Tag: Motley Fool

Last week saw a large number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

ELMO Software Ltd (ASX: ELO)

According to a note out of Morgan Stanley, its analysts have retained their overweight rating and $9.00 price target on this cloud-based human resources and payroll platform provider’s shares. This follows the company’s acquisition of UK-based Breathe last week. On the whole, Morgan Stanley appears to believe this acquisition fits with the company’s strategy and has held firm with its positive rating. I agree with Morgan Stanley and would be a buyer of ELMO’s shares next week.

Fortescue Metals Group Limited (ASX: FMG)

Analysts at Ord Minnett have retained their buy rating and $20.00 price target on this iron ore producer’s shares. According to the note, the broker is expecting Fortescue to report another solid quarterly update later this month. It is also expecting favourable iron ore prices to have boosted Fortescue’s cash position materially. This is expected to result in a dividend of approximately $2.65 in FY 2021. I think Ord Minnett is spot on and Fortescue would be a great option, especially for income investors.

Westpac Banking Corp (ASX: WBC)

A note out of the Macquarie equities desk reveals that its analysts have upgraded this banking giant’s shares to an outperform rating with an improved price target of $18.00. The broker made the move on the belief that all of Westpac’s issues are now fully understood by the market. In light of this and its underappreciated business mix, the broker believes Westpac’s shares are attractively priced now. I agree with Macquarie and feel Westpac would be a good option for investors looking for exposure to the banking sector.

More reading

• Westpac (ASX:WBC) tips RBA cash rate cut in November
• Why Downer, ELMO, Netwealth, & Sezzle shares are storming higher today
• ASX 200 up 0.8%: Big four banks higher, CSL rises on vaccine update, Zip rockets
• Why the ELMO Software (ASX:ELO) share price is on watch today
• Are these the best small cap ASX shares to buy for FY 2021?

James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Elmo Software. The Motley Fool Australia has recommended Elmo Software. 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 buy next week appeared first on Motley Fool Australia.

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Last week the S&P/ASX 200 Index (ASX: XJO) had its strongest week in almost six months. The benchmark index rose a sizeable 5.4% over the five days to finish it at 6,102.2 points

Another busy one is expected next week, with plenty for investors to be watching out for.

Here are five things I’ll be watching:

ASX futures pointing lower.

The ASX 200’s winning streak looks set to be tested on Monday despite a positive finish to the week on Wall Street. According to the latest SPI futures, the benchmark index is expected to fall 5 points at the open on Monday. On Friday night the Dow Jones rose 0.6%, the S&P 500 climbed 0.9%, and the Nasdaq index stormed 1.4% higher. The latter could be good news for tech shares such as Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO).

Annual general meetings.

Another group of shares will be holding their annual general meetings next week and could provide updates at their events. One of note will be Cleanaway Waste Management Ltd (ASX: CWY) on Wednesday. At the event the waste management company’s under fire chief executive Vik Bansal will speak and shareholders will be voting on its remuneration report. Fund manager Perpetual Limited (ASX: PPT) is holding its meeting on Thursday.

Bank of Queensland results.

All eyes will be on the Bank of Queensland Limited (ASX: BOQ) share price on Wednesday when the regional bank releases its full year results. Last month the bank warned that its result would include loan impairment expense of $175 million (pre‐tax). This includes COVID‐19 related collective provision expense of $133 million. A note out of Goldman Sachs reveals that it expects Bank of Queensland to report a 34% decline in cash earnings to $210 million. It is also forecasting the payment of its deferred 10 cents per share interim dividend and a final 2 cents per share dividend.

BHP quarterly update.

The BHP Group Ltd (ASX: BHP) share price will also be one to watch on Wednesday when the mining giant releases its first quarter update. According to a note out of Goldman Sachs, it expects BHP to report Petroleum production of 26Mboe, Copper production of 365kt, and iron ore shipments of 71.5Mt. The latter represents a 7% quarter on quarter decline in shipments. Rival Rio Tinto Limited (ASX: RIO) is scheduled to release its quarterly update two days later on Friday.

Dividends.

