Motley Fool Australia

Is now the time to Sell Everything?

You may remember back in January 2016 that the Royal Bank of Scotland put out a note to clients that said “sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small”.

The predicted cataclysmic year did not eventuate, even with the Brexit and U.S. election votes going against expectations.

Perhaps the Royal Bank of Scotland was trying to protect client capital and be the one to make the first move to make a name for itself as having predicted the next GFC. During 2016 the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) rose by 6.98% and it has grown by 8.79% from 1 January 2016 to today.

There will inevitably be bumps along the road for investors. There will be minor market dips, recessions and global crashes over the decades ahead.

Investors should keep in mind that the current market has survived two World Wars, the Great Depression, the Vietnam War, the Iraq war, the Ebola scare and so on. Throughout all of those troubles, the share market has generated an average annual return of around 10% over the decades.

The key to creating good returns for investors is to take the long-term approach. If you have a portfolio full of reliable blue chip businesses like Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL) and Macquarie Group Ltd (ASX: MQG) and you hold long-term you will likely generate pleasing returns.

Your portfolio will probably outperform the market if you fill it with quality businesses that have competitive advantages and produce strong financial results. Businesses like these include REA Group Limited (ASX: REA), NIB Holdings Limited (ASX: NHF), Rural Funds Group (ASX: RFF) and Ramsay Health Care Limited (ASX: RHC).

It is a good idea to hold some cash on hand in case there is an opportunity to buy stocks at beaten-down prices. However, you never know when the market may dip and when it will recover, so it’s better to be invested for the long-term than not invested at all.

Foolish takeaway

In my opinion, investing is pretty simple. The difficult part is having patience and holding your nerve when things are looking uncertain. As long as you invest for the long-term and fill your portfolio with market-beating businesses like these three stocks, you will create comfortable wealth for yourself.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

Motley Fool contributor Tristan Harrison owns shares of Ramsay Health Care Limited and RURALFUNDS STAPLED. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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