Tag: Motley Fool

In order to maximise your potential returns and limit the damage of market shocks, I believe investors should ensure that their portfolio is diversified.

A good example of why this is important is the travel sector. If the COVID-19 pandemic had never occurred, I suspect Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) shares would have generated strong returns for investors in 2020.

However, with the pandemic coming out of nowhere and bringing global travel markets to their knees, both Flight Centre and Webjet shares are down materially this year. 

This means that if your portfolio had a high weighting to the travel sector, it would have been impacted significantly more than a balanced portfolio.

How can you diversify?

There are a number of ways to diversify your portfolio. The first is to maintain a decent sized portfolio with exposure to different industries and sectors.

A company such as Wesfarmers Ltd (ASX: WES) could be a good option as gives investors exposure to a number of industries through the one company.

But perhaps an easier way to achieve this is through exchange traded funds (ETFs). These funds give investors the option of investing in whole indices, countries, sectors, or even themes through a single investment.

But which ETFs should you buy? Listed below are two that I think would be great for diversification:

BetaShares NASDAQ 100 ETF (ASX: NDQ)

If you don’t have meaningful exposure to the tech sector, then the BetaShares NASDAQ 100 ETF could be a great option. It gives investors access to 100 of the largest non-financial companies on the famous Nasdaq index. This includes some of the biggest tech companies in the world such as Amazon, Apple, Facebook, and Microsoft.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

Another great option to consider buying the Vanguard MSCI Index International Shares ETF. This ETF is arguably as diverse as it gets. It provides investors with exposure to some of the world’s largest companies listed in major developed countries. Among its largest holdings are the likes of Amazon, Apple, Microsoft, Nestle, and Visa.

More reading

• 3 five-star ASX shares to buy next week
• How to replace your entire wage with ASX dividend shares
• Which ASX ETFs offer the most diversification?
• Brokers name 3 ASX shares to buy right now
• ASX 200 finishes 1.3% higher after federal budget

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS, Flight Centre Travel Group Limited, 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.

The post Why it is important to diversify your ASX portfolio and how you can do it appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3do5qQH

If you’re a growth investor, then you might want to take a look at the ASX shares listed below.

I believe these companies are well positioned to grow their earnings at an above-average rate for many years to come.

This could potentially lead to their shares outperforming the market over the long term.

Here’s why I would invest $3,000 into these ASX growth shares once the market reopens:

Afterpay Ltd (ASX: APT)

The first growth share to consider buying is Afterpay. Although its valuation makes it a reasonably high risk option, I believe its exceptionally strong growth potential justifies the premium its shares trade at. I think the payments company is destined for big things due to the continued success of its international expansion and the growing popularity of the payment method with consumers and retailers.

Aristocrat Leisure Limited (ASX: ALL)

Another growth share I would suggest you consider buying is Aristocrat Leisure. This gaming technology company is best known for designing and manufacturing many of the poker machines you’ll find in Crown Resorts Ltd (ASX: CWN) and countless casinos across the world. However, there is more to it than just that. Aristocrat Leisure also has a very lucrative and growing digital business which is generating significant recurring revenues from its millions of daily active users. I believe this side of the business has significant growth potential and could become the company’s biggest earner in the not so distant future. 

Cochlear Limited (ASX: COH)

A final growth share to consider buying is Cochlear. I think the hearing solutions company is a great option due to the quality of its products, its strong long term growth prospects, and high level of investment in research and development. I’m confident the latter will help maintain its leadership position and underpin solid earnings growth over the next decade and beyond. Another big positive is its sizeable market opportunity. Management estimates that less than 10% of people who would benefit from an implantable hearing solution have been treated.

More reading

• 5 things to watch on the ASX 200 next week
• Why I would invest $10,000 into these fantastic ASX shares today
• BNPL ASX shares are running hot today
• Top ASX growth shares to buy in October 2020
• Why I would buy Afterpay (ASX:APT) and these ASX growth shares

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 3 excellent ASX growth shares to invest $3,000 immediately appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2FjsuUd

Bargain shares could produce impressive returns over the long run. Although they face short-term risks such as Brexit and coronavirus, their low valuations suggest there is significant scope for capital growth in the 2020s.