The shares of dividend favourite Brickworks Limited (ASX: BKW) will be trading ex-dividend on Wednesday and could drop lower. The building products and investment company will be paying eligible shareholders its 39 cents per share fully franked dividend on 25 November. Before then, next week the likes of Chorus Ltd (ASX: CNU), Coca-Cola Amatil Ltd (ASX: CCL), Newcrest Mining Limited (ASX: NCM), and Orora Ltd (ASX: ORA) are scheduled to pay their respective dividends.

More reading

• How to replace your entire wage with ASX dividend shares
• These were the worst performing shares on the ASX 200 last week
• 2 leading ASX 200 shares to buy for growth and income
• ASX 200 rises, Cimic (ASX:CIM) share price climbs
• This is where I’d invest $1,000 right now into ASX 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 Xero. The Motley Fool Australia owns shares of and has recommended Brickworks. 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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I don’t normally invest in exchange-traded funds (ETFs) for my portfolio, but there are at least two that I think could make really good buys today.

Why ETFs can make good investments

ETFs allow people to invest in a large number of assets in a single investment. If you want to get quick diversification then ETFs can be a really good way to get it. You can buy dozens or even hundreds of shares with one investment.

Most ETFs usually track an index, which should mean the costs can be very low compared to an active manager.

ETFs can either form part of your portfolio, along with individual shares, or they can be your entire portfolio.

There are some really good options out there like iShares S&P 500 ETF (ASX: IVV) and Vanguard Msci Index International Shares Etf (ASX: VGS). But there are couple of ETFs that I like the idea of even more:

Betashares Ftse 100 ETF (ASX: F100)

The UK share market has not recovered from the COVID-19 crash yet, unlike the US share market which is now higher than it was before the crash came long.

The FTSE 100, being the 100 businesses on the London Stock Exchange, is full of quality global businesses that I think can recover in value. COVID-19 won’t be an issue forever for the UK. Hopefully Brexit will be sorted sooner rather the later. But I think it’s a good time to buy shares when investors are fearful.

Within this ETF are quality names like AstraZeneca, GlaxoSmithKline, HSBC, Diageo, Unilever, Rio Tinto, Reckitt Benckiser, BHP, National Grid, Vodafone and the London Stock Exchange.

Industrial companies can generate pleasing long-term returns and this could be a good time to buy exposure to them.

The ETF may also be a solid option for dividends once the COVID-19 impacts end. Companies are currently being quite careful with their capital.

It has an annual management fee of 0.45% per year.

Betashares Global Quality Leaders ETF (ASX: QLTY)

An even better pick could be going for quality businesses, rather than just a random collection of businesses based on their size.

To get into this ETF’s holdings, a business must rank well on return on equity (ROE), profitability, low leverage and earnings stability.

It gives exposure to 150 high quality companies from a range of geographies and global sectors. It has a surprisingly cheap annual management fee of 0.35%, which is much cheaper than you’d pay for a typical active manager focused on quality.

Looking at the top 10 holdings, its biggest positions are: Nike, Keyence, Intel, Novo Nordisk, Nvidia, Texas Instruments, Apple, Adobe, Intuit and Intuitive Surgical.

Just under two thirds of the ETF is invested in the US. But it also gives exposure to markets like Japan, Switzerland, Denmark, France, Hong Kong, the UK, Spain and Finland.

Almost 60% of the portfolio is invested in the two sectors of IT and healthcare. I think it’s good to have that exposure because both of them offer secular long-term growth. However, there’s also decent diversification with industrials, communication services and consumer discretionary.

It has been a strong performer since inception in November 2018, returning 19.6% per annum after fees.

Foolish takeaway

Both of these ETFs look like really good investment options to buy right now. UK shares are looking cheap, partly due to external events. Meanwhile, I think it’s nearly always a good idea to buy high quality shares, so I’d be very happy to make Betashares Global Quality Leaders ETF a large part of my portfolio if I shifted to ETFs.

More reading

• How to replace your entire wage with ASX dividend shares
• I’d buy this ASX share this week
• 3 ASX shares that I’d invest $1,000 into EVERY month
• Where I’d invest $10,000 into ETFs right now
• Why I just bought shares of this ASX ETF

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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 I don’t normally buy ETFs, but I would buy these 2 appeared first on Motley Fool Australia.

