Picking stocks is a difficult task, but becomes easier once you develop the emotional intelligence to successfully invest in the stock market.
You need to focus on 3 to 5 year time horizons in order to let time do the heavy lifting for your investments.
In fact it's worth thinking about stock investing in the same way as you would think about buying an investment property for example.
As you wouldn't decide to sell an investment property just a couple of days, weeks, or months after you bought it out of fear that its value had dropped one or two percent.
You also wouldn't phone the real estate agent three times a week to get the property valued again. As you would be happy to own it to receive the rental income and trust that over the long term the value of your property would appreciate assuming you had bought a good quality one in a residential area likely to remain in demand.
When you invest in shares you also must buy good quality companies that will pay you rent, while you wait patiently for capital appreciation that should come over the long term.
Shares also have the added advantages over property of no strata, council tax, leaky pipes, agents' fees, or vacating tenants. So here's where I would invest $100,000 in shares, rather than an overvalued investment property.
Ramsay Health Care Limited (ASX: RHC) is the world's fifth-largest private hospital operator and as such offers defensive revenue streams powered by the tailwinds of growing demands for private healthcare. The stock sells for $74.05, with a trailing yield of 1.7%. This looks reasonable value and I would invest $25,000 in Ramsay.
Macquarie Group Ltd (ASX: MQG) is an asset manager that also does some financial services and investment banking work. Its shift into the asset management space means profits should be slightly less volatile than historically and selling for $88.48 I think it looks reasonable value. It also offers a 5.3% trailing yield and I would invest $25,000 in Macquarie.
XERO FPO NZ (ASX: XRO) is the fast-growing cloud-accounting business that is likely to tip into profitability within the next couple of years. It looks to be one for the long term and is building a network effect that should serve it well in keeping or growing its global market share. The stock sells for $24.59 and I would happily invest $15,000 in Xero shares.
REA Group Limited (ASX: REA) is the online real estate business that has a dominant Australian website that is likely to enjoy the benefits of a surge in listings this coming spring. It is also moving into financial services and the mortgage broking space with a deal to acquire Smartline. Notably, REA Group already possesses a website that is likely to generate vast amounts of leads for its mortgage brokers. At $66.80 I would invest $15,000 in REA Group shares.
BetaShares NASDAQ 100 ETF (ASX: NDQ) is a fund that tracks the value of the 100 largest companies on the tech heavy NASDAQ index. There's been a lot of dumb commentary about tech stocks being overvalued in the U.S. recently, largely on the back of their recent share price appreciation after some rocketing profit growth. Compared to most ASX-listed tech companies, U.S. tech companies still look cheap by most valuation metrics and have far stronger competitive positions, alongside pools of talent to draw on. As such this fund looks a good bet for long-term focused investors and I would happily invest $20,000 at today's prices.
