Australia's S&P/ASX 200 (Index: ^AXJO)(ASX: XJO) and ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) indices finished higher on Monday.

Here's a quick recap of the Aussie market:

• S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) up 0.3%
• ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) up 0.2%
• AUD/USD at US 76.75 cents
• Gold at US$1,271 an ounce, up 0.2%
• Oil at US$53.90 a barrel, up 2.4%

Amongst the best-performing shares during Monday's session was those of oil and gas business Santos Ltd (ASX: STO), which rose 3.7%. Although the company did not release material news to the market, commodity prices rose favourably at the weekend.

Also leading the pack higher were shares of ResMed Inc. (CHESS) (ASX: RMD), James Hardie Industries plc (ASX: JHX) and Qantas Airways Limited (ASX: QAN).

ResMed recently posted a strong first quarter operating performance, with investors warming to the news.

Further down the market and shares of Vocus Group Ltd (ASX: VOC) rose 5.4% while Blackmores Limited (ASX: BKL) shares leapt 4.4%.

On the other side of the ledger, shares of property businesses Lend Lease (ASX: LLC) and Westfield Corp Ltd (ASX: WFD) fell 1.6% and 1.4%, respectively.

Mid-cap companies Syrah Resources Ltd (ASX: SYR) and Super Retail Group Ltd (ASX: SUL) lost 4.7% of their value today. According to an ASX filing, a Super Retail director sold 15,825 shares. However, he holds an additional 1.3 million.

Here are today's top stories:

• Is Westpac Banking Corp facing a shareholder class action?
• 3 shares to profit from the falling Australian dollar
• My Aussie Share Market Investing Don'ts of 2017/2018

The post ALL ORDINARIES finishes higher Monday: 10 shares you missed appeared first on The Motley Fool Australia.

More reading

• The superannuation balance you actually need at 65 to retire without the Age Pension
• 5 years ago, $10,000 bought 111 CBA shares. But how many would it buy now?
• Here are the top 10 ASX 200 shares today
• ASX 200 drops again. This is what's starting to worry investors
• 3 ASX 200 stocks storming higher in this week's sinking market

Share market investing is a journey every person can enjoy while making a lasting difference to their family.

Leave your ideas at the door

The first — and most common — problem I encounter when it comes to educating people about share market investing is their preconceptions.

Most people perceive the sharemarket to be risky, but it's a matter of understanding and perception. Does a falling price tag make a T-shirt from Myer Holdings Ltd (ASX: MYR) more or less risky? To me, a falling price makes it less risky because it means I'm getting more bang for my buck.

Unfortunately, most people develop harmful preconceptions about investing before they've even started. For example, even if they intended to buy and hold shares for many years, if the shares fall 30% that idea goes out the window.

Much of the time people will get a tip from their friend's cousin's step dad's mate, Ruben, who runs a cattery 9-to-5. It turns belly up. They sell. Then, they leave the market with their tail between their legs.

The best investors check their preconceptions at the door. They strive to interact with people who challenge their thinking.

Jason Zweig, a fantastic writer and thinker for The Wall Street Journal, says he has only had a great week if he is proven wrong.

Assuming you know everything before you have begun is a quick way to get some hard investing lessons.

Just ask Ruben.

The idea is to make your 'identity' as small as possible, according to Zweig. That is, most people protect their core body of knowledge and identity like it is a sacred cow. It's not. If you desire to become a successful investor you'll need to consider and critique others' views and opinions for what they are.

Time

The ability to think long term is another significant advantage that is utilised by the best investors.

As an individual investor, you are not compelled to sell a share of a2 Milk Company Ltd (ASX: A2M) because it has increased 1,000%. Some professional investors would love that opportunity. 

From my experience interviewing some of Australia's best investment managers, a long-term investment horizon can lower risk and increase your return potential. As Warren Buffett says, the ideal holding period is forever.

Work

Finally, the best investors have a desire to work hard and learn. They know success is preceded by a desire. Alternatively, think about it like this: no one falls to the top of the mountain.

It takes hard work and a lot of ups and downs.

For every 100% gain on Xero Limited (ASX: XRO) shares, or 1,000% gain on an investment in Commonwealth Bank of Australia (ASX: CBA), there are many more investments like Telstra Corporation Ltd (ASX: TLS).

