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Both Coles Group Ltd (ASX: COL) stock and Woolworths Group Ltd (ASX: WOW) stock have been dependable over the last four years. With the COVID-19 boost gone and inflation moderating, which ASX share is a better buy?

I’m going to look at the three main areas that would help me decide.

P/E ratio

When two businesses are from the same industry, and they’re both profitable, it can make a lot of sense to compare them based on their earnings multiple. This measure is called the price/earnings (P/E) ratio.

Usually, a lower P/E ratio is more appealing if the business is growing over the longer term.

But, it’s more important to know about future earnings than the past. That’s why forecasts are so useful. I wouldn’t put too much weight on the exact number, but it can be a useful guide for which direction earnings are expected to go, and roughly what the valuation is.

According to the numbers on Commsec, Coles stock is valued at 21 times FY24’s estimated earnings and 17.5 times FY26’s estimated earnings. Coles’ earnings per share (EPS) is predicted to grow by 19.6% between FY24 to FY26.

Woolworths stock is valued at 22.6 times FY24’s estimated earnings and 20 times FY26’s estimated earnings. Woolworths’ EPS is projected to grow by 14% between FY24 to FY26.

There’s not a huge amount in it, but Coles is valued more cheaply and it’s projected to grow profit by more. The huge investment in new automated warehouses can help the business deliver efficiencies in the coming years once they’re all completed.

Sales growth

Short-term sales performance is not the greatest indicator of future profit sales growth or future financial years, but it’s a snapshot of which business is doing better.

Weaker, or stronger, sales growth than what was expected can influence both Coles stock and Woolworths stock.

In Coles’ FY24 first-half result, it said supermarket sales grew by 4.9% to $19.8 billion. In the first eight weeks of the FY24 third quarter, supermarket sales had grown by another 4.9% “underpinned by volume growth”.

In Woolworths’ FY24 first-half result, it said its Australian food division saw 5.4% sales growth. However, Australian food sales in the first seven weeks of the second half of FY24 only grew by 1.5%.

Coles seems to be entering the second half with much better momentum, though that’s not guaranteed to continue.

Dividend yield

Profit growth can influence the direction of the share price, but the dividends are the ‘real’ returns that shareholders receive until they decide to sell shares.

According to Commsec, Coles is projected to pay a grossed-up dividend yield of 5.6% in FY24 and 6.8% in FY26 at the current Coles stock price.

Woolworths is forecast to pay a grossed-up dividend yield of 4.7% in FY24 and 5.3% in FY26 at the current Woolworths stock price.

Foolish takeaway

Both of these are strong businesses, but Coles stock seems to win on each measure at the moment, so it would be my choice. However, I do appreciate that Woolworths has more diversification within its business, including Big W, Petstock and other relatively small businesses.

The post Better buy: Coles or Woolworths stock? appeared first on The Motley Fool Australia.

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More reading

• 3 ASX shares you can confidently invest $500 in right now
• Buy Coles and these ASX dividend shares next week
• Top ASX passive income shares to buy in March 2024
• Bell Potter says these ASX 200 stocks are strong buys for March
• 2 buy-rated ASX dividend stocks for income investors in March

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 Coles 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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The Pilbara Minerals Ltd (ASX: PLS) share price is charging higher on Tuesday morning.

At the time of writing, the lithium miner’s shares are up almost 5% to $4.19.

Why is the Pilbara Minerals share price jumping?

Investors have been bidding the company’s shares higher today after it announced a new offtake agreement.

According to the release, Pilbara Minerals has executed a new offtake agreement with Sichuan Yahua Industrial Group (Yahua) for the supply of spodumene concentrate from its 100% owned Pilgangoora Operation.

Yahua is a leading lithium chemicals company and one of the largest lithium hydroxide producers globally. It has strong connections across the lithium supply chain with key customers including Tesla, LG Energy Solutions, LG Chem, and CATL.

