinto may have 12 replacement mines to build by 2027, which equates to almost current annual production. 

As key advantage for BHP is its larger mine sites and mining hubs which lowers the requirement for replacement sites. The broker notes that this brings BHP’s capital intensity in Pilbara to average c. US$7/tonne over the next five years, compared to Rio Tinto and Fortescue at c. US$11/tonne. 

Strong margins to drive the BHP share price 

The report positions BHP as the iron ore major with the highest earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins. In the long run, Goldman forecasts that BHP will generate an EBITDA margin of 60% compared to Rio at 56% and Fortescue at 47%. 

From an iron ore grade perspective, BHP is also positioned to surpass Rio Tino when its South Flank mine ramps up and replaces the lower grade Yandi mine. Rio Tinto currently has the highest average product grade at 61% compared to BHP at 60% and Fortescue at 57–58%.

More reading

• Flight Centre and Zip were some of the most traded ASX shares last week
• Broker warns of big iron ore oversupply next year: time to panic?
• Why Advance Nanotek, BHP, Limemade, & Metcash shares are sinking
• Should you buy BHP, Fortescue, or Rio Tinto shares?
• Chinese factory output is up an astonishing 35%

Motley Fool contributor Kerry Sun 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 Bruce Jackson.

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There are many benefits young people have when investing in the share market. I mean, Warren Buffett made his first investment at age 11!

No doubt the first kind of investing to do when you’re just starting out in life is into your savings account.

If you’re young and you’ve managed to accumulate some savings that you’re interested in using to invest in the ASX, here are two advantages you have over the rest of the pack.

What investment strategies advantage young people?

You can invest in practically anything, from property to antiques, but let’s assume you’re looking to invest in ASX shares. You’ve got three main choices: plain shares, mutual or exchange-traded funds (ETFs) or dividend-paying shares.

If you need more information about what these are or how to trade on the ASX, The Motley Fool has a great guide on getting started.

Like all investors, young people need to take a personal approach to investing and consider their individual situation before taking action. 

Depending on your stock market knowledge and your risk tolerance, there are two major investment strategies where young people might have an advantage.

The easiest, least risky investment approach for young people: invest passively

If you’re looking for a hands-off approach, you could consider popping your little nest egg in ETFs or even some quality blue-chip shares, and let the interest start compounding. Because you’re getting in early, you’ve got the benefit of time. With only a small amount of attention, your egg may grow exponentially over the years.

The math is pretty convincing on this one, and the Australian Government has developed a handy little calculator to help figure it out. 

Let’s assume you have $125 a week that you can spare to invest: that’s roughly $500 a month. If you invest wisely and manage to grow that by 10% per year and continue to add $500 a month, you’ll end up with a healthy $347,014 portfolio in 20 years. Not bad, considering you’ll only be out of pocket $120,000 over the entire 20 years. 

The other investing approach with advantages for young people is possibly the riskiest way to invest

You may not have as much cash in your pocket, but you’ve got more time to replace it if needed. Investing in smaller up-and-coming companies or growth shares that you understand and believe in can be risky, but it can also be rewarding if you get it right.

If you’re going to go big, make sure you don’t do so in any single company. The broader your investments are – across different industries and commodities – the less likely you are to lose everything you’ve invested.

What the experts say

UniSA’s Financial Planning Lecturer Geoff Pacecca told On The Record what he believes all young people looking to invest in the share market need to know.

I think [they] need to ensure they have a long-term investment time frame, a well-diversified portfolio and, where possible, that they access professional advice

You should not invest any cash you think you may need for a holiday or car or anything else over the next 7–10 years. You do not want to find yourself on the wrong end of a market cycle should you need the cash in a down market.

I would say to students that your biggest asset is you. They should focus on good grades and doing well in their field of education, getting some work experience in Australia or even overseas, and be open to getting involved by volunteering and contributing in some way to their local community.

The hard lessons you don’t want to learn from experience

You didn’t live off ramen noodles for years to lose all your savings because some CEO made a poor decision!

Firstly, investing is a risky business. Even the most stable company can see share price volatility from a number of factors.

That’s not to discount the value of properly planned long-term investments in ASX listed companies. Particularly today, as low-interest rates and rising bond prices mean that cash savings accounts and bonds aren’t as prosperous as your parents may believe.

Secondly, if you have high-interest debt, you probably want to pay that off before investing in the share market. Investing in Afterpay Ltd (ASX: APT) or Zip Co Ltd (ASX: Z1P) should come after paying off all you owe them!

Finally, make sure you have a good safety blanket of a few months’ expenses left over after putting your savings into any investment. You want to ensure you can still take a holiday or support yourself if your income stream slows to a trickle.

More reading

• Afterpay (ASX:APT) share price wobbles on CommBank BNPL news
• How this week’s Fed meeting could impact ASX 200 shares
• Why Lake Resources, PainChek, Z Energy, & Zip shares are rising today
• ASX 200 jumps, Pointsbet reveals acquisition, Metcash drops
• Flight Centre and Zip were some of the most traded ASX shares last week

Motley Fool contributor Brooker Cooper has no position in any of the shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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