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If you’re looking for additions to your portfolio next week, then I think the three ASX shares listed below would be great options.

I believe these shares are some of the best the ASX has to offer and could generate market-beating returns for investors in the future.

Here’s why I rate them as five-star stocks:

BetaShares NASDAQ 100 ETF (ASX: NDQ)

The first five-star option for investors to consider buying is the BetaShares NASDAQ 100 ETF. I think this exchange traded fund would be a great option due to the fact that it gives investors access to a large number of five-star stocks through just a single investment.

The BetaShares NASDAQ 100 ETF provides investors with exposure to the 100 largest non-financial shares on the famous Nasdaq index. These are among the highest quality companies in the world and include the likes of Amazon, Apple, Facebook, Microsoft, Netflix, Nvidia, Tesla, and Google parent, Alphabet. Collectively, I believe these 100 companies have the potential to outperform the ASX 200 by some distance over the 2020s.

Pushpay Holdings Ltd (ASX: PPH)

Another five-star share to consider buying is Pushpay. It is a donor management and engagement platform provider with a focus on the faith sector. Pushpay has been growing its earnings at a rapid rate in recent years thanks to the growing popularity of its platform with churches. This led to the company reporting a very impressive ~1,500% increase in EBITDAF in FY 2020.

The good news is that this strong performance is expected to continue in FY 2021. Management has provided EBITDAF guidance of US$50 million to US$54 million. This represents a 99% to 115% increase year on year. But its growth isn’t likely to stop there. Pushpay has its eyes on winning a 50% share of the medium to large church market in the future. This is currently estimated to be worth US$1 billion in revenue. As a comparison, Pushpay’s revenue in FY 2020 came in at US$127.5 million.

ResMed Inc. (ASX: RMD)

A final five-star share to buy is ResMed. I believe the sleep treatment-focused medical device company is one of the best long term options on the Australian share market. This is because I feel ResMed’s masks and software-as-a-service solution are among the best on the market and likely to experience a surge in demand in the coming years as the number of people diagnosed with sleep disorders increases.

Management estimates that there could be upwards of 1 in 7 people impacted by sleep apnoea. However, the vast majority of these sufferers are undiagnosed at present. I believe this provides ResMed with a significant runway for growth over the next decade.

More reading

• This is where I’d invest $1,000 right now into ASX shares
• ASX 200 down 0.2%: Big four banks drop, CIMIC jumps, CSL slides lower
• Top ASX growth shares to buy in October 2020
• Why I would buy Afterpay (ASX:APT) and these ASX growth shares
• Is the ResMed (ASX:RMD) share price a strong buy today?

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 and PUSHPAY FPO NZX. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS, PUSHPAY FPO NZX, and ResMed Inc. 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 five-star ASX shares to buy next week appeared first on Motley Fool Australia.

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Is the Domino’s Pizza Enterprises Ltd. (ASX: DMP) share price a buy?

The Domino’s share price has actually risen by 67% over the past six months in a remarkable performance by the pizza business since the COVID-19 crash.

It has been one of the ASX businesses most prepared for the COVID-19 pandemic because how much investing it has done into its online ordering systems over the previous years.

Domino’s made sure it helped its outlets get COVID-19 ready so that it could continue to serve customers efficiently and safely.

With so many other food locations closed because of COVID-19 restrictions, Domino’s was well placed to step into the gap.

FY20 result

Domino’s produced a solid set of numbers for FY20 because of the COVID-19 impacts.

Network sales increased by 12.8% to $3.27 billion. Online sales rose by 21.4% to $2.36 billion. Domino’s reported that its earnings before interest and tax (EBIT) grew by 3.6% to $228.7 million and free cashflow increased by 90.7% to $161.9 million.

There was a mixed performance across its store network.

In Japan it generated a record performance across multiple metrics, attracting new customers and increasing order frequency. Japanese earnings before interest, tax, depreciation and amortisation (EBITDA) rose 29.9% to ¥7.5 billion. It’s good that the Japan market has improved because it was a troublesome market for a while.

In Europe there were short-term closures in France and support for franchisees, reducing EBITDA by 1.5% to €50.6 million.

In Australia and New Zealand, increased safety and franchisee investments protected the network but reduced EBITDA by 5.8% to $129.4 million.