Pilbara Minerals advised that the agreement starts in 2024 and will be for the following supply:

• 2024: 20kt of spodumene concentrate (with an option for up to an additional 60kt at Pilbara Minerals’ election) resulting in a total supply of between 20kt to 80kt.
• 2025: 100kt of spodumene concentrate (with an option for up to an additional 60kt at Pilbara Minerals’ election) resulting in a total supply of between 100kt to 160kt.
• 2026: 100kt of spodumene concentrate (with an option for up to an additional 60kt at Pilbara Minerals’ election) resulting in a total supply of between 100kt to 160kt.

Management notes that consistent with its other existing agreements, all spodumene concentrate volumes will be sold based on the prevailing market price.

‘Delighted’

Pilbara Minerals’ managing director and CEO, Dale Henderson, was very happy with the news. He said:

We are delighted to have signed this offtake agreement with Yahua, a leading global lithium chemicals producer which has extensive supply chain relationships with major battery materials customers globally.

This offtake builds-on an established relationship between our companies, having previously completed a number of sales together. The agreement enables Yahua to further expand its supply chain commitments with key global battery customers and builds-out Pilbara Minerals medium-term sales profile whilst preserving long-term optionality as we assess downstream opportunities in-line with our growth strategy.

The Pilbara Minerals share price is up 8% over the last 12 months.

The post Pilbara Minerals share price jumps on deal with Tesla supplier appeared first on The Motley Fool Australia.

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More reading

• Why are short sellers shifting into ASX blue chips and out of lithium losers?
• These are the 10 most shorted ASX shares
• Why these 3 ASX 200 shares grabbed the Motley Fool’s headlines this record-breaking week
• Morgans says Pilbara Minerals shares are a best idea in March
• Could the big short of ASX lithium stocks be nearing its end?

Motley Fool contributor James Mickleboro 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 Tesla. 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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Lake Resources N.L. (ASX: LKE) shares have returned from their trading halt and crashed deep into the red.

In morning trade, the lithium developer’s shares are down 20% to 9.2 cents.

Why are Lake Resources shares crashing?

Investors have been selling the company’s shares this morning after it announced the completion of an institutional placement.

According to the release, the company has received firm commitments to raise $15 million at 7 cents per new share. This represents a whopping 39.1% discount to where Lake Resources shares last traded.

Management advised that the placement received strong support from offshore and domestic institutional and sophisticated investors, leading to the introduction of new high-quality investors to its register.

The company will now seek to raise a further $5 million from retail investors through a share purchase plan (SPP) at the same offer price.

Why is it raising funds?

These funds will be used to keep the lights on at Lake Resources while it aims to complete its ongoing strategic partnership process. This process is expected to conclude in the second half of the year. The company explains:

The Offer enhances Lake’s balance sheet by providing additional working capital and financial flexibility during the strategic partnership selection process for Kachi. Lake is actively conducting outreach to a wide array of potential strategic partners including car and battery manufacturers, lithium producers, oil and gas companies, sovereign wealth funds and private equity. The strategic partnership process is scheduled to conclude in the second half of the year.

Lake’s CEO, David Dickson, adds:

We are pleased with the level of support shown for Lake from both existing and new shareholders. The equity raising will provide funding capacity to support the delivery of the strategic partnership process. We are pleased to offer our existing retail shareholders the ability to participate in the capital raising via the SPP.

The post Why are Lake Resources shares crashing 20% on Tuesday? appeared first on The Motley Fool Australia.

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More reading

• Why are Lake Resources shares in a trading halt?
• Why Cettire, Fletcher Building, Lake Resources, and Nick Scali shares are falling today
• Down 80% in a year why are Lake Resources shares tumbling again today?
• Down 7%: What’s gone so wrong for Lake Resources shares today?

Motley Fool contributor James Mickleboro 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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NVIDIA Corp (NASDAQ: NVDA) shares have been one of the best-performing blue chips in the world over the past year, rising by 270%! In 2024 alone, they have gone up 80%.

In five years, the stock has soared more than 1,900%. What a fantastic return. It’s now one of the largest businesses in the world in terms of market capitalisation. Of course, past performance is not a reliable indicator of future performance after such big gains.