With past recoveries from economic downturns having led to rising stock prices, the same outcome appears likely in the coming years. Furthermore, the scale of monetary policy stimulus being put in place across major economies could strengthen the outlook for many businesses that currently trade at cheap prices.

Low valuations across the stock market

The capital growth potential of bargain shares appears to be high. Although the share prices of some companies have rebounded following the stock market crash, many other businesses trade at prices that are substantially below their historic values. Investors may be significantly underestimating their capacity to survive a difficult set of trading conditions, as well as their potential to deliver improving profitability in the long run.

This may provide long-term investors with a wide range of buying opportunities today. Those businesses that are trading at low prices because of wider challenges could present particularly attractive buying opportunities. They may even be able to expand their market positions at the expense of weaker rivals. This may put them in a strong position to produce rising profitability, and share prices, in the coming years.

The past recoveries of bargain shares

Bargain shares may struggle to post capital growth in the short run due to an uncertain economic outlook. However, the past performance of the stock market suggests that a return to growth is very likely. Even after the most severe bear markets, such as the global financial crisis, indexes such as the FTSE 100 Index (FTSE: UKX) and S&P 500 Index (SP: .INX) have recovered. This has allowed them to produce annual total returns of around 8% per annum.

Therefore, this level of return seems to be very achievable during the 2020s. Certainly, some years, such as 2020 itself, may lower the average return for the decade. But on a long-term basis, the stock market has the capacity to deliver high single-digit annual returns that catalyse your financial prospects.

Stimulus packages can encourage growth

Many bargain shares recovered after their March lows due in part to the monetary policy stimulus packages announced in major economies in North America and Europe. They have had a positive impact on asset prices this year, just as they did when they were implemented following the global financial crisis over a decade ago.

In fact, a loose monetary policy led to a decade-long bull market following the 2008/09 crash. A period of low interest rates and asset repurchase programmes now looks set to remain in place in the coming years. It could have an equally positive effect on share prices, and cause a boom period that lasts throughout much of the 2020s. As such, now could be the right time to buy undervalued stocks and hold them over the next decade.

More reading

• 3 reasons why I’d buy the best bargain shares right now
• 3 top ASX shares to buy and cash in on the Federal Budget
• Is the Westpac (ASX:WBC) share price a buy?
• Would Warren Buffett buy SEEK (ASX:SEK) shares?
• Why I would buy these ASX dividend shares in October

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

The post Why today’s bargain shares can grow rapidly during the 2020s appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2SNynvK

Buying the best bargain shares today may not deliver high returns in the short run. Risks such as coronavirus and political uncertainty in the US may contribute to further weak sentiment among investors that puts pressure on stock prices.

However, in the long run, today’s undervalued stocks could deliver a strong recovery. The low prices of some high-quality businesses suggest that equities offer superior return potential than other assets. As such, now could be the right time to add attractive stocks to your portfolio.

High-quality stocks are cheap

Some of the best bargain shares may be those businesses that are priced at low levels due to weak investor sentiment towards the wider stock market, or towards the sector in which they operate.

For example, the retail sector may be facing a very difficult near-term outlook as a result of weak consumer sentiment. However, this does not mean that all retailers will produce poor results in the coming months. There may be some companies with wider economic moats that are able to outperform their peers.

Therefore, there may be opportunities to buy bargain shares due to weak investor sentiment towards a specific sector or the stock market in general. Over time, undervalued stocks that produce relatively impressive results can command higher valuations that lead to appealing investment returns.

The recovery potential of bargain shares

Bargain shares offer strong recovery potential over the long run. The past performance of the stock market shows that it has produced high single-digit annual returns over recent decades. It has also recovered from every previous bear market. As such, while the near-term prospects for many stocks are currently uncertain, a diverse portfolio of companies is likely to deliver impressive returns.

