It is a great company with a promising long-term outlook, but Wesfarmers Ltd (ASX: WES) shares appear to be fairly valued today.
You: So Wesfarmers Ltd shares are not a 'bargain'?
Me: No. If you want to beat the market, I'm not willing to say it's a 'buy'.
You: Hmm…
Me: Based on my analysis, Wesfarmers is facing some risks from increased competition and disruption, and its shares are trading at a premium valuation.
You: But the divid…
Me: No. At these levels, the Bunnings Warehouse business will have to continue growing rapidly to justify its current price.
You: It owns Coles, Kmart, Target and…
Me: Yes, but it comes back to the difference between price and value. I would love to buy an Armani suit at $10,000 retail, but if I can get a $700 T.M Lewin suit for $220 (which I did!) — that's much better value.
You: Yeah, but… I have $5,000 that I want to invest.
Me: The fear of missing out (FOMO, the kids call it) is a real thing. Chances are, you're infected. Get some help.
You: So, instead of buying Wesfarmers shares you are telling me I need to do something else with my cash?
Me: Yes. Did you know Warren Buffett did not make one big investment between 9/11 and the GFC of 2008? That's like…1, 2, 3… sixish years that he didn't buy anything.
You: What's that got to do with the price of tea in China?
Me: Buffett's wealth increased more than $10 billion in that time. And he didn't buy anything.
You: Yeah, but he's Buffett and I'm me. I don't own any businesses like he did.
Me: What's the rush? Patience won't lose you money.
You: I dunno, FOMO?
Me: Listen, I'll give you a hot tip: there are over 2,000 businesses listed on the Australian stock exchange and more than 10,000 worldwide. Plus, you have thousands of bank accounts, managed funds, private businesses and yourself, which you can invest in at any moment.
You: Oh. So where should I start?
Me: Start with yourself. Consider a business, if you can. Then consider shares. If you don't know where you to start, yet you are worried about missing out, you can always try an ETF that tracks the market, like Vanguard's Australian Shares Index Fund ETF (ASX: VAS) or the Vanguard Total US Market ETF (ASX: VEU). But don't go all in at once.
You: Yeah, nah.
Me: Ok, get some help from the experts…