Any investment professional can value a company (at least I hope they can!), but few are willing to value 50 to find that one idea which might be good enough to make it into their portfolio.

Foolish Takeaway

There are no secrets to investing success, just personality traits that drive people towards superior returns. If you intend to commit to investing for yourself be prepared to invest for the long run, for your ideas to be critiqued and to work hard.

The post Are these the secrets behind Australia's best ASX investors? appeared first on The Motley Fool Australia.

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Earlier today I wrote an article about some Australian share market Investing Don'ts for 2017/2018.

Here are some of my finance and Investing Do's for the year ahead.

Consider how each of these ideas applies to you and whether your investing process would improve with their use.

Remember, magic won't help you make money in the share market. It's your persisting purpose and strategy that will help you build lifelong wealth.

Investing Do's

No-brainers:

• Build a blummin' budget. I think of a household budget like the heart of your finances that beats every time money comes in and goes out. When you're investing, it's best to contribute regularly to your brokerage account. $500 is the minimum investment on the ASX. Even if you cannot save $500 a month, however, you should get in the habit of transferring the money into the account anyway, until you have enough to invest.
• Have an investing insurance policy. You should have three months of living expenses put aside before you invest in shares. Why? On average, the share market will crash every few years. Typically, it happens around the time most Aussies will experience job loss. You may be able to avoid selling your shares at rock bottom prices if you have, say, three or six months' worth of living expenses.
• A cut-up credit card provides a superb investment return. If you can earn, say, 10% per year from the sharemarket but you also have a credit card charging 23% interest, is that a good use of your money? You might be happy that you are finally investing. But you could make an extra 13% return if you pay off your credit card before you invest!

A bit harder:

• An investment in yourself will pay the best dividends. I can all but guarantee that with more knowledge and purpose (which when added together equal something like motivation) you will compound your investing returns. I think successful investing in the share market requires three key ingredients: analytical ability, emotional constraint and quality information. You can harness each of those traits if you are motivated to develop yourself by learning as much as you can.
• Develop an investing strategy. Some people call themselves "value investors", some identify as "growth", while others are more 21st century and have a non-strategy specific mandate.
  I don't subscribe to the idea that, "I'm nothing if not consistent". But, you must know what does and does not work in the share market — and stick to it. You should also be flexible in your thinking because the market does not reward you for being stubborn. Warren Buffett's four-part checklist is super-simple, while the "Magic Formula" by Joel Greenblatt has produced impressive results on the ASX. Both are simple. But neither is easy to execute.
• Buy quality. The ASX has 2,000-plus companies in which you could buy shares. However, at a guess, I'd say 1,900 of them are not worth your time. Your time is finite, so you should focus your attention on buying shares of companies that have great 'economics' and bright futures. Some names you could put on your watchlist include Xero Limited (ASX: XRO), Gentrack Group Ltd (ASX: GTK), Altium Limited (ASX: ALU), Flight Centre Travel Group Ltd (ASX: FLT), Pro Medicus Limited (ASX: PME) and ARB Corporation Limited (ASX: ARB). I'm not saying these shares are a buy. I am saying these companies have features which I find very appealing.

First, avoid losing money. Then, focus on the potential. If you can do that, you'll be able to sleep easier knowing that you have done the best you can to put the odds of investing success firmly in your favour.

The post My Aussie Share Market Investing Do's of 2017/2018 appeared first on The Motley Fool Australia.

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I'm about 11 months late for my 2017 Investing Do's and Don'ts, so let's just assume the following rules apply for this year and the next.

Now, as you know, it's easier to appear smart by being negative or cynical (just ask my uncle), so let's cover the investing don'ts first.

Investing Don'ts

No-brainers:

• Don't take financial advice from the back of a Cornflakes packet, Twitter, a stock forum or from your brother-in-law. Similar to Barnaby Joyce's seat in parliament, it's probably against the law and you'll never be comfortable holding the share when times get tough.
• Get trustworthy and licensed financial advice before buying Commonwealth Bank of Australia (ASX: CBA) shares or any other investment. The licensing part is easy: if they do not have an AFSL, or AFS Licence, the advice you're receiving is illegal in Australia. Unfortunately, as my mother would say, "it's harder to find people you can trust than you can love". Finance is no different. Make sure the adviser's interests are aligned with yours because even a licensed charlatan can sweep you off your feet with some crazy theory or promises of reward.
• Think twice before day trading or charting, buying gold, shares without positive free cash flow, and Bitcoin. The blockchain is here to stay, in my opinion, but the same cannot be said of Bitcoin.