Historically, the best buying opportunities have often appeared when investor sentiment is weak. At such times, a larger number of companies often trade at prices that do not fully reflect their long-term growth potential. As such, now could be the right time to buy a selection of stocks ahead of a very likely recovery over the long run.

A lack of opportunities elsewhere

The prospect of buying bargain shares is made more appealing due to the lack of return potential available elsewhere. Assets such as cash and bonds are likely to offer very low returns over the medium term due to low interest rates. High house prices mean that property investment may be disappointing from a return perspective. Meanwhile, gold’s high price may also mean that investors have factored in a tough period for the economy.

Therefore, building a portfolio of undervalued shares may prove to be a relatively profitable move. It may not lead to high returns in the short run. However, it has been a sound strategy over many years that could lead to an improvement in your financial situation.

More reading

• Why today’s bargain shares can grow rapidly during the 2020s
• 3 top ASX shares to buy and cash in on the Federal Budget
• Is the Westpac (ASX:WBC) share price a buy?
• Would Warren Buffett buy SEEK (ASX:SEK) shares?
• Why I would buy these ASX dividend shares in October

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

The post 3 reasons why I’d buy the best bargain shares right now appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2SGOL1c

Tuesday’s Federal Budget contained some big surprises but also some good news for ASX shares. There were tax cuts, wage subsidies and increased fiscal spending to try and keep many sectors of the economy ticking along.

Investors might be wondering how they can make the most of the Federal Budget through their investing next year. Here are a few of my favourite ASX shares to buy to take advantage of the latest government outlook.

1. SEEK Limited (ASX: SEK)

The Seek share price has been rocketing higher since Tuesday as investors pile into the employment classifieds business.

A weak economy is not good for Seek as it generates earnings from job listings and advertising. That’s the main reason why the Seek share price was hammered in the March bear market.

However, investors have a reason to be bullish on the ASX share given strong incentives to boost employment levels. A quick economic rebound could put Seek shares back in the buy zone in early 2021.

2. Woolworths Group Ltd (ASX: WOW)

Woolworths is one of Australia’s largest companies with strong ties to essential and discretionary retail.

That means the Government’s $74 billion JobMaker scheme could be a real winner for investors. The ASX conglomerate share has been climbing since Tuesday thanks largely to the large wage subsidies on offer for hiring unemployed youth.

That could see Woolworths slash its employment costs across its major businesses that often hire young workers such as Bunnings and its Woolworths Supermarkets business.

If that kicks in soon, we could see Woolworths post a handy dividend in FY21 on the back of stronger earnings.

3. Lendlease Group (ASX: LLC)

On top of the subsidies and employment boosters, the Federal Budget earmarked $10 billion of additional funds for infrastructure and construction.

That’s good news for Lendlease which is a leading player in that sector and already has several major government contracts.

The ASX infrastructure share has been smashed in 2020 but this could be the start of a turnaround. Increased infrastructure spending could benefit Lendlease and lead to stronger earnings in the years ahead.

Foolish takeaway

These are just a few of my favourite ASX shares that I think can outperform thanks to Tuesday’s Federal Budget announcement.

More reading

• Would Warren Buffett buy SEEK (ASX:SEK) shares?
• 4 high quality ASX blue chip shares to buy right now
• Buying and holding these ASX shares could be the key to becoming wealthy
• Budget 2020: Why the Woolworths (ASX:WOW) share price can soar
• Why I think the Seek (ASX:SEK) share price is primed to surge in 2021

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended SEEK 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.

The post 3 top ASX shares to buy and cash in on the Federal Budget appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2SQ90JL

Is the Westpac Banking Corp (ASX: WBC) share price a buy right now?

Since 2 October 2020, the Westpac share price has gone up by around 10%. That’s a good amount of growth in a short amount of time.

