The Motley Fool

Why investing in shares is the only asset that makes sense

I believe that investing in (ASX) shares is the only asset that makes sense for people’s wealth these days.

There are plenty of asset classes to consider putting your money into. If you’ve held your assets for a long time then you’ll hopefully be sitting on big paper gains.

But the problem is where do we put new money?

Cash and bonds? Any short-term savings goals should probably be in cash. If you’re looking for capital protection then cash and bonds are not a bad option in the short-to-medium-term. But the annual returns offered by cash and bonds are truly terrible.

Despite inflation being exceptionally low, interest rates have gone even lower. That’s one of the main reasons why other assets now offer poor potential returns.

Residential properties? They have very low rental yields and capital growth is not going to be what the past decade has offered up. Interest rates can’t really go much lower and household debt can’t really go much higher.

Owning gold doesn’t generate any cashflow at all. Gold miners are a bit better. I think gold miners like Evolution Mining Ltd (ASX: EVN) are only really good as a hedge against falling share markets.

Commercial property is a mixed bag. Bricks and mortar retail property faces disruption from online shopping. There’s plenty of office buildings out there. Industrial properties like the ones owned by Goodman Group (ASX: GMG) are in heavy demand by business and investors alike – but I’m not sure it makes sense to pay such high prices compared to the underlying asset prices.

I do like the values that farmland real estate investment trusts (REIT) are valued at. Both Rural Funds Group (ASX: RFF) and Vitalharvest Freehold Trust (ASX: VTH) are below their net asset values (NAV) and have yields above 6%. I think these two could be pretty good buys today. 

However, not all shares are necessarily buys today. The best growth shares on the ASX are also at high prices like CSL Limited (ASX: CSL), WiseTech Global Ltd (ASX: WTC), Pro Medicus Limited (ASX: PME), REA Group Limited (ASX: REA) and Afterpay Touch Group Ltd (ASX: APT). But they have the ability to grow profit into the long-term and can be good wealth compounders.

Foolish takeaway

But there are plenty of ASX shares that could be good buys today like Webjet Limited (ASX: WEB), Altium Limited (ASX: ALU), Costa Group Holdings Ltd (ASX: CGC), Bingo Industries Ltd (ASX: BIN) and Citadel Group Ltd (ASX: CGL).

To have the best chance to beat the market you should be thinking about the best ideas on the ASX like these.

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Tristan Harrison owns shares of Altium, COSTA GRP FPO, RURALFUNDS STAPLED, and Vitalharvest Freehold Trust. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Altium, CSL Ltd., and WiseTech Global. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO, Pro Medicus Ltd., and RURALFUNDS STAPLED. The Motley Fool Australia has recommended Citadel Group Ltd, REA Group Limited, and Webjet 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.

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Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

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