What about FY21 and beyond?

The Domino’s share price, indeed all share prices, are meant to be forward looking. The pizza business is continuing to expect to grow its revenue base over the coming years. It’s expecting annual same store sales growth of 3% to 6% over the next three to five years. It also expects to add annual organic new store additions of 7% to 9% over the medium-term.

If it achieves those goals then it could see earnings grow by double digits over the next five years. That could also mean that the dividend can grow at a good pace too.

I think that Domino’s looks like it can deliver good business growth over the next few years. The company has invested heavily in technology and it’s now benefiting from that.

The key question is whether Domino’s is worth buying today.

At the current Domino’s share price it’s valued at 31x FY23’s estimated earnings.

Domino’s is expecting a lot of growth over the next decade. Quite a lot of the new growth is expected to come from new stores. Hopefully that doesn’t cause competition with existing Domino’s stores.

The company is priced fairly highly. Will growth be hampered when most other food places are at full capacity again? Domino’s may well see momentum slow down across its global network.

Other food ideas

Domino’s isn’t the only food business on the ASX that could be worth looking at.

Fish business Tassal Group Limited (ASX: TGR) is steadily growing operating earnings and is trading at just 9x FY23’s estimated earnings.

KFC franchisee company Collins Foods Ltd (ASX: CKF) keeps growing its earnings and store network.

Farm owner Vitalharvest Freehold Trust (ASX: VTH), the owner of citrus and berry farms, is trading at cyclical lows.

Domino’s has done very well since COVID-19 impacted the world. But it’s now trading at a high valuation, so I think it’s worth taking a look at other food ASX shares such as the three I just mentioned – I believe all of them are trading at better valuations compared to Domino’s. But Dominos could keep growing nicely if its store rollout is a success.

But I think there are better sectors to look at for returns than food, I’m looking at other share opportunities at the moment.

More reading

• Why Domino’s, Harvey Norman, WiseTech Global, & Zip shares are dropping lower
• 5 things to watch on the ASX 200 on Friday
• Forget term deposits and buy these ASX dividend shares instead
• Leading brokers name 3 ASX shares to sell today
• Why I would buy Wesfarmers (ASX:WES) and this ASX share for a retirement portfolio

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods Limited and 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 Is the Domino’s (ASX:DMP) share price a buy? appeared first on Motley Fool Australia.

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Is the Domino’s Pizza Enterprises Ltd. (ASX: DMP) share price a buy?

The Domino’s share price has actually risen by 67% over the past six months in a remarkable performance by the pizza business since the COVID-19 crash.

It has been one of the ASX businesses most prepared for the COVID-19 pandemic because how much investing it has done into its online ordering systems over the previous years.

Domino’s made sure it helped its outlets get COVID-19 ready so that it could continue to serve customers efficiently and safely.

With so many other food locations closed because of COVID-19 restrictions, Domino’s was well placed to step into the gap.

FY20 result

Domino’s produced a solid set of numbers for FY20 because of the COVID-19 impacts.

Network sales increased by 12.8% to $3.27 billion. Online sales rose by 21.4% to $2.36 billion. Domino’s reported that its earnings before interest and tax (EBIT) grew by 3.6% to $228.7 million and free cashflow increased by 90.7% to $161.9 million.

There was a mixed performance across its store network.

In Japan it generated a record performance across multiple metrics, attracting new customers and increasing order frequency. Japanese earnings before interest, tax, depreciation and amortisation (EBITDA) rose 29.9% to ¥7.5 billion. It’s good that the Japan market has improved because it was a troublesome market for a while.

In Europe there were short-term closures in France and support for franchisees, reducing EBITDA by 1.5% to €50.6 million.

In Australia and New Zealand, increased safety and franchisee investments protected the network but reduced EBITDA by 5.8% to $129.4 million.

What about FY21 and beyond?

The Domino’s share price, indeed all share prices, are meant to be forward looking. The pizza business is continuing to expect to grow its revenue base over the coming years. It’s expecting annual same store sales growth of 3% to 6% over the next three to five years. It also expects to add annual organic new store additions of 7% to 9% over the medium-term.

