Tag: Motley Fool

ASX lithium shares seem to be one of the market’s most exciting sectors at the moment.

Between 23 June 2022 to 9 November 2022, the Pilbara Minerals Ltd (ASX: PLS) share price went up by around 170%.

However, Pilbara Minerals shares fell by 34% to 3 January 2023. Since 3 January, Pilbara Minerals shares have risen by more than 25%.

Other ASX lithium shares have seen similar patterns, including Allkem Ltd (ASX: AKE), Core Lithium Ltd (ASX: CXO), IGO Ltd (ASX: IGO), Sayona Mining Ltd (ASX: SYA), and Mineral Resources Ltd (ASX: MIN).

My thoughts on the lithium sector

Volatility is common on share markets. It doesn’t surprise me when investors regularly shift between euphoria and fear on particular businesses. The wider share market occasionally goes through large bumps as well.

It makes sense that the lithium sector creates a lot of excitement. KPMG has estimated the world will need to manufacture more than two billion electrical vehicles to “accommodate world demand and fully transition away from internal combustion engine vehicles by 2050″.

Of course, electric vehicles are just one use for lithium. Home batteries and large-scale batteries could increase demand too.

More supply is very likely to come online in the coming years, including the Mt Holland project that Wesfarmers Ltd (ASX: WES) is working on in Western Australia.

If lithium prices stay this high for longer, then it will drive more supply.

But it takes time for that supply to appear, so 2023 could still see a very healthy lithium price. Each ASX lithium share has its own customers, contracts, and method of selling its production.

For example, Pilbara Minerals is benefiting from increased prices from its major offtake customers, as well as a much higher price from the Battery Material Exchange (BMX) platform auctions compared to a year ago.

Strong cash flow and demand

I think that the businesses that are already producing lithium are in a really good place. They are producing enormous cash flow and are reaping the benefits. I think that strong cash flow will continue for (at minimum) the majority of the year.

In the three months to December 2022, we saw Pilbara Minerals increase its cash balance by $851 million.

Hopefully, the ones that aren’t producing lithium at the moment will still get to reap the rewards of a good lithium price when they do start producing meaningful output.

In the latest Allkem quarterly update, it said that it expects the average price of lithium carbonate in the third quarter of FY23 to be in line with the second quarter. The ASX lithium share also pointed out:

EV sales growth is expected to remain robust in 2023 given strong order books and potential pent-up demand. Supportive government targets and policies announced globally (including subsidies or tax incentives) continue to ensure strong fundamentals for future growth.

Foolish takeaway

Overall, I think it could be a good year for the ASX lithium share sector as I don’t think enough supply will come online this year to drive down the price substantially.

The post My top predictions for ASX lithium shares in 2023 appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Brokers name 3 ASX shares to buy now
• Wesfarmers shares: A potential source of secondary income
• Why Fisher & Paykel, Pilbara Minerals, Resolute, and Whitehaven Coal are storming higher

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers. 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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As much as you might be a long-term investor, there is no escaping the fact that the stock markets are now not the same as they were four, two or even one year ago.

The Motley Fool’s own chief investment officer Scott Phillips admitted as much this month, when he cited the return of inflation and higher interest rates as changing the way you pick ASX shares to buy.

“Inflation matters because pricing power matters. If you are a business that can’t pass on higher costs, you have no choice but to deliver lower margins, [and] lower profits,” he said on the Your Wealth podcast.

“Rates matter to the price of the assets that I buy…, rates matter to the amount of debt a company can affordably carry and what it can do with that debt; and what my investment thesis looks like with those rates.”

He likened these conditions to a return to the 1980s and the early 1990s. 

Back to the “old normal”, if you will, after leaving behind a decade of near-zero interest rates and inflation.

So there are some ideas about what to seek in a business. But what are the attributes to avoid like the plague in this new era?

Airlie Funds portfolio manager Emma Fisher helpfully had some ideas this week:

Stay away from companies that exhibit these behaviours

Fisher, in an Airlie video, highlighted two traps that she would avoid when picking stocks for this year.

The first is debt.

Fisher cited two reasons why debt is such a negative right now compared to just eight months ago.

“If you’ve got a lot of debt, interest rates have gone up, it’ll cost you more to service that debt — so your profits are going to fall,” she said.

“The second one is around operational flexibility. Ideally, at this point in the [economic] cycle, you want to have a mountain of cash you’re sitting on as a business.”

With recessions likely looming around the world, having that cash buffer will be a huge advantage to any company — especially if competitors are struggling with servicing their loans.