I think it has done a good job of justifying its rise. It’s heavily involved in powering the growth of AI around the world. Nvidia says it has the world’s most advanced AI platform with full-stack innovation in computing, software, and AI models and services.

In February, the business announced its numbers for the quarter and year ending December 2023. Quarterly revenue was US$22.1 billion, an increase of 22% quarter over quarter and a 265% rise year over year. The full-year revenue rose 126% year over year to US$60.9 billion.

Can we buy Nvidia shares on the ASX?

We can’t directly buy Nvidia shares on the ASX. The business’s primary listing is in the US on the NASDAQ.

However, there are several ways for Aussies to access the company. Of course, we can invest in Nvidia shares via a broker that allows international share trading.

There are a number of exchange-traded funds (ETFs) on the ASX that own Nvidia shares as part of the portfolio.

For example, the iShares S&P 500 ETF (ASX: IVV) currently has a 5.1% weighting to the business.

But, for investors wanting an even bigger allocation, I have some other suggestions.

Betashares Nasdaq 100 ETF (ASX: NDQ) currently has a 6.5% weighting to the technology company.

The BetaShares Global Sustainability Leaders ETF (ASX: ETHI), an ethically-based ETF, currently has a weighting of 10.4% to the AI stock.

The Global X Fang+ ETF (ASX: FANG) has an even bigger allocation – 16% – to Nvidia shares.

If I wanted to get as much exposure to Nvidia shares as possible, I’d go for the FANG ETF. Not only does it have the biggest portfolio allocation to the US company, but the rest of the ETF also gives exposure to tech-focused businesses like Alphabet and Microsoft, with a number of them having AI exposure in their own way.

The post Can you buy Nvidia shares on the ASX? appeared first on The Motley Fool Australia.

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More reading

• 4 ASX ETFs for smart investors
• This trend could signal more gains for Nvidia shares
• 2 ASX ETFs for beginner investors to buy in March
• Are these record-breaking ASX ETFs now too expensive to buy?
• Is the surging Nvidia share price causing a stock market bubble?

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 Alphabet, BetaShares Nasdaq 100 ETF, Microsoft, Nvidia, and iShares S&P 500 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Alphabet, Nvidia, and iShares S&P 500 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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The ASX penny stock Airtasker Ltd (ASX: ART) is one of the most exciting ASX small-cap shares around.

I love finding stocks that have the potential to grow revenue and their profit margins significantly, as they are the ones that might achieve significant shareholder returns.

The business I’m talking about is Airtasker. This company operates a platform that brings together people needing help with a task and people/businesses with the skills to do that work.

It has the financials to do something special if things go right.

Strong profit margin to unlock rapid earnings growth?

The company recently reported its FY24 first-half result. In the six months to December 2022, its gross profit margin was 94.4%, while it increased to 95.7% in HY24. This is such a high margin that almost all of the new revenue is turning into gross profit.

I’m not expecting the gross profit margin to remain above 95%, but being above 90% is very impressive.

Extra gross profit means it can spend more on growth initiatives and/or allow its profit lines to increase, such as earnings before interest, tax, depreciation and amortisation (EBITDA) and net profit after tax (NPAT).

Despite the challenging economic conditions, group revenue rose by 6.8% to $23.3 million.

We saw HY24 group EBITDA improve by $7.1 million to $2 million, NPAT increased by $7.48 million to $0.2 million and non-statutory free cash flow grew by $4.75 million to $0.1 million.

Airtasker has tipped into profitability, which could be a real turning point for the ASX penny stock if it can keep growing revenue.

Strong international growth for the ASX penny stock

Airtasker has built a strong position in Australia and I’m excited by its efforts overseas.

In the UK, the company has formed a media-for-equity partnership with Channel 4, after successful growth in Australia using this model. Posted tasks in the UK are already up 30%. The company said its trailing 12 months (TTM) of revenue was up 33.6% to £532,000, while UK TTM gross marketplace volume (GMV) rose 10.1% to £3.8 million.

