It’s easy to feel lost when stepping into the confusing world of investing. This feeling can make you uncomfortable about putting your money into the market. And rightfully so. Using your savings to buy shares in a company you don’t really understand can leave you sleepless at night wondering if it will go broke.
But it doesn’t need to be this stressful.
The S&P/ASX 200 Index (ASX: XJO) is home to many large and fantastically-run Australian businesses, with many being household names and simple to understand. Investing in these businesses should help you become more comfortable with the process. After all, when it comes to investing, it’s important to know what you own and why you own it.
Being comfortable with your investments should help you to remain invested for the long term – which is when the real magic of compounding happens. Not to mention the extra sleep you’ll get.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
One way I believe it’s possible to keep investing simple and stress-free is through an investment in Washington H. Soul Pattinson, or ‘Soul Patts’.
Soul Patts is an investment house which owns a diversified portfolio of investments. So, investing in Soul Patts basically means you are gaining instant exposure to a broad range of companies and industries. These include stakes in ASX-listed companies, private companies, real estate and fixed income.
Another way of looking at it is making an investment in the management team at Soul Patts. Investing in their expertise to make investments which have outperformed the All Ordinaries (ASX: XAO) by an average of 2.6% per annum over the past 15 years.
You can also sleep well at night knowing that Soul Patts has been listed on the ASX since 1903. And in this time, has never failed to pay a dividend.
Transurban Group (ASX: TCL)
Transurban is Australia’s largest toll road operator and also has tollways in the US and Canada. This is a relatively simple business to understand, and one which until recently was seeing a steady increase in demand.
Since Transurban collects revenue from road users, this was steadily rising thanks to increasing traffic conditions and the completion of projects. However, due to the current lockdowns and restrictions on travel, the company has seen recent traffic volumes almost halve.
This dramatic fall in traffic will lead to lower revenues and subsequently, unfortunately for income investors, a reduced dividend. At the beginning of April, Transurban withdrew its dividend guidance for FY20, instead advising that it expects to pay a distribution in line with free cash, excluding capital releases.
Nonetheless, the market is forward-looking by nature, pricing a company’s future earnings potential into its share price. So although the short term will be painful for Transurban, I believe its current share price reflects this outlook.
Additionally, Transurban has advised it has sufficient liquidity to meet its capital and debt requirements until the end of FY 2021. This means the company looks to be in a comfortable position until it sees a return in traffic volumes. Not to mention a large pipeline of future projects to help grow future earnings.
BHP Group Ltd (ASX: BHP)
The metals and mining sector is home to over 700 public companies, the most compared to any other sector on the ASX. However, I would class many of these as wildly speculative investments, with enormous share price volatility leading to a more stressful investment.
But with that being said, some of these companies are Australia’s largest and oldest, such as BHP.
In 1885, BHP listed on the (now) ASX. It was established by a syndicate of 7 men from the Mt Gipps sheep station and became The Broken Hill Proprietary Company Ltd.
BHP has diverse operations extracting and processing minerals, oils and gas in many countries around the world. It has relatively low costs of extraction and its diversified nature provides it with some protection from a price drop in any single commodity.
I believe the reliance on its products will be high for a long time to come, meaning BHP would make a great ‘set and forget’ investment in my eyes.