Cracking the market can be tough work for new investors. Identifying the best companies and ignoring the bad. But you can never make all the right calls.
You'll always get some investments wrong. In the words of one of the world's most famous fund managers, Peter Lynch: "In this business, if you're good, you're right six times out of ten. You're never going to be right nine times out of ten."
So don't be disheartened if you fail to get all your investments right. Things happen outside your calculations, assumptions and wildest expectations.
However, a simple investing strategy used by the best money managers throughout the world will help. Diversification. In itself, it's not a market-beating tactic, but maintaining a well-rounded portfolio helps you take advantage of the tailwinds in some industries or markets and counteract the headwinds in others. Here are a handful of mixed investments you could look to add to your diversified portfolio.
All-rounders
Unlike some commentators and advisors I believe mid-cap stocks, i.e. those which pay modest dividends and boast expanding business models, should make up the bulk of a long-term growth portfolio. You'd likely be familiar with their names and services they offer.
Village Roadshow Ltd (ASX: VRL), Slater & Gordon Limited (ASX: SGH) and Ardent Leisure Group (ASX: AAD) – owner of Dreamworld, AMF Bowling and GoodLife Health Clubs – each offer growing earnings and dividends. Respectively, they currently trade on price-earnings ratios of 18, 16 and 18 and pay dividends of 4.3%, 1.6% and 5%.
Big Names
Although there might not be many blue-chip stocks which are a standout 'buy' at current prices. Two companies which I'd be happy to add to my portfolio today are Telstra Corporation Ltd (ASX: TLS) and Coca-Cola Amatil Limited (ASX: CCL). They respectively offer dividend yields of 5.7% and 5.3% fully franked. In the current interest rate environment these payouts are not to be scoffed at. More importantly both companies have a long-term runway for earnings growth and proven track records.
Growth
Depending on your tolerance for risk, high-risk investments should be minimised. However, a small company doing everything right is just as compelling as a blue-chip investment. Collins Foods Limited (ASX: CKF) owns and manages KFC and Sizzler restaurants throughout Australia and Asia. The Sizzler chain has dragged on the performance and forced management to release a full-year earnings guidance of only 5% growth for the remainder of 2014. However the store count is growing, costs are coming down and the group maintains robust balance sheets.
Foolish takeaway
Cracking the share market is tough. Everyone's got a variant perception on what is and what isn't value investing and no one can accurately predict the future. However, conducting rigorous research and building up your portfolio around established businesses will put the odds of success in your favour.