In the US, HY24 TTM GMV increased 46.3% to US$0.5 million, while revenue rose 132.4% to US$57,000.

The numbers generated in the UK and the US are currently small, but if those regions keep compounding at similar rates, they could become sizeable contributors to the overall business. There are a number of other markets that Airtasker could expand into, such as Canada and New Zealand, though I’m not expecting that to happen any time soon. It’s a useful growth lever to have.

Foolish takeaway

The ASX penny stock has a lot of growth potential, with the margins and business model to scale significantly. Now it just needs to execute on the growth prospects and deliver rising GMV.

The post Could this ASX penny stock become an investing goldmine? appeared first on The Motley Fool Australia.

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More reading

• Want to make big returns? ASX small-cap shares are poised to outperform
• 2 ASX stock picks with explosive potential
• Where I’d invest $5,000 into ASX small-cap shares aiming for big growth

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 recommended Airtasker. 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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Investors that are looking for mid-cap exposure in 2024 might want to check out the shares that Goldman Sachs is currently tipping as buys.

Especially with the broker tipping gains of approximately 30% to 40% for their shares from current levels.

Here’s what you need to know about them:

IDP Education Ltd (ASX: IEL)

Goldman continues to be a big fan of this language testing and student placement (SP) provider.

It believes that recent weakness caused by regulatory changes has created a compelling buying opportunity for investors. Especially given its very bright long-term outlook. It said:

EL continues to be impacted by regulatory changes that are restricting the flow of international students, but is well positioned to capitalise when conditions normalise given improving SP market share and investments into its network/platforms.

Goldman has a buy rating and $26.60 price target on its shares. This implies potential upside of 41% for investors over the next 12 months.

Lifestyle Communities Ltd (ASX: LIC)

Another mid-cap ASX share that could be a top buy is Lifestyle Communities. It is a leading developer and manager of residential land lease communities in Australia.

While the broker was surprised with the company’s decision to raise equity recently, it is pleased that its balance sheet is now looking strong. This means investors can focus more on its settlements and earnings growth over the coming years. It said:

LIC’s equity raising came as a surprise, and in our view is reflective of a softer resi backdrop (impacting both settlement cash flows and opportunity to acquire new land). From here, now that the balance sheet is under considerably less strain, we expect investors to respond positively as settlements, earnings and cash flow improve significantly into FY25/26E.

Goldman has a buy rating and $21.32 price target on the mid-cap ASX share. This suggests that its shares could rise 34% from current levels.

The post These mid-cap ASX shares could rise 30% to 40% appeared first on The Motley Fool Australia.

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More reading

• Why are short sellers shifting into ASX blue chips and out of lithium losers?
• Here are the top 10 ASX 200 shares today
• Leading brokers name 3 ASX shares to buy today
• These are the 10 most shorted ASX shares
• 3 ASX 200 shares that could rise 20% to 50%

Motley Fool contributor James Mickleboro 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 Goldman Sachs Group and Idp Education. The Motley Fool Australia has recommended Idp Education. 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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There are a lot of options for growth investors to choose from on the Australian share market.

But two that could be standouts according to Morgans are named below.

The broker not only thinks they are buys but predicts strong returns from their shares over the next 12 months. They are as follows:

Corporate Travel Management Ltd (ASX: CTD)

The first ASX share that could be a quality option for growth investors is Corporate Travel Management. It is a global leader in business travel management services.

While its performance during the first-half underwhelmed analysts at Morgans, the broker believes it is worth sticking with the company. It explains:

The quantum of the earnings downgrade is clearly disappointing. Given the aggressive pivot in earnings guidance from the AGM last year, the market may take time to rebuild its confidence in the outlook. However, if CTD delivers even close to its five-year strategy, the share price will be materially higher in time. We maintain an Add rating with a new price target.

Morgans has an add rating and $20.65 price target on its shares.