But because Westpac is a fairly slow growth business due to its size and industry, you need to make sure you buy it at the right price, particularly because of the ongoing COVID-19 difficulties right now.

What has Westpac announced recently?

In the FY20 half-year result it reported that statutory net profit was down 62% to $1.19 billion and cash earnings was down 70% to $993 million. A big part of this disappointing result was that the impairment charge was $2.24 billion, up from $1.9 billion largely because of COVID-19.

In the third quarter of FY20 it reported another impairment charge of $826 million, resulting in statutory earnings for the quarter of $1.12 billion and cash earnings of $1.32 billion.

The bank’s balance sheet was still in a strong position at the end of the third quarter with a CET1 capital ratio of 10.8%. However, part of the reason for the bank’s balance sheet strength was because the board decided not to pay a dividend.

The other big ASX banks of Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) have all paid at least one dividend in 2020.

One of most disappointing things about the third quarter update was that Westpac said its net interest margin (NIM) fell by 8 basis points to 2.05% (excluding notable items). Westpac said it was driven downwards by lower rates.

The problem is that Westpac is quite dependent on a good margin for its loans for generating profit, particularly after divesting some non-core assets, and it continues to look at other subsidiaries that it could sell.

The NIM tells investors how much profit the bank is making from the loans it gives out compared to the cost of funding for the bank.

Is the Westpac share price a buy?

Westpac is one of the biggest banks in Australia, I have no doubt it will get through this difficult period.

However, there could be elevated levels of bad debts for Westpac in 2021, perhaps for a few years. This is despite the official interest rate being almost 0%.

In terms of potential growth of the Westpac share price, I don’t think that it can rise much more whilst underlying profit growth remains difficult.

Westpac may return to paying a dividend in 2021, but I don’t think it’s going to be as good as 2018. Therefore, I don’t think Westpac is a good option for total returns over the next couple of years at the current Westpac share price.

Other ideas

I believe there are plenty of other ASX shares that I’d buy first.

Getting more diversification could be option, so simply buying an exchange-traded fund (ETFs) which includes Westpac may be a smart move like Vanguard Australian Shares Index ETF (ASX: VAS) and BetaShares Australia 200 ETF (ASX: A200).

Listed investment companies (LIC) that own Westpac shares could also be better ideas like WAM Leaders Ltd (ASX: WLE) and Australian United Investment Company Ltd (ASX: AUI).

There are other dividend-paying ASX shares that could be solid long-term buys today including: Brickworks Limited (ASX: BKW), Rural Funds Group (ASX: RFF), Pacific Current Group Ltd (ASX: PAC) and Magellan Financial Group Ltd (ASX: MFG).

I believe all of the above ideas can generate stronger total returns and pay more reliable dividends than Westpac.

More reading

• Top brokers name 3 ASX shares to buy next week
• Westpac (ASX:WBC) tips RBA cash rate cut in November
• ASX 200 up 0.8%: Big four banks higher, CSL rises on vaccine update, Zip rockets
• ASX 200 finishes 1.3% higher after federal budget
• Top brokers name 3 ASX shares to buy today

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended Brickworks and RURALFUNDS STAPLED. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Is the Westpac (ASX:WBC) share price a buy? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2SGBSnQ

One of the most successful investors in history is Berkshire Hathaway’s Warren Buffett.

At the last count the legendary investor had amassed a fortune of US$80.5 billion according to Forbes. In order to get there Mr Buffett has invested wisely and with a long-term view.

While amassing a similar fortune may be difficult, I believe regular investors can create significant wealth by following his investing principles.

Four key principles that Buffett follows are listed below. I’ve used these principles to see if SEEK Limited (ASX: SEK) would be a share that he would invest in. Here’s what I found:

Buffett invests in companies that he can understand.

SEEK operates an eponymous online job listings portal in the ANZ market and several equivalents in international markets. The latter includes the growing Zhaopin business in China. I feel SEEK’s business model is one of the simplest models out there and something which Mr Buffett would be comfortable investing in.

