The direction of the stock market has been easy to predict over the past year or so. Fueled by large gains in large-cap stocks like QBE Insurance (ASX: QBE) and Amcor (ASX: AMC), the S&P/ASX 200 has jumped 20%.
Dart-throwing monkeys have made money in this market. Even I have. I suspect you have too, and hopefully lots of it. This rising tide has lifted all boats.
Enjoy it whilst you can, for the stock market is rarely in such a hospitable mood. It won't always be this easy to make such good money.
Climbing The Wall
They say the stock market climbs a wall of worry. There are always reasons as to why it might crash. Today, we can point to the rising unemployment, a budget deficit, and the ongoing concerns about the Chinese economy. And that's just for starters.
Yet the market continues on its inexorable upward trajectory. Whilst we are naturally fearful of the next crash, history tells us crashes are few and far between. Experience tells us crashes are almost impossible to predict.
If you live your life being worried about the next stock market crash, you likely will never be a truly successful investor.
You'll constantly be sitting on the sidelines, waiting, waiting, and waiting. And when the right moment does come along, moments like we had last year, and the year before, and the year before, you'll inevitably sit on your hands, waiting for the market to fall even further.
Companies You'd Love To Buy, But Shouldn't
All that said, it always pays to be a cautious investor. The best way to do that is to concentrate on buying good companies at cheap prices. Sadly, it's easier said than done, because good companies usually trade at premium prices. For example…
Domino's Pizza (ASX: DMP)
InvoCare (ASX: IVC)
CSL Limited (ASX: CSL)
You can pay up and buy companies like these, but beware you'll have a relatively low margin of safety should things go wrong, either with the economy or the individual company. In effect, a lot of future growth is already priced into the share prices of these quality companies.
3 Companies You Can Buy Today
But investors shouldn't despair, for there are still a number of decent companies trading at fair prices. For example…
Macquarie Group (ASX: MQG)
Telstra (ASX: TLS)
Myer (ASX: MYR)
Investing in these large, somewhat boring stalwarts is not going to turn you into an instant millionaire, but in an uncertain economy and potentially rocky stock market, they should stand you in good stead.
The icing on the cake are the juicy dividend yields on offer, particularly with Telstra and Myer. Those sorts of returns, albeit with a higher level of risk, knock the socks off the 2.5% on offer for savings accounts.
No Risk, No Reward
There are never any guarantees when it comes to investing. Your best laid plans can and will come awry. But if you concentrate on getting the basics right, you should be able to generate positive returns over the long-term.
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