If it achieves those goals then it could see earnings grow by double digits over the next five years. That could also mean that the dividend can grow at a good pace too.

I think that Domino’s looks like it can deliver good business growth over the next few years. The company has invested heavily in technology and it’s now benefiting from that.

The key question is whether Domino’s is worth buying today.

At the current Domino’s share price it’s valued at 31x FY23’s estimated earnings.

Domino’s is expecting a lot of growth over the next decade. Quite a lot of the new growth is expected to come from new stores. Hopefully that doesn’t cause competition with existing Domino’s stores.

The company is priced fairly highly. Will growth be hampered when most other food places are at full capacity again? Domino’s may well see momentum slow down across its global network.

Other food ideas

Domino’s isn’t the only food business on the ASX that could be worth looking at.

Fish business Tassal Group Limited (ASX: TGR) is steadily growing operating earnings and is trading at just 9x FY23’s estimated earnings.

KFC franchisee company Collins Foods Ltd (ASX: CKF) keeps growing its earnings and store network.

Farm owner Vitalharvest Freehold Trust (ASX: VTH), the owner of citrus and berry farms, is trading at cyclical lows.

Domino’s has done very well since COVID-19 impacted the world. But it’s now trading at a high valuation, so I think it’s worth taking a look at other food ASX shares such as the three I just mentioned – I believe all of them are trading at better valuations compared to Domino’s. But Dominos could keep growing nicely if its store rollout is a success.

But I think there are better sectors to look at for returns than food, I’m looking at other share opportunities at the moment.

More reading

• Why Domino’s, Harvey Norman, WiseTech Global, & Zip shares are dropping lower
• 5 things to watch on the ASX 200 on Friday
• Forget term deposits and buy these ASX dividend shares instead
• Leading brokers name 3 ASX shares to sell today
• Why I would buy Wesfarmers (ASX:WES) and this ASX share for a retirement portfolio

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods Limited and 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 Is the Domino’s (ASX:DMP) share price a buy? appeared first on Motley Fool Australia.

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Although the Reserve Bank held firm with the cash rate at its October meeting, the economics team from Westpac Banking Corp (ASX: WBC) doesn’t expect that to be the case for long.

In its latest economics report, the bank’s Chief Economist, Bill Evans, reiterated his belief that a cut to 0.1% is coming.

He said: “We continue to expect the RBA will cut the cash rate; 3-year bond yield target; and TFF rate from 0.25% to 0.10% in November and will also announce additional government bond purchases for maturities between 5 and 10 years at that meeting.”

After which, the bank is predicting that the cash rate will stay on hold at this level until at least June 2022 when its forecast period ends.

In light of this, I think income investors ought to prepare for at least a few more tough years of low rates.

But don’t worry, because there are plenty of quality ASX dividend shares for investors to generate an income from.

One that I think would be great option for investors right now is named below. Here’s why I would buy it:

BWP Trust (ASX: BWP)

I think one of the best ASX dividend share to consider buying is BWP. It is a real estate investment trust (REIT) that invests in and manages commercial assets across Australia. The majority of its assets are leased to home improvement giant, Bunnings Warehouse.

While having such a reliance on a single tenant can often be a risk, I see it as a strength on this occasion. This is because Bunnings is arguably the highest quality retailer in the country, making the risk of rent defaults and stores closures very low. Furthermore, the owner of Bunnings,  Wesfarmers Ltd (ASX: WES), is also a major BWP shareholder. I believe this means Wesfarmers would be unlikely to do anything that would have a negative impact on its investment.

Overall, I believe this puts the company in a strong position to grow its income and distribution at a consistent rate over the next decade. Based on the current BWP share price, I estimate that it offers investors a forward 4.4% yield.

More reading

• 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
• ASX 200 up 0.4%: Big four banks push higher, Westpac upgraded, ARB impresses
• Which ASX banking share is the cheapest today?

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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 Westpac (ASX:WBC) tips RBA cash rate cut in November appeared first on Motley Fool Australia.

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The idea of buying cheap shares may seem less appealing after the COVID-19-led stock market crash. It highlighted the volatility that can be present in the stock market over short time periods, as well as the paper losses that can be incurred by any investor.

