One of the Motley Fool’s original co-founders, David Gardener, said he wished the word ‘stock’ hadn’t been invented. The word stock creates a disassociation between what is really going on as opposed to thinking of shares as just a bunch of tickers to be gambled on.
Tickers exist as a quick way to reference shares, but we need to think about the businesses behind those three characters.
Our very own Scott Phillips is a strong advocate for referring to businesses by their name, not the ticker.
If you think of shares as these things that just go up and down with no reason and it’s all a big gamble then you’re likely to stay well away. If you do that, you’d be ignoring the greatest wealth creating asset class of the last century. Despite the GFC and every other crash, shares have roughly averaged 10% a year over the decades.
Just owning the stalwarts like BHP Billiton Limited (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Wesfarmers Ltd (ASX: WES) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) over the past two decades would have meant very attractive returns.
Business prices are volatile. You can see a share price move 2% or 3% in a day. Sometimes 5%. Sometimes more than 10%! Of course, that doesn’t just mean down, it can also mean going up that amount in a day as well. Volatility can be scary, that’s the price of investing in businesses.
I find it much easier to invest long-term when I consider: “Will this group of businesses that I own earn a lot more in five years and therefore probably be worth a lot more in value in five years?” Plus, don’t forget about the growing dividends.
If you own a bunch of tickers and you panic if one goes down 5% without understanding the real reason then that’s a recipe for selling in fear, therefore permanently damaging your wealth.
Businesses as a collective will continue to grow profits higher and higher. All you have to do is own the right ones over the long-term, or just hold an index like Vanguard MSCI Index International Shares ETF (ASX: VGS).
One of the right shares to own over the next decade could be one of these top businesses.
Renowned investor Scott Phillips just released a brand-new report detailing his 4 favourite stocks to buy right now.
And I don’t know about you, but I always pay attention when some of the best investors in the world give me a stock tip.
This is your chance to get in at the very beginning of what could prove to be very special investments.
Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited and Wesfarmers Limited. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. 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 Scott Phillips.