Buffett looks for companies with a durable competitive advantage.

While there are a number of competitors, SEEK is easily the most dominant player in the ANZ market. In FY 2020, the company recorded 35 million monthly visits and had 15 million user profiles. Unsurprisingly, with such large numbers, the company commands the highest volume of job ads in the region. I believe this gives SEEK a durable competitive advantage and expect it to remain the dominant force in the region for a long time to come.

Management must be talented and have integrity.

SEEK is led by chief executive officer Andrew Bassat. He co-founded the company with his brother back in 1997. Mr Bassat is a highly regarded executive and has helped turn the company into what it is today. I believe Warren Buffett would be a fan of his management style.

Don’t overpay for shares.

This is where it gets a little tricky. As well as being impacted by the pandemic, SEEK has been investing heavily in its future growth over the last few years. This has narrowed its profit margins materially and means its shares are trading on sky high earnings multiples. In light of this, I think investors should focus on its sales instead, which came in at $1,577.4 million in FY 2020 and means its shares are trading at 5.2x sales. This is notably lower that Carsales.Com Ltd (ASX: CAR) and REA Group Limited (ASX: REA). Furthermore, SEEK is aiming to grow its sales to $5 billion by FY 2025, though acknowledges that the pandemic may push this back a touch. If it delivers on this target, its shares are likely to be worth considerably more in five years.

Conclusion.

Overall, I think SEEK ticks all the boxes for a Buffett investment.

I expect its shares to generate strong returns for investors over the 2020s, which could make it a great buy and hold option for investors today.

More reading

• 4 high quality ASX blue chip shares to buy right now
• Buying and holding these ASX shares could be the key to becoming wealthy
• Why I think the Seek (ASX:SEK) share price is primed to surge in 2021
• Which ASX share may benefit from the jobs-led recovery Budget?
• Why a2 Milk, Afterpay, ARB, & SEEK shares are pushing higher today

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended carsales.com Limited, REA Group Limited, and SEEK 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.

The post Would Warren Buffett buy SEEK (ASX:SEK) shares? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3jPrgiy

If you’re on the lookout for some new dividend shares, then I think the ones listed below would be well worth considering.

Here’s why I think they would be great options for income investors in October:

Coles Group Ltd (ASX: COL)

The first ASX dividend share that I would buy this month is Coles. Since the supermarket operator was spun out of Wesfarmers Ltd (ASX: WES) in 2018, it has been onwards and upwards for its shares. The good news is that I don’t believe it is too late to invest.

I believe Coles is well-placed to grow its earnings and dividend at a solid rate over the next decade. This is thanks to its defensive earnings, refreshed strategy, expansion opportunities, and its focus on automation. The latter is expected to cut costs and support its margins in the coming years. For now, based on the current Coles share price, I estimate that its shares offer investors a fully franked 3.5% FY 2021 dividend.

Telstra Corporation Ltd (ASX: TLS)

Following a sharp pullback in its share price over the last couple of months, I think this telco giant would be a great ASX dividend share to buy. While there are concerns that Telstra will cut its dividend down to 12 cents per share in FY 2021 because of its softer than expected earnings guidance, I’m optimistic this won’t be the case.

This is because a shift to a more appropriate free cash flow based dividend policy would allow for it to be maintained if it achieves its guidance. But either way, both dividends offer above average yields. Based on the current Telstra share price, a 12 cents per share dividend will provide a fully franked 4.3% yield. Whereas if it maintains it at 16 cents, it will provide a very generous 5.8% yield.

