Warren Buffett, the Berkshire Hathaway Chairman of the Board, President, and CEO, has been quoted as saying,
There is nothing wrong with a 'know nothing' investor who realizes it. The problem is when you are a 'know nothing' investor but you think you know something.
Despite the numerous articles and stock ideas you'll read on this site, there are perhaps some of you who yearn for a simple investment strategy.
Not 'Buy this, sell that'. As for puts and call options … forget it.
What Warren Buffett went on to argue is that if you acknowledge you don't know much about investing, you could simply invest in low-cost index funds, or exchange-traded funds which mimic the returns of an overall market.
A couple of examples that you could consider for your portfolio may include the iShares S&P 500 ETF and the Vanguard All-World ex-US Shares Index ETF (known respectively as ISCSS&P500 CDI 1:1 (ASX: IVV) and the VWORLDXUS CDI 1:1 (ASX: VEU)).
Both offer incredible diversification and at a low cost.
But what if you're ready to take the leap into the purchase of actual shares in companies, but without all of the analysis and grunt work that goes with understanding what goes on under the bonnet?
No investment is completely set-and-forget, but the three below are, in my opinion, perfectly suited for those investors who don't wish to be an active investor and can trust the investments do their thing.
WAM Capital Limited (ASX: WAM)
What better way to start an investing career than with a fully-franked 5.9% dividend via a listed investment company (LIC) run by Geoff Wilson and his team at Wilson Asset Management? The underlying investments include a broad parcel of Australian listed shares, and early investors in this LIC have been rewarded with an annual average return of almost 18% over the last 18 years. Given their track record and dedication to smaller shareholders, this is about as close as you can get to a hassle-free investment.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Although not a listed investment company, it's not far off that definition. Soul Patts does hold a diversified portfolio of assets which help generate a stream of fully-franked dividends. The difference between this and a conventional LIC is that it own major stakes in companies like its 25% interest in TPG Telecom Ltd (ASX: TPM), its 24% interest in Australian Pharmaceutical Industries Ltd (ASX: API), and its 44% shareholding in Brickworks Limited (ASX: BKW). Its diversified and conservative nature means it has never failed to pay a dividend since 1903 and has increased its dividends to shareholders every year since 2000. A 'bottom-draw' stock if there ever was one.
Scentre Group (ASX: SCG)
This real estate investment trust owns and operates Westfield-branded shopping centres throughout Australia and New Zealand. Given the impending entry of Amazon into the Australian market, and the general ubiquity of online shopping, buying units in this trust could be considered risky. However, Scentre is morphing its centres into premium, high quality regional shopping centres that are also places now for luxury retail, fine dining and entertainment. For this reason, I believe Scentre will have a bright future and will be able to co-exist comfortably with the likes of its online competition.
Foolish takeaway
No investment is completely safe and no returns, of course, are guaranteed.
But the three ideas above represent as close as you can get to investments that won't frighten the horses and keep you up at night.
Once you've established your initial investments, you can then continue to learn and expand your knowledge in the world of investing that, with a regular savings plan, will hopefully provide you with a blue-chip retirement.