More don'ts:

• Be careful of intellectual naysayers. In Australia, we have Tall Poppy Syndrome. The cultural and gravitational pull of our tribal wiring tells us that there is safety in numbers. When someone sticks their head above water — especially in finance — other 'intellectual naysayers' are quick to shoot down the stars and appear smart. For example, I know of one Australian investment guru who has built a 20-year career from being negative but yet does not have a public investing track record of his own.
  You can spot these people from a mile away because they often say things that…
• Agree with your belief system or preconceptions. However, the populist vote in investing is more often than not an express ticket to the poor house. For example, if I say Woolworths Limited (ASX: WOW) shares are expensive and you agree, has our conversation added any rigour to the debate? If you want to be average, just agree with everyone else. But, if you want to be better-than-average, you need a variant perception.
  You are the average of your five closest friends, family or colleagues. But remember, you need people who are willing to disagree with you. Social media and the "follow" button have made this behavioural miscalculation more difficult to correct. Acknowledging it is the first step.
• Assume the good times will go on. Aussie property has had a pretty good run. 20 years of gains, they say. The banks tell us investors are ahead on repayments. And interest costs are low. Yeah, nah.
  It's not just property whose cycle rhymes with steep and deep. Humans have a tendency to anchor our perceptions of what has — and what will — happen, to the present time. Assuming the good times will continue because they are good right now is a massive risk to your wealth. However, it's impossible to know when something will change. And it's nearly as risky to not be invested in the share market, so all you can do is be prepared emotionally and financially.

In the next article, I'll cover the Investing Do's.

The post My Aussie Share Market Investing Don'ts of 2017/2018 appeared first on The Motley Fool Australia.

More reading

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• Sell alert! Why this expert is calling time on CBA shares
• 3 ASX 200 financial shares to sell: experts

Australia's S&P/ASX 200 (Index: ^AXJO)(ASX: XJO) and ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) indices finished lower on Friday.

Here's a quick recap of the Aussie market:

• S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) down 0.2%
• ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) down 0.2%
• AUD/USD at US 76.47 cents
• Gold at US$1,268 an ounce, down 0.85%
• Oil at US$52.76 a barrel, up 1.1%

Amongst the best-performing shares during Friday's session were ResMed Inc. (CHESS) (ASX: RMD), South32 Ltd (ASX: S32) and Macquarie Group Ltd (ASX: MQG), each rose more than 4%.

Earlier today ResMed announced first-quarter revenue of $524 million, up 11%, and profit of $0.66 per share.

Mining and minerals business South32 did not announce any material news to the market.

However, Macquarie, Australia's largest investment bank, released its half-year financial report showing an 8% increase in dividends and revenue up 3%.

Further down the market and shares of Treasury Wine Estates Ltd (ASX: TWE) and a2 Milk Company Ltd (ASX: A2M) finished more than 2% higher. Shares of Blackmores Limited (ASX: BKL) ended 10% higher.

On the other side of the ledger, shares of Qantas Airways Limited (ASX: QAN) finished 5.55% lower following the airline's annual general meeting.

Shares of Westpac Banking Corp (ASX: WBC) ended 1% lower while Lynas Corporation Ltd (ASX: LYC) fell 5.1%.

Here are today's top stories:

• Why the Macquarie Group Ltd share price just hit a record high
• Why I think Reece Ltd is a buy at this share price
• Here are 3 of my favourite healthcare shares

The post ALL ORDINARIES finishes lower Friday: 9 shares you missed appeared first on The Motley Fool Australia.

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• ASX 200 drops again. This is what's starting to worry investors

Unless you've been 'off grid' with tin foil wrapped around your cranium you would know that GetSwift Ltd (ASX: GSW) shares could go on to be massive winners.

Here are some recent headlines:

"Pivotal Announcement Steepens Trajectory For GetSwift"

"GetSwift Ltd shares rocket on game-changing deal"

"Young Rich 2017: Joel Macdonald, the $100m ex-footballer behind GetSwift"

GetSwift is a smallish ASX-listed logistics business that saves companies precious time on their delivery routes. It's often the 'last mile' of delivery that's most challenging for logistics businesses and e-commerce companies.