The second red flag to avoid is excessive inventory levels.

“A lot of businesses — particularly retailers and consumer brands — going into the pandemic, demand was elevated and supply chains were tight. So businesses put in huge orders in order to get stock.”

But now all that stock is now sitting there while supply chains have resumed normal operations.

“You’ve got a lot of companies that are sitting on very elevated inventory levels, potentially heading into a softening demand environment,” said Fisher.

“Throw in some debt, and that can be a really toxic combination of factors.”

The post 2 traps to avoid when buying ASX shares in 2023 appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Top brokers name 3 ASX shares to buy next week
• How much profit could Telstra shares make in 2023?
• My top predictions for ASX All Ords shares in 2023
• 2 excellent ASX passive income shares to buy next week: analysts

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

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On Friday, the S&P/ASX 200 Index (ASX: XJO) finished the week with a decent gain. The benchmark index rose 0.3% to 7,452.2 points.

Will the market be able to build on this on Monday? Here are five things to watch:

ASX 200 expected to rise gain

The Australian share market looks set to rise again on Monday following a strong finish to the week on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 34 points or 0.45% higher this morning. On Wall Street, the Dow Jones was up 1%,the S&P 500 rose 1.9%, and the NASDAQ jumped 2.65%.

Oil prices rise

It could be a good start to the week for ASX 200 energy shares Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) after a solid finish to last week for oil prices. According to Bloomberg, the WTI crude oil price was up 1.3% to US$81.64 a barrel and the Brent crude oil price rose 1.7% to US$87.63 a barrel. Oil prices rose on Chinese demand optimism.

Tech shares on watch

It could be a great session for tech shares such as Altium Limited (ASX: ALU) and Xero Limited (ASX: XRO) on Monday after their US peers stormed higher on the Nasdaq Friday. Jeff Kilburg, the founder and CEO of KKM Financial, told CNBC: “You’re seeing more weight go into some of the beat-up technology and because people are becoming a little bit more thoughtful of opportunity in the absolute tech wreck we saw in 2022.”

South32 quarterly

The South32 Ltd (ASX: S32) share price will be on watch today when the mining giant releases its quarterly update. According to a note out of Goldman Sachs, its analysts expects South32 to report copper production of 17kt, met coal production of 1,450kt, alumina production of 1,402kt, and nickel production of 11kt.

Gold price edges lower

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a subdued start to the week after the gold price edged lower on Friday. According to CNBC, the spot gold price fell 0.15% to $1,925.33 per ounce after the US dollar firmed. However, this couldn’t stop the precious metal from recording its fifth successive weekly gain.

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

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More reading

• Top brokers name 3 ASX shares to buy next week
• My top predictions for ASX All Ords shares in 2023
• How to find undervalued ASX shares to buy now and hold in 2023
• Guess which ASX energy share has exploded 110% in 2 days?
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in Altium and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium and Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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All Ordinaries Index (ASX: XAO), or All Ords, shares saw plenty of volatility last year and I think 2023 could be another year of big movements.

The All Ords is an index of approximately 500 of the biggest businesses listed on the ASX.

Typically, the index’s performance is heavily influenced by the returns of the biggest companies, because they make up such a large percentage of the All Ords.

I’m talking about names like BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ).

Other All Ords ASX shares that have sizeable positions in the index include Woodside Energy Group Ltd (ASX: WDS), Macquarie Group Ltd (ASX: MQG), Wesfarmers Ltd (ASX: WES) and Telstra Group Ltd (ASX: TLS).

Here are my thoughts on some of the sectors.

ASX tech shares

While none of the tech names are among the biggest holdings, collectively the way they were punished in 2022 did have an effect on the All Ordinaries. Just look at how far the Xero Limited (ASX: XRO) share price dropped last year.

Higher interest rates may have been the key culprit for hurting the valuations last year. But, I think these heavily hit ASX tech share names could look like opportunities to investors when interest rates finally stop going up, if not before.

Some of the businesses that saw the biggest declines in 2022 could have the best chance of outperformance during the rebound. Names with attractive long-term revenue growth outlooks include Xero, Megaport Ltd (ASX: MP1), Frontier Digital Ventures Ltd (ASX: FDV) and Life360 Inc (ASX: 360).

Resource shares

On Friday I outlined my thoughts in a separate article regarding S&P/ASX 200 Index (ASX: XJO) mining shares.

I suggested that it’s likely to be a good year for many ASX 200 mining shares with China coming out of lockdowns. This could be good news for All Ords ASX shares iron ore miners, copper miners and other commodities if strong Chinese buying returns.

