While we Fools are all looking to invest in the next top stock, there are generally two groups of ASX investors – those who are looking for growth and the others wanting high-income shares.
Why growth stocks are a double-edged sword
Some of the top performers within the S&P/ASX200 Index (INDEXASX: XJO) have been the hottest growth stocks on the ASX including the ‘WAAAX’ group of WiseTech Global Ltd (ASX: WTC), Afterpay, Appen Ltd (ASX: APX), Altium Ltd (ASX: ALU) and Xero Ltd (ASX: XRO).
However, while many of these companies’ share prices have doubled since the start of 2019, we saw in early August the double-edged sword of the Aussie growth stocks: high volatility.
The WAAAX share prices all plummeted 15% lower in just a matter of days as the US-China trade war tensions ramped up again with more tit-for-tat tariffs.
Growth stocks are usually the hardest hit segment on the market in a downturn given a large percentage of their share prices are based on future growth expectations rather than actual cash flow.
Despite a cooling off in the ASX200 performance since June, valuations remain very high which makes growth stocks vulnerable in the event of a market correction or recession in the coming 12-18 months.
Are income shares the answer?
Alumina and BOQ are currently yielding 11.8% and 8.3% per annum, respectively, which when reinvested can represent a viable strategy to rival that of ASX growth shares.
While capital growth hasn’t been great for either the Alumina or BOQ share prices so far this year, a consistent dividend stream reinvested in an ASX company with a strong balance sheet and earnings profile can work wonders for your net worth.
In the end, either strategy is able to deliver strong returns in the long run and Fools’ main focus should be on picking the winners and ditching the losers in their ASX portfolio.
It’s not very often that a top growth stock like Afterpay comes along, which is why a diversified ASX200 portfolio is a good long-term option as part of a “buy and hold” strategy.
Whether you jump on board the growth stocks or reinvest the dividends from those high-yield ASX stocks, discipline and consistent investing should boost your wealth and put you firmly on the retirement track.
For those sitting firmly in the dividend camp, these 3 stocks could be at the top of your shopping list before the end of the year!
With interest rates likely to stay at rock bottom for months (or YEARS) to come, income-minded investors have nowhere to turn... except dividend shares. That’s why The Motley Fool’s top analysts have just prepared a brand-new report, laying out their top 3 dividend bets for 2019.
Hint: These are 3 shares you’ve probably never come across before.
They’re not the banks. Not Woolies or Wesfarmers or any of the “usual suspects.”
We think these 3 shares offer solid growth prospects over the next 12 months. Each of these three companies boasts fully franked yields and could be a great fit for your diversified portfolio. You’ll discover all three names and codes in "The Motley Fool’s Top 3 Dividend Shares for 2019."
Even better, your copy is free when you click the link below. Fair warning: This report is brand new and may not be available forever. Click the link below to be among the first investors to get access to this timely, important new research!
The names of these top 3 dividend bets are all included. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.
Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Altium, WiseTech Global, and Xero. The Motley Fool Australia owns shares of Appen Ltd. 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.