Yesterday's dismantling of gold as a credible form of investment certainly struck a chord.
Whenever I write about gold, I find readers generally fall into three camps…
Camp #1 — Your baby is ugly.
Believe it or not, some babies are born ugly. Some stay ugly. We can't all look like George Clooney or Elle Macpherson.
The truth hurts. And when it comes to gold, the truth is since 2011 it has been an awful investment. It's a safe haven of nothing. Your golden baby is ugly.
Camp #2 — The believers
More than a few readers took the plunge yesterday and subscribed to Motley Fool Share Advisor.
If that's you, thank you. You're all set now to receive our brand new ASX stock tip, revealed tomorrow.
Perhaps you were drawn to the story of how a little known ASX software company gained over 400% since we recommended it to Motley Fool Share Advisor subscribers.
Or perhaps you're sick to death of getting bad, over-priced financial advice, and for just $199 for a 12 month subscription, decided you had little to lose by giving us a try.
Or perhaps the penny finally dropped. Gold is a dud investment. Shares are a much better option, even more so with the RBA's cash rate riding at just 2%.
Camp #3 — Fence sitters
Gold doesn't interest you. Nor does losing money.
So you sit on the fence, undecided.
You know the share market is the greatest wealth creation vehicle on earth, but you're fearful of taking the plunge in case there's a share market crash just around the corner.
I get it. I especially get it if you are a retiree. You've worked hard to build your retirement nest egg. The last thing you want is to see half of it go up in a puff of smoke.
The Motley Fool Australia is authorised under its Australian Financial Services Licence (AFSL no. 400691) to provide general financial product advice in relation to a number of products including derivatives, securities and superannuation.
Try this piece of general advice for size…
Buying shares monthly is a great way to ease your way into the share market.
Do it like clockwork. Every month, commit to investing an amount (it could be anything from $500 to $50,000 depending on your means) into shares.
If the market goes up, happy days. You're in the money.
If the market goes down, happy days. You get to buy your next wedge of shares at cheaper prices.
The key to success, and wealth creation, is having the discipline to…
a) Invest every single month, no matter what the market is doing, either up or down.
b) Stick in there, to leave your money invested for the long-term, no matter what the market is doing, either up or down.
Investing during a bull market is easy. Your portfolio only goes up. Happy days.
It's what you do during the inevitable downturns that ultimately determines whether you'll be prince or pauper.
Will you bail out when markets wobble?
Will you stop buying shares when markets wobble?
Most do. Sadly. They are destined to buy high and sell low, and as such to forever under-perform the market.
To be honest, if that's you, you're better off in cash. Or even property. Cash is safe. Property prices are less volatile, and takes time to sell.
I'm in cash. I'm in shares too.
Cash helps me sleep well at night.
It also gives me options. The option to buy shares whenever I see opportunity. The option to pile a heap of money into the market when prices are cheapest. The option to go on holiday, to repair the car, or to upgrade the TV.
Yesterday, I bought more shares. Our strict internal trading rules mean I can't tell you the name of the company, yet. That will have to come another day.
What I can tell you is this…
- I already owned the stock, already sitting on a profit. My new year's resolution was to add to my winners. No time like the present.
- The company is firing on all cylinders, growing like gangbusters, consistently exceeding market expectations.
Everyone likes a bargain. They like to buy a stock when it's trading on the cheap… even if business momentum is running against it.
Like Woolworths Limited (ASX: WOW), for example.
Or any number of mining companies, including BHP Billiton Limited (ASX: BHP).
Or even the big four banks, including Commonwealth Bank of Australia (ASX: CBA).
All are facing headwinds.
The competitive threat to Woolworths has never been greater. Add in the ongoing and compounding disaster that is Masters Home Improvement, and although the shares might look cheap, they could easily get cheaper.
BHP Billiton is operating well, but has no control over the price of iron ore, LNG, copper or oil. All are under pressure, none more so than iron ore. The juicy fully franked dividend yield is about all the shares have got going for them.
Commonwealth Bank is facing regulatory hurdles which will likely crimp its future growth rate, both in profits and dividends. Add in that bad debts are about as low as they can get, and interest rates can't go much lower, and the upside potential for the shares doesn't look so rosy.
Investors generally fall into two categories.
They love their blue chips. They equate size with safety. Regardless of the challenges facing the above three companies, they won't be deterred from buying or holding.
They also love making highly speculative bets. Usually on penny share mining stocks. They hope to strike it rich, quickly. Regardless of their many failures, and that the odds are totally stacked against them, they saddle up time and time again… to lose money.
In the middle, there's a WHOLE HEAP of opportunity. Growth stocks. Companies with huge growth runways ahead of them. Companies with passionate, talented management. The blue chips of tomorrow.
At Motley Fool Share Advisor, it's in that pond we like to fish. Swimming with the tide.
Dangers lurk. You won't make every post a winner. But I'd certainly far prefer to invest my money in a growing company with multiple ways to win than in one of yesterday's heroes.
Sure, you generally have to pay up. Quality doesn't come cheap. But get it right, find those 100%, 200%, 300% and even 400% winners of tomorrow — as we've consistently done at Motley Fool Share Advisor — and what you paid today will pale into total and utter insignificance.