Unless Russian energy production is reintegrated back into the global system in 2023, I can’t see ASX coal shares or ASX energy shares having a bad year either.

The global demand for lithium still seems promising for the coming years, so I think it could be a good year of cash flow for ASX lithium shares.

ASX bank shares

The banking sector is going through rapid change with the Reserve Bank of Australia (RBA) interest rate now much higher than it was a year ago.

All Ords ASX bank shares are increasing interest rates faster for borrowers than savers, so it’s increasing their profitability. I think this has been a good boost for share prices of names like Westpac already.

I think bigger profits and dividends are likely in 2023. I’m not sure if the share prices can rise much more from here. It may depend on when banks start reporting an increase in arrears amid the higher interest rates – a large increase in arrears could worry investors. A small rise could be positive and allay fears.

All Ords ASX retail shares

Some areas of retail are seen as cyclical. People need to keep buying food, but new TVs and new cars may be seen as less essential.

However, the share price reaction is another part of the equation. A number of ASX retail shares have fallen significantly. I don’t believe that retail conditions are going to seem tough forever.

So, I believe names like Temple & Webster Group Ltd (ASX: TPW), Adore Beauty Group Ltd (ASX: ABY), Adairs Ltd (ASX: ADH) and Universal Store Holdings Ltd (ASX: UNI) could be longer-term opportunities.

By the end of 2023, the outlook could be more positive for retailers, compared to today.

Foolish takeaway

Overall, I think it’s going to be a positive year for All Ords ASX shares, particularly when including the dividend income.

I wouldn’t be surprised to see tech as the best-performing sector this year after the difficult year last year.

My investment strategy will continue to be to find ASX shares I think can perform over the long term.

The post My top predictions for ASX All Ords shares in 2023 appeared first on The Motley Fool Australia.

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More reading

• 3 reasons to buy these top ASX growth shares: experts
• How I’d invest $40k in ASX shares and aim for $1 million
• One oversold ASX 300 dividend share (with a 6% yield) to buy now
• 3 ASX All Ords shares getting hammered on disappointing results
• Watch these 2 ASX 200 growth shares take off this year: expert

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs, CSL, Frontier Digital Ventures, Life360, Megaport, Temple & Webster Group, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group. The Motley Fool Australia has positions in and has recommended Adairs, Telstra Group, Wesfarmers, and Xero. The Motley Fool Australia has recommended Adore Beauty Group, Frontier Digital Ventures, Macquarie Group, Megaport, Temple & Webster Group, and Westpac Banking. 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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If you’re searching for new passive income investments, then read on!

Listed below are two ASX 200 dividend shares that have been named as buys by brokers.

Here’s what you need to know about these dividend shares:

Australia and New Zealand Banking Group Ltd (ASX: ANZ)

The first ASX 200 dividend share that could be a buy is ANZ Bank. It is of course one of the big four banks.

The team at Citi is positive on the bank and is forecasting big dividend yields from its shares in the coming years.

The broker expects this to be supported by net interest margin (NIM) improvements driven by rising interest rates.

Citi is forecasting fully franked dividends of $1.66 per share in FY 2023 and $1.76 per share in FY 2024. Based on the current ANZ share price of $24.75, this will mean yields of 6.7% and 7.1%, respectively.

The broker also sees plenty of upside potential with its buy rating and $29.25 price target.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Another ASX dividend share for investors to consider is Domino’s.

Due to its shares being sold off last year due to tough trading conditions and inflationary pressures, they now offer a more attractive than normal yield. And while this yield is certainly not as great as what is on offer with ANZ’s shares, that could change in the future if all goes to plan.

Management is aiming to double its store network this decade. If it can continue to deliver on its same store sales target and improve its margins, this could lead to some incredible earnings and dividend growth over the same period.

It is partly for this reason that Morgans believes investors should be buying its shares. In fact, the broker believes that “now is the best time to consider an investment in a quality business like DMP that is facing headwinds that will reverse in time.”

Morgans has an add rating and an $90.00 price target on the company’s shares.

As for dividends, the broker is forecasting partially franked dividends per share of $1.55 in FY 2023 and $1.89 in FY 2024. Based on the current Domino’s share price of $73.25, this will mean yields of 2.1% and 2.6%, respectively.

The post 2 excellent ASX passive income shares to buy next week: analysts appeared first on The Motley Fool Australia.

