I’m someone who lives and breathes ASX shares, investing and using money to make more money. It’s hard to look at the kinds of returns the S&P/ASX 200 Index (ASX: XJO) has delivered for over 100 years to investors, and imagine not being part of this process. Especially in our modern era of near-zero interest rates. There are few things more depressing in today’s financial world than seeing your hard-earned savings sitting in the bank and losing value in real (inflation-adjusted) terms (in my view anyway).
The answer seems obvious: put your money in ASX shares (or any other growth asset) instead. And yet, for most Australians, the share market remains this mythical casino, where only the rich, the brave and the foolish (and not the ‘capital F’ type foolish) go to get their kicks. It can be frustrating to hear these misconceptions because they are very far from the truth.
How many Aussies invest in shares?
According to a report released by the ASX, and put together with data from the Australian Bureau of Statistics (ABS), there are roughly 19.4 million adults living in Australia today. Of those 19.4 million adults, 9 million are estimated by the ABS and the ASX to own some form of investment outside their super fund and the family home. Of those 9 million, 58% directly hold ASX shares or exchange-traded funds (ETFs).
That’s a lot of room to make up. So what do you say to someone who has never invested in ASX shares? Here are 3 things I would say…
3 things to convince someone to invest in ASX shares
Shares go up most of the time
It’s always the dramatic share market crashes that get the media attention. But the reality is that most years, the ASX 200 records a positive gain. Over the past 10 years (2010-2019), the ASX has given investors 8 years of positive returns and just 2 years when shares went backwards. In 5 out of the 10 years, the annual return was more than 10%, and 3 out of 10 delivered a return of more than 20%.
It’s easy if you want it to be
Many investors think shares are about stock picking and digging through company data. Whilst many of us do enjoy those things, index ETFs are an easy and almost effortless alternative that anyone who doesn’t want to devote any time to the share market can use. Just take the Vanguard Australian Shares Index ETF (ASX: VAS). This ETF tracks the largest 300 companies on the share market and essentially gives you an ‘average’ return of the whole thing. It’s easy, you only have to buy this one investment to benefit from the power of the share market. Now a fund like VAS won’t wake you rich overnight. But it has delivered an average return of 7.33% per annum over the past 5 years. That looks a lot better than 1% in a bank account.
Shares pay you back
When you buy ASX shares, many of them pay you just to hold them. I’m of course talking about dividends. Dividends are a cash payment that many companies pay their shareholders every 6 (sometimes 3 or 12) months. Not all ASX shares pay dividends, but most of the larger ones do. Let’s take Coles Group Ltd (ASX: COL) — a company we’d all probably be familiar with. On current prices, Coles shares are offering a dividend yield of 3.19%. This means that for each $100 you have invested in Coles shares, you can reasonably expect to be paid $3.19 every year. And that’s on top of any share price appreciation you might enjoy as well.
It can be hard convincing your friends and family to invest in ASX shares. But I hope these 3 reasons to invest can help make a difference. Investing is about more than just making money, it’s about making the fruits of your labour work harder for you so you can live the life you want to. I think that’s something everyone deserves a shot at.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
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 February 15th 2021
Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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