More reading

• 4 high quality ASX blue chip shares to buy right now
• Has the Afterpay (ASX:APT) share price stalled?
• ASX 200 finishes 1.3% higher after federal budget
• 3 reasons the Telstra (ASX:TLS) share price is a buy
• Why I would buy these 3 ASX dividend shares for income today

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

The post Why I would buy these ASX dividend shares in October appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3nG7Fn0

Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

ASX Ltd (ASX: ASX)

According to a note out of Credit Suisse, its analysts have retained their underperform rating and $73.00 price target on this stock exchange operator’s shares. Its analysts expect a soft first half performance from ASX Ltd in FY 2021. It notes that the majority of its divisions are experiencing subdued trends, with only cash equities performing well. In light of this, it feels its shares are overvalued at the current level. The ASX Ltd share price ended the week at $82.28.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Another note out of Credit Suisse reveals that its analysts have retained their underperform rating but lifted the price target on this pizza chain operator’s shares to $61.32. Although the broker has upgraded its estimates to account for a stronger than expected performance in the first half of FY 2021, it remains concerned with its valuation. Based on Credit Suisse’s forecast, Domino’s is current trading at 41x forward earnings. The Domino’s share price was trading notably higher than this price target at $82.91 on Friday.

St Barbara Ltd (ASX: SBM)

A note out of the Macquarie equities desk reveals that its analysts have retained their underperform rating and cut the price target on this gold miner’s shares to $3.00. This follows the release of St Barbara’s first quarter update, which fell short of the broker’s expectations. This has led to the broker downgrading its near term earnings forecasts and price target accordingly. The St Barbara share price ended the week a touch higher than this price target at $3.10.

More reading

• Is the Domino’s (ASX:DMP) share price a buy?
• Why Domino’s, Harvey Norman, WiseTech Global, & Zip shares are dropping lower
• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.

The post Top brokers name 3 ASX shares to sell next week appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2GLJ1AP

Investing money in shares after the stock market crash may be viewed as a risky idea by some people. After all, the world economy’s outlook is very uncertain, and investor sentiment could quickly change in response to risks such as Brexit and coronavirus.

However, low valuations among high-quality businesses may mean that now is the right time to start investing in equities. Over time, they could deliver high returns that improve your financial circumstances.

Diversifying after the stock market crash

The stock market crash and subsequent recovery has shown that investing in a small number of shares can lead to elevated levels of risk. For example, some companies have rebounded strongly following the market downturn. They face improving financial outlooks due to trends such as increased online opportunities or a move towards a greener economy. However, other businesses face difficult outlooks that are reflected in their disappointing share price performances in 2020.

Therefore, it is crucial to always diversify across a range of businesses, sectors and geographies. This reduces your reliance on a small number of investments. Otherwise, you will have too much exposure to one company, industry or region that may lead to a disappointing portfolio growth rate. With the cost of sharedealing having fallen in recent years, diversifying is easier and cheaper for all investors.

Buying the best companies

The stock market crash has been largely caused by a weakening in the economy’s outlook. This could mean that many companies face difficult operating conditions that compromise their financial performances over the coming months.

Therefore, it is important to buy high-quality businesses. They are usually those companies that have sound financial positions through which to overcome difficult trading conditions. They are also likely to have a competitive advantage over their peers that may allow them to occupy a more dominant position in their chosen industry as the economic outlook improves.

With the threat of a second stock market crash likely to remain in place for the foreseeable future, the best stocks may offer the most attractive risk/reward opportunities. As such, they could be the best investments to make right now.

Cheap stocks can offer long-term growth

The stock market crash has caused many companies to trade at cheap prices compared to their historic averages. In some cases, their current valuations are undeserved due to their balance sheet strength and economic moat. Therefore, buying them can produce impressive gains over the long run as investor sentiment recovers.

Buying cheap stocks can improve your prospects of outperforming the stock market. Since the stock market has produced a high single-digit annual return over recent decades, this could mean that you obtain a very attractive growth rate. When compounded over the long run, this has the potential to boost your portfolio and improve your financial situation.

More reading

• Top brokers name 3 ASX shares to sell next week
• Top brokers name 3 ASX shares to buy next week
• 5 things to watch on the ASX 200 next week
• I don’t normally buy ETFs, but I would buy these 2
• 3 five-star ASX shares to buy next week

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

The post Here’s how I’d start investing after the stock market crash appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/30Pj1eM