So GetSwift sounds like a great idea.

And with so much press behind GetSwift, its shares haven't disappointed.

More press, more money, less problems

I think the $380 million company could be a good one for investors over time, once it starts generating meaningful revenue.

Although, take that with a grain of salt because I said the same about Reffind Ltd (ASX: RFN) before the company's shares fell 98%.

The differences between "shares", "stocks" and businesses

The words "stock" and "share" probably come from some latin word I can't pronounce. But fundamentally they mean that you have 'part' ownership (that's why it is a 'share') of the equity in a business. Just like a couple that has a 'share' of the equity in a home.

Yet, some financial analysts and all traders have taken 'a share' to mean something else entirely.

"Good" stock. "Bad" stock. 

To them, a "share" is an instrument for speculation. The same way you would speculate on the price of gold, Bitcoin or emu eggs – people often speculate on "a share".

There is no such thing as a "good" share or a "bad" share, they are just shares.

It's also vital for investors to know the difference between a "business market" and a "share market". If you focus on the 'share' and forget the business you are going to slip into a short-term mindset — something which can be very hazardous to your wealth.

The endless search for rationality

People gamble all the time. Horses, 'the dogs', keno, pokies, stocks, the name of Princess Stacey's sister's brother-in-law's second child. You name it, you can speculate on it.

Note: "speculation" is a word made up by a (bald) middle-aged finance dude that means "gamble". We respond better to labels when we do things that don't fit with the status quo.

Unfortunately, as my colleague Claude Walker knows too well, although it may not be a smart idea to "speculate" on "good stocks", the search for rationality in financial markets is endless.

What's this got to do with GetSwift?

It has been said by the company and its supporters that GetSwift has a novel idea and technology. But as investors, we have to carry our scepticism with us at all times. Without any material cash flows, as it stands, GetSwift is purely in the realm of speculation.

I'm very happy to be proven wrong in two or three years from now (and very well could be) but if my scepticism saves even one person from losing their life savings on the whim of a marketing team, it was worth the risk of looking like a (lower-case-f) fool.

The post Why I won't buy a "good stock" like GetSwift Ltd again appeared first on The Motley Fool Australia.

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We all want to become millionaires by investing in quality ASX shares, but most of us aren't prepared to do what it takes.

Cut the crap

Investing in shares has proven to be the best way to grow wealth over the long-term — but only if you can match or exceed the market's 'average' return.

Unfortunately, the 'average' direct investing Aussie does worse than the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

We're wired wrong

Humans have a department in our brain which tells us to think that we are better than Average Joe down the street. It's called the 'illusory superiority', a cognitive bias in which we overestimate our own ability.

For the record, I believe some investors can do better than the market average, but you must have an 'edge'.

In my opinion, we only gain an investing edge by putting in the hard yards. Doing the work.

By turning over more stones than anyone else.

But how much work?

Not-so variant perceptions

From my experience interviewing Australia's best — and most highly paid — professional investors, I can tell you that 99% of us will never be as smart as the 'pros'.

(Note: I'm talking about investors. From a 'technicals' point-of-view, it's tougher again because you're competing against Jim Simons' supercomputer.)

However, even professional investors underperform the market between 86% and 99% of the time.

Why?

These guys and gals bring three university degrees and put in 70-hour weeks to justify their fees. Yet, even they cannot carve out an edge, on average. Obviously, people who invest with these 'average' professionals do worse than average after fees.

So due to the poor performance of professional investors, on average, many good financial advisers will tell their clients to lower their costs. Costs are the only thing you can control right now because investing performance is unpredictable in the medium term.

But what about direct share market investors like you and I?

How can we outperform?

Play to your strengths

The one major advantage we have over the pros is our time horizon. Most professional investors are compelled to act. Buying and selling shares to justify their fees year-to-year, or quarter-over-quarter.

Yet, when we look at the performance of the sharemarket, we measure its success over decades — not days, weeks or months.

So, first of all, you need a long-term mindset.

Second, you should take note of the proven recipes for investing success: small companies tend to outperform larger companies, cheap companies (measured against asset value) outperform expensive companies, and good companies tend to keep winning (momentum).

