Motley Fool Australia

Wealth creation in an ASX bear market

retire wealthy

I started down the path of real wealth creation during the wreckage of the 1991 recession. I was out of work, on welfare and applying for jobs that a 20-year-old kid had no chance of getting. It became painfully clear that savings would provide future security as well as short-term options. Even if I was on welfare at the time.

I significantly adjusted my life so I could put away 10% of whatever came into my account. This was a very small amount and it was easy to be disheartened. But over time, it grew. 

Learning from FIRE

There is a large financial movement out there driven mainly by smart millennials called ‘financial independence, retire early’ or FIRE. This movement advocates a path of wealth creation, developing passive income and cutting living costs. 

The coronavirus pandemic and resulting ASX bear market might see a slowdown in the FIRE movement. However, some of the basic ideas are sound, particularly those around spend reduction. Don’t overbuy food, change entertainment expectations, indulge in-home training, read more, cut down on fees and rates. There are some very skilled people with recommendations in this area

Wealth creation on a budget

While some people still hold cash, the chance of people ‘buying the dip‘ over the next weeks and months is going to reduce. For many, there will be no chance in these uncertain times. 

Fortunately, there are several platforms you can use for fractional investing today. The received wisdom in investing is that most people are better off tracking the S&P/ASX 200 Index (ASX: XJO) via an exchange-traded fund (ETF).  There are also plenty of other ETF options. In the field of fractional investing, this would be similar to apps like Raiz.

However, I prefer having a direct role in where my capital is allocated.

The minimum marketable parcel of shares as a first trade on the ASX is $500. After that, you can top up your shareholding with smaller amounts. There is still plenty of activity, plenty of liquidity and plenty of profit opportunities on the ASX today.

Gold Corporation, also known as the Perth Mint, has a range of platforms and mechanisms for investors to participate in the gold market. An off-market tool that I use is their depository scheme, although they have many other options.

I invest what I can monthly and it stays in cash until I decide to purchase gold or silver. At any time, I can redeem for physical gold and all of the gold is backed by the West Australian government.

Lastly, there are fractional wealth creation options in the real estate market. Brickx and DomaCom are some of the players in Australia at present and their operating models are significantly different. I have been investigating this area pretty intensely over the past 4 months.

Foolish takeaway

An irrational bear market combined with uncertain employment prospects seems like the last time to start thinking of the future. However, there is always opportunity, even in the darkest of times. Take heart, good luck. 

Where to invest $1,000 right now

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Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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