There are a number of strategies to become rich with ASX shares.
I think we can learn a lot from the lessons given for free to us by some of the wise and leading investors like Warren Buffett and Geoff Wilson who have generated strong long-term returns.
Here are some of the important investment strategies in my opinion:
Don’t lose money
Investing can seem dangerous with the amount of times that shares can suffer from an individual wipe out.
However, if you invest in sound businesses in compelling industries with a reasonable margin of safety then you can’t go too far wrong. If you chase ‘dangerous’ ideas then you may eventually get burnt.
Of course, you will sometimes see the value of your shares fall, but if you’re careful and considered with your investment choices and avoid the GetSwift Ltd (ASX: GSW) and Big Un Limited (ASX: BIG) type investments on the ASX then your overall portfolio return should be pretty good.
Invest for the long-term
Trying to guess what a share price will do over next week or month is almost definitely gambling, unless a catalyst like an annual report is due within that time.
When share prices fall some people despair, others recognise that lower prices should result in better long-term returns if you take advantage of them.
Give your shares the time they need for business plans to eventuate and for compounding to work its magic with shares like Costa Group Holdings Ltd (ASX: CGC) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). When you invest for the long-term it isn’t gambling at all, sticking with cash is a gamble because you may not beat inflation.
Focus on cashflows
A business is supposedly worth all of its future cashflows discounted to its current value.
Profit can be manipulated by some accounting tricks to look better than expected in the short-term, but cashflow is (usually) harder to manipulate and is a better way to judge a business.
As we enter seemingly the final phase of this bull market it will be even more important to monitor the ongoing cash receipts and debtors of businesses to see if there’s a slowdown in payment.
If you keep these three things in mind then you should do better than most other investors.
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Motley Fool contributor Tristan Harrison owns shares of COSTA GRP FPO and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and Washington H. Soul Pattinson and Company Limited. 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.