Next, you should reinvest regularly. A person is sitting in the shade today because they planted seeds for success a long time ago. As the proverbs read, the best time to plant a tree was yesterday, the next best time is today. But investors should plant multiple trees. Investing regular amounts of money is a great way to capture the long-term, gradual rise of the stock market.

Finally, know that your worst enemy is you. You will do things that hurt your chances at success by letting emotions creep into your strategy. For example, the best investments, like Amazon, Google and New Zealand's a2 Milk Company Ltd (ASX: A2M) don't fall to success. It's a hard road to the top, with plenty of ups and downs.

You must have the stomach to watch your investments fall by 20%, 40% or even 80% and keep your cool. It's easier said than done, of course.

If that sounds too hard, just control your costs and buy an index fund.

The post Who else wants to be a stock market millionaire? appeared first on The Motley Fool Australia.

More reading

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• EVT flags FY26 EBITDA growth amid hotel strength and portfolio changes

Australia's S&P/ASX 200 (Index: ^AXJO)(ASX: XJO) and ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) indices finished lower on Monday.

Here's a quick recap of the Aussie market:

• S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) down 0.2%
• ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) down 0.2%
• AUD/USD at US 78.25 cents
• Gold at US$1,280 an ounce, down 0.7%
• Oil at US$51.84 a barrel, up 0.6%

Amongst the best-performing shares during Monday's session were Ramsay Healthcare Limited (ASX: RHC), the private hospital operator, which rose 2%. a2 Milk Company Ltd (ASX: A2M) continued its rise, increasing 1.7%.

Today's increase takes a2 Milk's 2017 share price rise to over 255%.

Further down the market and fellow infant formula business Bellamy's Australia Ltd (ASX: BAL) rose 3.5%, while shares of publishing and property business Fairfax Media Limited (ASX: FXJ) rose 3.3%.

On the other side of the ledger, shares of telco company Vocus Group Ltd (ASX: VOC) fell 0.4% following a presentation by management. The company has made the decision to sell some of its key assets, such as its New Zealand-based businesses and its data centres.

South32 Ltd (ASX: S32) shares fell 2.5% despite no news. Meanwhile the Reliance Worldwide (ASX: RWC) share price fell 3.7% and ARB Corporation Limited (ASX: ARB) fell 2.4%.

Here are today's top stories:

• Is this the "Magic Formula" to investing in ASX shares?
• This obvious "secret" ASX share investing strategy
• Why Domino's Pizza Enterprises Ltd. is under attack from short sellers

The post ALL ORDINARIES finishes lower Monday: 8 shares you missed appeared first on The Motley Fool Australia.

More reading

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• 5 years ago, $10,000 bought 111 CBA shares. But how many would it buy now?
• Here are the top 10 ASX 200 shares today
• ASX 200 drops again. This is what's starting to worry investors
• EVT flags FY26 EBITDA growth amid hotel strength and portfolio changes

Joel Greenblatt's The Little Book That Still Beats the Market would have served ASX investors very well over the past few years, had they followed his simple investing strategy.

Just ask Webjet Limited (ASX: WEB) and MACA Limited (ASX: MLD) shareholders.

Who is Joel Greenblatt?

Joel Greenblatt is a famous — and hugely successful — US investment manager. His hedge fund, Gotham Capital, is believed to have delivered an average yearly return of 40% over the years 1985 to 2006. That turns $10,000 into over $8 million.

Greenblatt authored the funny, easy-to-read and simple book called The Little Book That Beats the Market.

So what?

In the book, Greenblatt details a simple "Magic Formula" for sharemarket success, which requires investors to buy shares in quality companies when they're cheap.

Sounds simple, right?

Yes, it's simple. But it is not easy.

Why?

Most people are too scared to hold some of the shares that the formula tells us to buy.

Returns in Action

Going on three years ago, my colleague Matt Joass, CFA, wrote this article and provided a list of 30 shares which would have been produced by the "Magic Formula" on the ASX:

In 2014, the mining sector was on its knees and mining services companies were being thrown out. China's slowdown was going to wreak havoc on these companies, or so we thought.

Based purely on share prices (no dividends), the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is up 10.4% since that time.

Although it is not exactly correct I excluded the companies from Matt's list that were smaller than $100 million in market capitalisation. I also excluded Premiere Eastern Energy (ASX: PEZ) because it had a share price of $0 according to the table.

