"Shares up, gold down," went the early morning headline in The Age today.
Gold is yellow, heavy and pays you nothing. Shares are liquid, cheap and pay a dividend.
To me, choosing shares over gold is a no-brainer.
Overnight in the States, the Dow jumped 111 points to close back over 17,000.
Robert Pavlik, chief market strategist at Banyan Partners was quoted in Bloomberg as saying…
"The market has more room to run."
The same publication says Goldman Sachs raised its S&P 500 forecast for 2014 from 1,900 to 2,050 saying…
"Rising earnings and faster economic growth will push equities higher and stocks are still attractive relative to bonds."
Gutsy call it's not, given the S&P 500 is already trading at 1,977, but at least the boffins at Goldman are not predicting a market crash.
Phew.
Here in Australia, it's undeniable dividend paying stocks are attractive when compared to term deposits, especially if local Goldman Sachs economist Tim Toohey is right on his latest interest rate call.
You may remember last week The Age reported Mr Toohey as saying he would not be surprised to see the Reserve Bank of Australia (RBA) cut interest rates to just 2.25% as soon as September 2014.
Yikes. Things could soon get very ugly on the term deposit front! Thank goodness for dividend paying stocks, I say…
Speaking of which, last week I told readers of our Motley Fool Take Stock email that I've committed to buying shares in at least one of Motley Fool Share Advisor's brand new Three Best Buys Now stocks, just published exclusively to subscribers of our flagship stock picking service.
My favourite is an "under the radar" ASX stock I already own.
I can't reveal the name of the stock — it's reserved exclusively for our paying Motley Fool Share Advisor members — but I am excited to top up my already substantial holding, especially after our ace stock picker Scott Phillips said this about the company…
As the 2014-15 financial year clicks into action, now is a great time to review your investing goals.
As a special treat, I'm re-running Motley Fool colleague Buck Hartzell's one-page financial checklist that will allow you to build your wealth over the long term.
Enjoy!
9 Simple Money Tips for 2014-15 and Beyond
by Buck Hartzell
"Boy, if only I had found you guys 20 or 30 years ago. I would be all set!"
I hear some variation of that comment all the time from members of our Motley Fool community. Sadly, we can't turn back the clock and do things right. We can, however, teach the younger generation to avoid making our mistakes.
With that in mind, I created a handy, one-page financial checklist that will allow everyone to build their wealth over the long term.
If you follow this simple advice, you'll be on the road to financial freedom. Best of all, you'll have no regrets in the future about your financial condition.
1. Pay yourself first.
That's a fancy way of saying you need to get in the habit of saving a portion of your earnings early on in life. It's probably the biggest single predictor of financial independence for you in the future.
2. Invest your savings smartly.
(A) First, make sure you set aside about three to six months of living expenses. Keep it in cash for unexpected events.
(B) Consider salary sacrificing to your superannuation fund.
(C) If you still have money left, open an online brokerage account and start making investments directly into individual shares.
3. Create a portfolio for all seasons.
Your plan for portfolio allocation shouldn't change with the investing environment. You will want a plan that you can stick to through thick and thin.
(A) A good rule of thumb for deciding what percent should be in stocks is to subtract your age from 110, the remainder should be in cash or bonds. If you're 40 years old, that means you'd have 70% in stocks and 30% in cash or bonds. Depending on your individual tolerance for portfolio volatility, you may deviate from this rule, but it's a good starting point.
(B) Only invest in stocks if you DO NOT need to touch that money for at least five years. If you need the money before, then you can opt for term deposits or just plain old cash.
(C) If you aren't interested in managing your investments, consider choosing an index tracking fund.
(D) Avoid high-fee funds.
(E) High-yielding fully franked dividend stocks are good candidates for superannuation funds.
4. Be an educated shopper of financial services.
Before acting on any advice ask your financial professional these two questions:
(A) How do they get paid for the advice they provide?
(B) Are they personally invested in whatever they've suggested?
(As an aside, Motley Fool General Manager Bruce Jackson owns a fair chunk of Motley Fool Share Advisor stocks in his own account.)
If you're uncomfortable with the answers to those two questions, seek help from someone else, preferably a fee-only financial advisor or from a referral from someone you respect.
5. Avoid McMansions.
Don't buy a home unless you plan to spend at least seven years in that area. And you don't want to be house poor, so don't mortgage yourself up so much that you don't have any money left over to save, invest and spend each month.
6. Be responsible and check your beneficiaries.
Make sure you have an up-to-date beneficiary listed on your superannuation.
7. Spend a few hundred bucks on these two important documents.
If you're an adult with substantial savings, you need to have a professional draft two documents. These are really important, so we don't recommend using an online form:
(A) A will.
(B) An enduring power of attorney.
8. Start your own business early in life.
This may seem like an odd suggestion. The reality is that most people will learn far more about life and investing if they've operated their own business. It doesn't need to be a huge financial success in order for you to learn a set of skills that will benefit you for a lifetime.
9. Create a diversified, self-reflective portfolio.
(A) A basic portfolio should contain somewhere around 15 to 25 positions. We like the idea of buying in thirds. If a full position is 6% of your portfolio, you'll buy 2% at a time. Be sure to keep your trading costs below 2%.
(B) Consider 10% as the maximum position size when buying a stock. And no more than 30% of your portfolio should be in a single sector.
(C) Your portfolio should say something about you. A great place to search for potential investments is to track where you like to spend your discretionary money.
A new financial year is a great time for all of us to get our financial houses in order. Hopefully, the above list provides some helpful guidance. Here's to a prosperous 2014-15 and beyond.