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More reading

• ANZ’s cheat sheet: How can ASX investors make the most of ‘ample opportunity’ in 2023?
• Dividends, dividends, dividends! 3 ASX 200 bank shares forecasting yields over 8%
• What could we expect for ASX 200 bank shares this earnings season?
• How to prepare your portfolio for the ‘old normal’: Scott Phillips
• Should I buy ANZ shares before earnings season?

Motley Fool contributor James Mickleboro has positions in Domino’s Pizza Enterprises. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Domino’s Pizza Enterprises. 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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Identifying the cream of the crop trading at bargain basement prices is the goal when searching for undervalued ASX shares. Locating those overlooked and underappreciated high-quality businesses is how many wealthy investors have made their millions.

While the greats — such as Warren Buffett — make this process look easy, it can be challenging. Fortunately, the erratic gyrations of Mr Market (or Ms!) can momentarily make this task much easier than usual.

The recession panic has increased the amount of indiscriminate selling. That means some absolute long-term gems could be found among beaten-down ASX shares.

Secret sauce to finding great ASX shares

There are tens of thousands of publicly listed companies around the world. It can be an incredibly arduous task to sort through opportunities without some form of system. That’s why focusing on a limited number of traits can be helpful to bring only top-tier companies to the table.

At a very high level, there are two interconnected factors that can put a company out of business — competition and funding. These two aspects grow all the more critical during cloudy economic times. The fight to survive becomes more fierce, and the funding tap runs dry.

For example, if consumers begin to drastically cut down on discretionary spending, every ASX consumer discretionary share will be competing for a share of a more limited pool of dispensable income. Unsurprisingly, much of this market area has fallen over the past year as the economy tightens.

That’s why the gross profit margin can be worth checking. A company with a high gross margin — that is its revenue minus the cost of goods sold converted to a per cent — can be suggestive of a business with pricing power.

An ASX share with a thicker gross margin than its peers has more wiggle room during pressing times.

The other area of the company to investigate is its balance sheet. As Peter Lynch once said, “Never invest in a company without understanding its finances. The biggest losses in stocks come from companies with poor balance sheets.”

If an ASX share has considerable cash behind it, it can fund itself even through unprofitable periods. The cost of capital plays a major role in long-term shareholder returns. For those high-quality businesses loaded with cash, their capital costs are minimal.

It will still be bumpy

The S&P/ASX 200 Index (ASX: XJO) is already up 7.1% so far in 2023. Amazingly, that means the losses of last year have already been erased for Aussie index investors. However, the year is far from over, and we have yet to discover whether the world’s central banks can coordinate a ‘soft landing’.

There is a chance that interest rates end up going higher than expected. Spending could deteriorate more than expected. Even though the economy appears to be on a solid footing, there are always risks that could cause it to falter… but don’t confuse volatility with risk.

If you can identify undervalued ASX shares, volatility should be embraced. The impulsive nature of markets could present an opportunity to build these positions at abnormally low prices.

The post How to find undervalued ASX shares to buy now and hold in 2023 appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Friday
• 3 ASX 200 shares leaping more than 5% on strong earnings updates
• Dividends, dividends, dividends! 3 ASX 200 bank shares forecasting yields over 8%
• 5 things to watch on the ASX 200 on Friday

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

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If you’re looking for an easy way to invest your hard-earned money, then exchange traded funds (ETFs) could be the answer.

But which ETFs could be top options when the market reopens?

Listed below are three wonderful ETFs that could be worth considering. Here’s what you need to know about them:

BetaShares Global Cybersecurity ETF (ASX: HACK)

The BetaShares Global Cybersecurity ETF could be a top option for investors. This ETF provides investors with an easy way to invest in the growing cybersecurity industry. This means you’ll be buying companies at the forefront of the industry such as Accenture, Cisco, Cloudflare, Crowdstrike, and Palo Alto. Due to the growing threat of cyberattacks globally and the financial and reputational damage that these attacks can do (just ask Medibank and Optus), these companies look well-placed to benefit from increasing demand for cybersecurity services.

BetaShares Global Energy Companies ETF (ASX: FUEL)

With many analysts tipping oil demand to increase strongly this year because of China’s reopening, the BetaShares Global Energy Companies ETF could be worth considering. This ETF allows you to invest in many of the largest energy producers in the world through a single investment. Through the ETF you’ll be owning shares in the likes of BP, Chevron, ExxonMobil, and Royal Dutch Shell.