The result?

Drum roll, please…

Adjusting for takeovers and mergers, the average return of these $100m+ companies in the Magic Formula was almost 51%. In other words, almost five times the return of the market, excluding dividends.

I think you will admit, that's a pretty handy return over three years.

Foolish Takeaway

I'm always sceptical (skeptical?) of quantitative or 'formulaic' investing strategies. However, the Magic Formula is simple, logical and well supported by research. If nothing else it would provide a useful starting point for investment ideas.

As a bonus, the book is easy-to-read and short, so you could get the low-down on the formula for less than $20 and a weekend of reading!

The post Is this the "Magic Formula" to investing in ASX shares? appeared first on The Motley Fool Australia.

More reading

• The superannuation balance you actually need at 65 to retire without the Age Pension
• 5 years ago, $10,000 bought 111 CBA shares. But how many would it buy now?
• Here are the top 10 ASX 200 shares today
• ASX 200 drops again. This is what's starting to worry investors
• EVT flags FY26 EBITDA growth amid hotel strength and portfolio changes

The Telstra Corporation Ltd (ASX: TLS) share price has bounced off a recent low, but it's not out of the woods just yet.

Telstra V. ASX 200

The chart above shows Telstra shares versus the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). As can be seen, Telstra has drastically underperformed the market in 2017 but the selloff appears to have eased recently.

Are Telstra shares good value?

At today's prices and using last year's results, Telstra shares look like great value. Shares trade at a trailing dividend yield of 8.8% — with full franking — and below market value using the price-earnings ratio.

However, since the share market is forward-looking and we invest by looking towards the future — not the past — we should focus on what investors can expect in coming years.

First of all, the dividend will be cut. Probably to 22 cents from the current 31 cents per share.

That's according to numerous analyst forecasts. Nevertheless, even at 22 cents per share, Telstra shares offer a 6% dividend yield.

Next up, valuation.

As I have said recently, Telstra shares are perhaps not a standout bargain at today's prices. With the NBN eroding Telstra's competitive advantage in broadband and home phone, and competition heating up in mobiles, it will likely come down to how well the mobiles business responds to extra competition.

Personally, I think Telstra will be less affected by new entrants to the mobiles market than its competitors given its network reliability and reach. Therefore, in terms of valuation, I think Telstra shares are decent value today but they are not a bargain.

Foolish Takeaway

At today's prices, I think Telstra is better value than many other blue chip shares on the ASX. But I'm not rushing out to buy any for my portfolio. I'm waiting for a more compelling entry point.

The post Will the Telstra Corporation Ltd share price rally into 2018? appeared first on The Motley Fool Australia.

More reading

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Ask yourself: What is your investing 'edge' when it comes to buying shares of Woolworths Limited (ASX: WOW) or National Australia Bank Ltd. (ASX: NAB)?

Edges

According to academic theory, no investor can have a sustainable 'edge' unless they take more risk. That is, according to the 'theory' an investor would need to take more risk to generate better returns than the broader 'market'.

However, in the investment profession, it is generally accepted that there are three investing edges:

1. Informational.

Presumably, if you have the best information you can make the best decisions. For example, if you get your information straight from a company's annual report you will have an informational advantage over someone who reads the dumb-downed version in the paper or in a forum.

If you are a small cap investor, you might benefit from unique insights in the under-served market.

2. Analytical.

This is a good one. The analytical advantage comes from deep research and thought.

If not for anything else, an analytical advantage can provide a great filter for avoiding terrible investments.

Warren Buffett says investors should stay within their 'circle of competence'. That is, an industry or business in which the investor has some experience or unique insight that is not commonly found amongst the investing community. Other people call this their 'wheelhouse'. Often, you will hear good investors say something along the lines of, "the company appears to be a great business, but it's outside my wheelhouse."

What they are really saying is, "it could be a good business, but I wouldn't be qualified to have an informed opinion."

To sort between good quality investments and those that will waste his time, an investor I highly respect will read the 100-word blurb of a mining company, for example, then tune out of the conversation. Why?

He's not an engineer or geologist, so no matter how hard he tries he would not have an analytical edge.

3. Behavioural.

One of the most obvious investing edges is having an awareness of your behaviour/psychology. Too many investors fall over themselves to sell their shares when their portfolio is awash with red, which has been proven to be the worst time to cash out.