However, over the long run, purchasing undervalued companies could be a profitable move. It is a strategy that has been used to great effect by Warren Buffett. He has used market downturns to his advantage over many years.

As such, avoiding popular assets such as Bitcoin and gold to buy bargain stocks may be a sound move despite heightened short-term risks.

The appeal of cheap shares

Cheap shares can sometimes be priced at low levels because they offer disappointing investment outlooks. For example, they may have high debt levels or a weak strategy that is in need of major change.

However, in some cases undervalued stocks can offer significant recovery potential. Their prices may be suffering because of weak industry conditions that ultimately give way to growth. Similarly, investor sentiment may be weak due to an uncertain economic outlook that gradually evolves into growth over the long run.

Warren Buffett has consistently purchased cheap shares after bear markets. This has enabled him to buy high-quality businesses at low prices. Over time, they are likely to recover to post impressive gains. As such, with many strong businesses currently in a similar situation, now could be the right time to capitalise on their low prices to improve your long-term financial prospects.

Short-term risks

Of course, cheap shares could fall in price in the short run. Risks such as political uncertainty in the US and coronavirus may mean that investor sentiment declines even further in the coming months. This may negatively impact stock markets and put share prices under greater strain.

As such, it is imperative that investors follow Warren Buffett’s lead and adopt a long-term timeframe when buying shares. It may take some time for industry operating conditions and investor confidence to return to 2019 levels. By allowing your portfolio the time it needs to recover, you can fully benefit from a likely resurgence in global economic growth and in the performance of the stock market.

Avoiding gold and Bitcoin

Short-term risks to cheap shares may persuade some investors that now is the right time to buy other assets such as gold and Bitcoin. However, gold’s high price means there may be limited scope for a similar rate of growth to that experienced so far this year. Moreover, improving investor sentiment towards risky assets such as shares may reduce demand for defensive assets such as gold, thereby negatively impacting on its performance.

Meanwhile, Bitcoin’s lack of infrastructure and regulatory risks mean that it may fail to deliver on investor expectations over the long run. It may underperform a portfolio of undervalued shares, while being a riskier means of planning for retirement. Therefore, following Warren Buffett’s advice and buying a portfolio of stocks could be a more prudent means of improving your long-term financial outlook.

More reading

• How anyone can become rich by investing in ASX shares
• How to replace your entire wage with ASX dividend shares
• These were the worst performing shares on the ASX 200 last week
• These were the best performing shares on the ASX 200 last week
• 2 leading ASX 200 shares to buy for growth and income

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.

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One thing I think most Australians will share, is the dream of becoming wealthy one day.

While you could achieve this by winning the lottery, it is worth remembering that the odds on you actually winning are extremely slim.

In light of this, if you want to become rich, I think you need to take matters into your own hands.

How can you become rich?

I believe that investing in the share market with a long term and patient strategy is arguably the most effective way of building wealth.

This is because if you invest over a long period, you will benefit from the magical power of compound interest. This is what happens when you earn interest on top of interest or returns on top of returns when it comes to shares.

It explains why a $10,000 investment earning a 10% return will be worth $11,000 after one year, but almost $26,000 after 10 years.

Compound interest will then turn that $26,000 into a massive $67,000 after 10 more years and then $175,000 after 10 more.

And that’s just a single investment, let’s not forget. Investing what you can each year would compound into materially more over the same period.

Which shares would be good options for long term investments?

If you’re wanting to make a successful buy and hold investment, then I believe you should be looking at companies with strong business models and long runways for growth.

A prime example of a quality buy and hold option is biotherapeutics giant CSL Limited (ASX: CSL). I believe it is well-placed to be a market beater due to its world class businesses, leading therapies and vaccines, and lucrative research and development pipeline.

Another company to consider is artificial intelligence services company Appen Ltd (ASX: APX). Its team of experts prepare the high quality data that goes into the machine learning models of some of the biggest technology companies in the world.

It has worked with Facebook and Google and also with Apple on its Siri virtual assistant. Due to the growing importance of artificial intelligence and its leadership position in the market, I believe it is well-placed for growth over the 2020s.

All in all, I think these two ASX shares would be a great place to start on your quest to becoming rich through investing.

