Having these ultra-low interest rates make knowing where to invest very difficult these days.
The whole point of interest rates is to appropriately compensate for risk. Interest rates are so low it distorts markets and investing.
Growth shares are priced for perfection and a lot of income shares don’t really offer much income any more after a rise in their share prices.
A lot of the businesses that seem more decently priced seem to be going through some sort of issue. Costa Group Holdings Ltd (ASX: CGC) is having farm issues, Domino’s Pizza Enterprises Ltd. (ASX: DMP) has wages problems, investors doubt whether MNF Group Ltd (ASX: MNF) can reach its guidance and so on.
A portfolio of those types of businesses could be a way to beat the market, but it’s certainly a higher-risk approach.
The best performing shares have been the ones delivering the best growth with investors willing to pay more for that growth. Shares like Appen Ltd (ASX: APX), Altium Limited (ASX: ALU), Nearmap Ltd (ASX: NEA) and Magellan Financial Group Ltd (ASX: MFG) have been the best to own if you could successfully identify the business potential of those businesses before they grew too much.
But anyone investing recently has been rewarded simply for buying the most expensive shares that became even more expensive. Can that continue? Who knows.
I think at this stage I might be wise to invest new money away from those highly prized growth shares and into shares that have attractive long-term futures but haven’t experienced the same crazy run-up in price.
Some of the shares I’m looking at are Vitalharvest Freehold Trust (ASX: VTH), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), WAM Microcap Limited (ASX: WMI) and NAOS Small Cap Opportunities Company Ltd (ASX: NSC).
Tristan Harrison owns shares of Altium, COSTA GRP FPO, NAO SMLCAP FPO, WAM MICRO FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of MNF Group Limited. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO, Nearmap Ltd., and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Altium and Appen Ltd. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited and MNF Group 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.