BetaShares NASDAQ 100 ETF (ASX: NDQ)

A final ETF for investors to look at is the BetaShares NASDAQ 100 ETF. This ETF allows investors to buy many of the highest quality companies in the world in one fell swoop. That’s because the BetaShares NASDAQ 100 ETF is home to the 100 largest non-financial shares on Wall Street’s NASDAQ stock exchange. Among the companies you’ll be owning a slice of are Alphabet, Amazon, Apple, Meta, Microsoft, Netflix, and Tesla. And with the NASDAQ 100 ETF falling materially last year, now could be a great time to start a long term investment.

The post 3 wonderful ETFs for ASX investors to buy next week appeared first on The Motley Fool Australia.

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More reading

• The Netflix share price just popped. Here’s one way to buy in on the ASX
• 3 undervalued ASX shares that should be on your radar
• How I’d invest $40k in ASX shares and aim for $1 million
• Waiting for ASX shares to bottom? Why you could miss out on a stock market rally
• Tech rebound! Here are 2 ASX ETFs to buy before it’s too late

Motley Fool contributor James Mickleboro has positions in BetaShares Nasdaq 100 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BetaShares Global Cybersecurity ETF and BetaShares Nasdaq 100 ETF. The Motley Fool Australia has positions in and has recommended BetaShares Global Cybersecurity ETF and BetaShares Nasdaq 100 ETF. 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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At this time of the year, there are many predictions and forecasts from experts to wade through.

However, you can’t invest directly in macroeconomic trends. And those predictions might be incorrect, or the expert’s timing might be off.

So it’s much more helpful if the pundits actually mention specific S&P/ASX 200 Index (ASX: XJO) stocks that they’re backing.

That way, the fund managers are putting their money where their mouth is, and you can consider buying stocks on the basis of the company’s potential rather than ethereal economic drivers.

The ECP Growth Companies Fund did exactly this recently, naming three ASX shares that had mixed fortunes last month but are worth holding for the long term:

‘A high-quality business’

The share price for building materials provider James Hardie Industries plc (ASX: JHX) tanked almost 10% in December.

In fact, with interest rates rising steeply, the past year has been pretty unpleasant for investors, with the stock plunging more than 40%.

“The slowdown in housing continues to weigh on investment appetite, particularly the rate of deterioration in volume outlook and lack of visibility,” read ECP analysts’ memo to clients.

“Growing their economic footprint may be challenging in the near term.”

​​

Despite these short-term pressures, the fund is sticking with James Hardie because of its excellent prospects in the longer run.

“James Hardie remains a high-quality business demonstrating its commitment to managing supply and demand, with a clear focus on product mix,” the memo read.

“Colourplus growth remains strong, with 31% volume growth in 2Q23, which should support average selling price and margins.”

‘Strongly positioned’ to grow in ‘structurally attractive’ market

Financial services software maker Netwealth Group Ltd (ASX: NWL) had a pretty ordinary Christmas too, with the share price plummeting 12% last month.

According to ECP analysts, there was no news from the company to justify the de-rating.

“Short-term investor sentiment has remained focused [on] the cadence of in-flows to wealth platforms with advisors regaining client consolidation momentum as markets have stabilised.”

​​

Despite the short-term hiccups, the ECP team is keeping the faith in Netwealth. 

“Notwithstanding variable quarterly flow results, we continue to believe Netwealth is strongly positioned to continue gaining market share in the structurally attractive wealth platform market.”

Netwealth shares have dipped 21% over the past 12 months.

China could be ramping up

December was a different story for the stock price of mining giant Rio Tinto Ltd (ASX: RIO), as it soared more than 6%.

The ECP team attributed this to China’s COVID-19 reopening triggering a rocket under iron ore prices.

“The Chinese government has also been making positive noises in relation to economic growth and have signalled that they plan to address issues related to residential property prices,” read the memo.

“Infrastructure spending is also likely to be a focus.”

The Rio Tinto share price has been on a wild rollercoaster over the past year, dipping as low as $87.60 and flying as high as $128.55.

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The post 3 all-star ASX 200 shares ECP is going all-in on appeared first on The Motley Fool Australia.

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More reading

• Should I buy Rio Tinto shares in 2023?
• My top predictions for ASX 200 mining shares in 2023
• Here are the top 10 ASX 200 shares today
• Why Alumina, Netwealth, Nickel Industries, and Paladin Energy shares are falling today
• Why Allkem, DGL, Nanosonics, and Rio Tinto shares are pushing higher today

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Netwealth Group. The Motley Fool Australia has positions in and has recommended Netwealth Group. 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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Building up a meaningful source of secondary income from the share market is one of the best ways of gaining passive income. ASX shares pay dividends, often with franking credits, and dividends are one of the best ways to receive passive income.