More reading

• ASX 200 down 0.2%: Big four banks drop, CIMIC jumps, CSL slides lower
• Why I would invest $10,000 into these fantastic ASX shares today
• 3 reasons I would buy CSL (ASX:CSL) shares today
• ASX 200 rises 1% again, Zip (ASX:Z1P) soars 8%
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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 CSL Ltd. The Motley Fool Australia owns shares of Appen 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 How anyone can become rich by investing in ASX shares appeared first on Motley Fool Australia.

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In this article I’m going to try to show you how to replace your entire wage with ASX dividend shares.

I can totally understand why people want to grow their dividend income because of what’s going on right now. COVID-19 has caused a lot of uncertainty. The great thing about ASX shares is that they are among the best businesses in their industry, perhaps the best in the country. You can usually rely on them for a decent flow of dividends. 

Whilst March 2020 and April 2020 certainly looked rough with the rapid spread of the coronavirus and the restrictions which caused many parts of the country and economy to come to a standstill.

But the following six months has shown why it’s important to be invested in shares. The recovery by the share market has just been extraordinary.

How to get started replacing your wage with ASX dividend shares

Over the long-term I think that shares, such as ASX shares, have proven that they can generate great returns for investors.

Most businesses make a profit each year and many of them pay out a portion of that profit out as a dividend (or distribution). Businesses can retain some of the profit to re-invest back into the business for more growth.

To get started you just have to start putting money to work into the share market. Pick a broker – there are plenty to choose from like banks or low-cost providers – then add some money and start investing.

There are lots of good choices where you can start your investment journey. You don’t have to necessarily start with ASX dividend shares. Picks like Future Generation Investment Company Ltd (ASX: FGX), Future Generation Global Invstmnt Co Ltd (ASX: FGG), Betashares Global Quality Leaders ETF (ASX: QLTY), iShares S&P 500 ETF (ASX: IVV) and Vanguard Msci Index International Shares Etf (ASX: VGS) could be good places to start.

There are lots of calculators to help you work out how much money you may need to add to your portfolio to grow your portfolio to the size you need replace your dividend income. I think Moneysmart’s is one of the best calculators out there.

How big does your portfolio need to be?

The necessary size of your portfolio will depend on how much income you’re trying to replace and the dividend yield of your portfolio.

For example, if you’re trying to replace $40,000 of wage income then a 4% dividend yield would require a $1 million portfolio.

If you had a portfolio with higher yielding ASX dividend shares, say a 6% yield, but you wanted to replace $100,000 of income then you’d need a $1.67 million portfolio.

I’m not going to name every single possible combination, but you get the idea.

For me, I’d be aiming for around a $1 million portfolio with a 5% yield to generate $50,000 of gross income before tax. If I were going to retire, I’d expect not to have to pay certain expenses – like transportation (to work), or mortgage costs because I’d aim to have paid off the mortgage by the time I retire. That would mean I could live off a lower annual income, meaning I’d be okay with a ‘smaller’ portfolio.

Which ASX dividend shares are worth buying?

It’s getting quite hard to find nicely-priced, good quality ASX dividend shares because of how strong the share market has run and how low interest rates are, which has pushed up share prices.

But here are some examples, many of which are in my portfolio:

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) has a grossed-up dividend yield of 3.3%.

Brickworks Limited (ASX: BKW) has a grossed-up dividend yield of 4.2%.

Rural Funds Group (ASX: RFF) has a FY21 distribution yield of 4.9%.

WAM Microcap Limited (ASX: WMI) has a grossed-up dividend yield of 5.2%.

Future Generation Investment Company (FGX) has a grossed-up dividend yield of 6.3%.

Australian United Investment Company Ltd (ASX: AUI) has a grossed-up dividend yield of 6.3%.

More reading

• 2 leading ASX 200 shares to buy for growth and income
• This is where I’d invest $1,000 right now into ASX shares
• Insiders have been buying these ASX shares this week
• Up 22% in a month, is the Soul Patts (ASX:SOL) share price a buy?
• Say goodbye to low interest rates and buy these ASX dividend shares

Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO, Future Generational Global Investment Company Limited, RURALFUNDS STAPLED, WAM MICRO FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended 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 How to replace your entire wage with ASX dividend shares appeared first on Motley Fool Australia.

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