Lovisa Holdings Ltd (ASX: LOV)

Another ASX growth share that has been tipped as a buy by analysts at Morgans is Lovisa. It is a fast fashion jewellery retailer with a rapidly growing international store network.

The broker was impressed with the company’s performance during the first half, noting that its result came in ahead of expectations. But while that was strong, Morgans thinks investors should be focusing less on the near term and more on its long-term growth potential. It said:

The 1H24 result surpassed expectations, mainly due to strong gross margins, which were supported by favourable changes to the price architecture. We have increased our EBIT estimate for the current year by 4%, but, for us, it’s not about the near-term. The investor should focus on what this business could develop into in the years ahead. We reiterate our Add rating and increase our target price.

Morgans has an add rating and $35.00 price target on its shares.

The post Broker says these ASX growth shares with very bright futures are top buys appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• The most profound lesson from Lovisa’s results. What could it mean?
• Top brokers name 3 ASX shares to buy next week
• 3 ASX winners from the reporting season (and 2 losers)
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in Lovisa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Corporate Travel Management and Lovisa. The Motley Fool Australia has recommended Corporate Travel Management and Lovisa. 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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Are you looking for some new additions to your income portfolio? If you are, then read on.

That’s because listed below are three ASX dividend shares that analysts have named as buys and tipped to offer 5%+ dividend yields in 2024.

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

BHP Group Ltd (ASX: BHP)

The first ASX dividend share that could be a buy is BHP. It is one of the world’s largest miners with a high-quality portfolio of assets across several commodities and geographies.

Goldman Sachs is positive on the Big Australian. In response to its half-year results, the broker retained its buy rating with a $49.40 price target.

As for income, its analysts are expecting the mining giant to provide investors with attractive dividend yields in the near term.

They are forecasting fully franked dividends of approximately ~$2.19 per share in FY 2024 and then ~$1.94 per share in FY 2025. Based on the current BHP share price of $42.82, this equates to yields of 5.1% and 4.5%, respectively.

Rural Funds Group (ASX: RFF)

Another ASX dividend share that has been named as a buy is Rural Funds.

It is an agricultural property company that leases almond orchards, macadamia orchards, poultry property and infrastructure, vineyards, cattle properties, cropping properties, cattle and water rights.

Bell Potter currently has a buy rating and $2.40 price target on its shares.

In respect to dividends, the broker is forecasting dividends per share of 11.7 cents in both FY 2024 and FY 2025. Based on the current Rural Funds share price of $2.13, this will mean yields of 5.5% in both years for investors.

Stockland Corporation Ltd (ASX: SGP)

Finally, this residential and land lease developer and retail, logistics and office real estate property manager could be a third ASX dividend share to buy right now.

Citi is feeling very positive about the company. So much so, it currently has a buy rating and $5.00 price target on its shares.

As for income, Citi is forecasting dividends per share of 26.2 cents in FY 2024 and 26.6 cents in FY 2025. Based on the Stockland share price of $4.67, this represents dividend yields of 5.6% and 5.7%, respectively.

The post Buy BHP and these ASX dividend shares appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why are short sellers shifting into ASX blue chips and out of lithium losers?
• Why Adairs, BHP, Deep Yellow, and Woodside shares are dropping today
• Why these 3 ASX 200 shares grabbed the Motley Fool’s headlines this record-breaking week
• These brave investors are earning a 9% dividend yield on BHP shares! Here’s how

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro 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 Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Rural Funds 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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The Wesfarmers Ltd (ASX: WES) share price has done very well, rising by roughly 30% in the past year. Not many S&P/ASX 200 Index (ASX: XJO) shares have managed that level of strength.

It’s clear that the Wesfarmers share price is a lot higher. Now, without a crystal ball, I don’t know if — or when — stock in the ASX retail conglomerate will ever fall back to its former levels.

And what happens next?

Is the Wesfarmers share price done rising? Or will it ride higher again?

Why I’m confident Wesfarmers’ share price and profit can keep rising

In the long run, rising profit will typically boost a company’s share price.