However, doing this isn’t easy. It requires a lot of time, capital and discipline. So let’s walk through how an investor might get to a secondary income of $100 per week using ASX shares.

So let’s get the maths out of the way. $100 a week works out to be roughly $5,200 per year.

Let’s take a simple ASX index fund, such as the Vanguard Australian Shares Index ETF (ASX: VAS). This exchange-traded fund (ETF) holds the 300 largest shares on our share market in its underlying portfolio.

This means an investment in this ETF basically exposes you to the profits of all 300 of those companies. In varying degrees, of course.

So because most of those 300 companies pay out consistent dividends, the Vanguard ETF passes through this income as dividend distributions.

So how much do ASX shares pay out in income?

Over the past 12 months, investors have enjoyed distributions totalling $6.36 per unit. That works out to be a yield of approximately 7% on current pricing.

So if an investor wished to receive $100 per week (or $5,200 per year) for this ETF, they would have needed to have around $74,300 invested last year.

If an investor invested $100 a week and received the historical rate of return of 8.8% that the Vanguard Australian Shares ETF has delivered since its inception, it would take around a decade to amass $74,300 in invested capital, spitting out $100 a week in dividend returns.

That assumes the Vanguard Australian Shares ETF keeps its dividend payouts at 2022’s levels going forward, which is not guaranteed, of course.

But this exercise shows exactly how ASX shares can be used to build up a stream of secondary income. What are you waiting for?

The post How to make a second income of $100 per week from ASX dividend shares appeared first on The Motley Fool Australia.

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More reading

• How I’d invest $40k in ASX shares and aim for $1 million
• Don’t ‘save’ for retirement! I’d invest in dirt-cheap ASX shares instead
• 5 reasons I’d consider buying the Vanguard Australian Shares Index ETF (VAS)
• How I’d invest $5,000 in high-yield ASX shares to earn a second income
• 3 ASX 200 shares I own for big dividends in 2023

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

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Warren Buffett is recognised as one of the world’s leading investors. He has built enormous wealth through the power of investing in businesses. I’m using some of his key lessons to help me become rich over time.

Buffett has built his company Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) into a world leader with investments including insurance, railroads, banking and Apple Inc (NASDAQ: AAPL).

While his choice of investments has been part of his success, there are a couple of important factors that I think have enabled Buffett’s wealth growth.

Investing when the share market is down

It’s obvious to say, but I think hefty market declines can have the biggest impact on people’s wealth, depending on how investors behave.

If people decide to sell when share prices have dropped, it means they’re locking in the negative returns their portfolio has experienced. We could call that buying high and selling low.

Just look at what’s happened to the global share market over the past year with the Vanguard MSCI Index International Shares ETF (ASX: VGS):

I believe that investors need to be patient during volatility – crashes regularly happen, so we should expect them. So, just holding onto good ASX shares during downturns seems like a smart move to me.

But, buying shares during a market decline could be a very good move. The lower the purchase price, the bigger the gains over time, if that particular investment does go up.

Warren Buffett advice about market volatility

Buffett once said: “Be fearful when others are greedy, and greedy when others are fearful.”

He also gave an excellent analogy about why it’s good to remain optimistic about investing when share prices drop:

To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.

A third example of his advice regarding price falls comes from his 1997 annual letter to shareholders:

If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.

Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.

Foolish takeaway

Choosing good investments is important. But it’s no good if investors sell when the market goes through volatility. Missing out on good prices could be a mistake as well. It takes patience to enable investments to compound and grow over time.

I used the COVID-19 crash as a big opportunity to invest and I’m using the current lower prices to buy a number of attractive ASX shares at cheaper prices than we saw in 2021. By using — and living by — Warren Buffett’s advice, I think it makes it more likely that I can become wealthy.

The post Forget gold, I’m using the Warren Buffett method to try and get rich! appeared first on The Motley Fool Australia.

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More reading

• 3 fantastic ETFs for ASX investors to buy this month
• With almost no investments at 30, can ASX shares still make me rich?
• 3 of the best ASX ETFs for investors to buy in January
• 2022 wasn’t kind to the Vanguard MSCI Index International Shares ETF (VGS). What now?
• How I’d invest $300 a month in ASX dividend shares to target a $30,000 annual second income

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Berkshire Hathaway, and Vanguard Msci Index International Shares ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple, Berkshire Hathaway, and Vanguard Msci Index International Shares ETF. 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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