Most ASX investors make mistakes in their investing careers – none of us are perfect but millennials, through being the youngest and often the most inexperienced group of investors, often make a disproportionate amount.

Whilst this is totally normal, it doesn’t change the fact that making mistakes when investing is financially painful and it’s far better to learn from someone else’s mistakes than your own.

So here are three mistakes I often see millennials make when investing in ASX shares:

Mistake 1 – obsessing over share prices

This is one of the most common things I see with young investors out there. I have had excited friends tell me that one of their stocks was “up 1% today” and so they were ‘raking it in’. Whilst I think keeping an eye on your shares is a great idea, checking them every hour of the day isn’t. Investing is a long-term game, not something that should be tracked just based on normal market fluctuations. As Warren Buffett once said: “If you buy a farm, do you go up and look every couple of weeks to see how far the corn is up?”

Mistake 2 – buying too high, selling too low

This one is a common mistake and also one that will set you back dramatically. I have seen many millennial investors get very excited when their shares go up in value. So excited, in fact, that they think they have to ‘lock-in’ their gains, even if they’ve only owned their shares for a few months. On the other hand, they can pile more money in, chasing those ‘sweet gains’.

Conversely, I have also seen would-be investors buy shares and, after watching them go down 5% or 10%, sell out, thinking they’ve made a terrible mistake.

Again, this is letting the markets dictate what you do, which is a terrible habit to get into if you want decent returns over the long-term.

Mistake 3 – not diversifying

I once met a young investor who told me (very proudly) that he only owned two ASX shares – Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P). On one hand, I think everyone should invest in companies they find interesting and exciting. But there is a limit. If your entire portfolio consists of unprofitable payments companies, you are leaving yourself open to a lot of risk.

That’s why I think it’s important for new investors to build up a diversified portfolio of companies across at least a few different industries. That way you are not wiped out if the government bans buy-now, pay-later offerings, for instance. If you only find interest in one area, you can always use exchange-traded funds (ETFs) to give your portfolio a little more balance.

More reading

• 2 exciting ASX tech shares to buy right now
• Could these small cap ASX shares be the next Afterpay?
• 3 top ASX shares to buy now and hold for 10 years
• If you invested $10,000 in the Afterpay IPO, this is how much you’d have now
• Is the Zip share price in the buy zone?

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 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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On Wednesday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below.

Here’s why these brokers are bearish on them:

Amcor PLC (ASX: AMC)

According to a note out of Goldman Sachs, its analysts have retained their sell rating but lifted their price target on this packaging company’s shares to $12.50. Amcor delivered stronger than expected earnings growth in the third quarter. Its EBIT increased 10% compared to Goldman’s 7% forecast. However, it remains sell rated on valuation grounds. It notes that Amcor is trading at a notable premium to other packaging companies under its coverage. Amcor’s shares are changing hands for $14.10 this afternoon.

Commonwealth Bank of Australia (ASX: CBA)

A note out of Morgan Stanley reveals that its analysts have retained their underweight rating and cut the price target on this banking giant’s shares to $56.00. According to the note, following the release of its third quarter update, the broker sees little reason that Commonwealth Bank’s shares should trade at a premium to its peers. In addition to this, it has forecast a sizeable dividend cut in August and has concerns over margin pressures. The Commonwealth Bank share price is down almost 3% to $59.16 this afternoon.

Sigma Healthcare Ltd (ASX: SIG)

Analysts at UBS have retained their sell rating and 53 cents price target on this pharmacy chain operator and distributor’s shares following its trading update. Although Sigma reported strong sales growth in March because of the pandemic, it notes that management has decided against providing guidance for FY 2021 at this stage. So, with its shares trading at approximately 20x estimated forward earnings, UBS sees no reason to change its rating at this point. The Sigma share price is trading at 57.5 cents this afternoon.

More reading

• ASX 200 down 0.9%: Xero posts strong growth & Australian economy loses 594,300 jobs
• Why Beach, CBA, Qantas, & Xero shares are dropping lower
• What happens to ASX shares if Australian house prices do fall 30%?
• Is the CBA share price a buy?
• Negative interest rates coming? Here’s what it would mean for ASX shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Amcor 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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Exchange-traded funds (ETFs) can be really good choices for easy investing and good returns.

It’s a lot easier to invest in exchange traded funds than identifying individual shares to buy. To outperform the share market you need to put in a lot of time to research the potential investments, think about how much it can grow, consider the balance sheet strength and so on.

Investing in an ETF needs less analysis. If you set up a regular investment plan then you don’t need to really think about much at all. Yet you still get access to the strong long-term returns. Some have very low annual management fees.

Option 1: Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE)

This is an ETF focused on the Asian share market. Predominately it’s invested in businesses located in China, Taiwan, South Korean, Hong Kong and India.

Before the coronavirus came along, Asian economies were growing at an attractive pace. Middle class wealth was rising quickly and eCommerce was growing strongly. I think that some Asian businesses are among the best in the world.

Among the top 10 holdings are: Alibaba, Tencent, Taiwan Semiconductor Manufacturing, Samsung and Ping An Insurance.

The ETF has a relatively low management fee of just 0.40% per annum, which is much cheaper than most Asian-focused Australian fund managers.

I think the returns of 8.9% per annum have been solid since inception in December 2015 (which includes the current decline).

It has over 1,200 holdings, a dividend yield of 3%, a p/e ratio of 12.3x and a return on equity (ROE) of 14.75%.  

Option 2: Betashares FTSE 100 ETF (ASX: F100)

The UK share market has been pummelled just like most other markets. With this investment you can get exposure to 100 of the biggest businesses listed on the London Stock Exchange.

One of the benefits of the UK share market is that the ETF’s top 10 holdings of the FTSE are in industries that are holding up quite well. There’s pharmaceuticals (Astrazeneca and GlaxoSmithKline), alcohol (Diageo) and consumer products (Unilever and Reckitt Benckiser).

Within the next group of 20 shares are shares like mining (Rio Tinto and BHP), electricity distribution (National Grid), a telco (Vodafone) and a supermarket (Tesco).

I think the UK share market is pretty defensive with a solid dividend yield. At the end of April this BetaShares offering had a trailing dividend yield of almost 6%, though this will probably reduce somewhat.

BetaShares charges an annual management fee of 0.45% per annum.

Foolish takeaway

Both of these ETFs look cheap today and have quality holdings that could be good for many years ahead. I’d probably prefer buying the UK ETF because of the defensive shares and high dividend yield, but getting exposure to Alibaba and Tencent sounds good to me too.

More reading

• 2 quality ETFs I’d buy today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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