And there are a number of drivers that can help Wesfarmers keep growing profit.

For starters, the Australian population continues to grow each year, which increases the potential number of customers at stores like Bunnings, Kmart and Officeworks.

Next, the company has a healthy dividend payout ratio, which is the percentage of profit that is paid as a dividend.

In the FY24 first-half result, Wesfarmers reported a dividend payout ratio of 72%. That means it kept more than a quarter of its profit to re-invest in more growth initiatives – it would be appealing if it could continue achieving a return on equity (ROE) of more than 30% (it was 31.4% in HY24) on the additional profit that’s re-invested.

Acquisitions can also boost the company’s profit in the future. For example, it recently acquired Instantscripts and Silk Laser Australia to help boost the scale and diversity of its growing healthcare division.

Finally, I think Bunnings and Kmart are two of the best retailers in the country. In this high cost-of-living environment, I think they’re both capable of winning market share, even if retail sales across Australia are challenged.

Valuation

According to the estimate on Commsec, the Wesfarmers share price is valued at 25x FY26’s estimated earnings. I think that’s a reasonable value for a long-term investment in this great business.

The post The Wesfarmers share price has jumped 30% in a year, is it too late to buy? appeared first on The Motley Fool Australia.

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More reading

• With a spare $500, here’s how I’d start buying ASX shares this March
• Are you investing or gambling?
• 3 things about Wesfarmers stock every smart ASX investor knows
• 5 ASX shares to buy for an effortless path to financial freedom
• 3 ASX 200 shares I think could grow to be bigger than BHP one day

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 Wesfarmers. 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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Berkshire Hathaway (NYSE: BRK.B) leader Warren Buffett is widely regarded to be one of the greatest investors of all time.

It isn’t hard to see why. The Oracle of Omaha’s most recent letter to shareholders reveals that he has delivered an average annual return of 19.8% for Berkshire Hathaway since back in 1965. This is almost double the market return over the same period.

To put that return into context, a single $1,000 investment in 1965 would be worth approximately $35 million today.

As a comparison, the market return would have turned that $1,000 into $280,000. And while this is still a fantastic return, I know which one I would prefer.

In light of the above, it certainly can pay to listen to Buffett’s advice when you’re planning to buy ASX shares.

Especially if you are contemplating buying term deposits instead of ASX shares.

Why invest in ASX shares over term deposits?

Firstly, while ASX shares could be the superior option for most investors, they may not be for everyone.

Term deposits are effectively low-risk loans made to banks in exchange for a fixed interest rate over a certain period of time. They offer a degree of safety, stability, and predictability. This can make them good options if you’re focusing on capital preservation and income.

However, their returns are typically modest and subject to inflation risk. Right now, you’re looking at a return of approximately 4% per annum (before inflation) from a 12-month term deposit. This is a fifth of the return that Buffett has achieved with shares and less than half the market return.

In 2008, Buffett commented on this type of use of capital. He said:

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

How do you invest like Buffett with ASX shares?

Investing like Warren Buffett is easier than you think.

In his most recent letter to shareholders, Buffett provided investors with a simple explanation for how he invests so successfully. This could be used by Aussie investors with ASX shares. He said:

We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring.

Overall, although term deposits offer a degree of safety and stability, their returns are typically modest and subject to inflation risk.

For investors seeking higher returns and long-term value, ASX shares arguably represent the superior option. By investing in high-quality companies with strong competitive advantages and long-term growth potential, like Buffett does, investors have the potential to grow their wealth over time.

The post Forget term deposits and listen to Warren Buffett’s advice with ASX shares appeared first on The Motley Fool Australia.

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More reading

• How to become a multi-millionaire with ASX shares
• Buffett’s latest thoughts on business, investing and Berkshire
• Here are Warren Buffett’s tips to becoming rich with ASX shares
• No savings in 2024? I’d follow Warren Buffett and start building wealth
• What can ASX investors learn from Warren Buffett’s latest buys and sells?

Motley Fool contributor James Mickleboro 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 Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. 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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