Some people use investing criteria or a checklist to control their emotions, while others have the ability to maintain their temperament.

An obvious "secret" ASX share investing strategy

By design, there are no investing secrets because if secrets stayed secret forever no-one could profit from them. However, if you can focus your attention on these three key areas, information, analytics and behaviour, you should be well on your way to becoming a better investor.

The post This obvious "secret" ASX share investing strategy appeared first on The Motley Fool Australia.

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• How does Morgans rate ANZ, BOQ, CBA, NAB, and Westpac shares?
• Should you buy Woolworths shares for the 'steady dividends'?
• Buy, hold, sell: ANZ, NAB, and WiseTech shares
• Stagflation: How to position an ASX stock portfolio

One in three Aussies want to start their own business.

Sure, the US has Apple, Europe has Nestle and we have Commonwealth Bank of Australia (ASX: CBA) and BHP Billiton Ltd (ASX: BHP).

But at heart, we are a country of small businesses. Mum and dad, and family type organisations, perhaps with a few employees.

Running a business is one of the easiest ways to get ahead financially. Need proof?

Think of the wealthiest people you know, then ask yourself: do they have anything in common?

It's an unspoken rule in business that employees (workers) are the cheapest — and best — way to invest money.

In what other scenarios can you get a complete stranger to spend a quarter of their life making you money?

Having a business is also a great way to implement some positive change on an industry or community. In addition, it gives you the flexibility to maintain your independence (unless you're like 90% of finance businesses, of course).

Unfortunately, starting a business isn't for everyone. And successfully running one is for even fewer of us, seeing that more than 60% of new businesses fail in their first year.

Nonetheless, you and I — Australia — need more people to fail.

Why?

Success = 2x your rate of failure

In places like California, parts of Europe or even in New Zealand, sticking your head above the crowd and 'giving it a go' is admirable. In Australia, however, it seems the opposite.

Get a j-o-b. Stay in it. Then apply to a bank for permission to live the Aussie dream.

That's what we're told.

No thanks.

3 types of people who succeed in business

I attended a venture capital conference run by Capital Pitch earlier this month. Venture capital is the area of finance where professional investors with lots of money invest in start-up businesses or ideas for businesses.

But behind all the interfaces, high-sugar drinks and technology, what investors are really investing in is the founder(s) of the business.

In startup land, it is well established that just three types of people succeed. Usually, it's a combination of all three of these personality traits:

1. The Hacker.

Hackers are the people who have the technical knowledge. For example, Xero Limited (ASX: XRO), the $4.7 billion cloud accounting software business, uses complex server-side technology and accounting rules to produce a "beautiful" piece of software.
But it's not just high-flying tech companies that need hackers. You wouldn't start a bakery without a great baker, or a mechanics shop without a mechanic.

2. The Hipster.

Every company needs a designer or a creative mind. People won't use something if it doesn't look the part.

Chances are, you have experienced it before…

Those early 90's looking websites 'might' have what you want but you're worried that your credit card details will be stolen. Design adds legitimacy, authenticity and brand.

The same could be said of any early stage or mature business. Praemium Ltd (ASX: PPS) is an ASX-listed small cap fintech business. Its platform has come a long way in recent years and customers have responded.

3. The Hustler

Most businesses start with a hustler, an eager salesman or woman who pounds the pavement in search of new sales. These people are particularly important in service type businesses, in which people rely on the mastery or skill in a niche. But they are also vital if your business operates in a competitive industry, like retail.

Foolish Takeaway

The best businesses have all three these types of people in their team. Or, at the very least, are founder-run, by a person who can switch hats until the time is right to bring people on board.

If starting a business isn't for you — you can always buy someone else's.

The post These 3 types of people succeed in business appeared first on The Motley Fool Australia.

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• 3 amazing ASX growth shares that continue to stand out
• How to generate monthly income using ASX ETFs

For anyone that's taken my advice before, you'll know that I believe the best investment you'll ever make is yourself.

As Ben Franklin said:

"An investment in knowledge pays the best interest"

Sure, you could invest some money to beat the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) and achieve 10% plus per year, on average. Sure you might, like I did, even get lucky and make many times your money in one year.

But nothing will compound over many years like your knowledge can. That's why children go to school — and not adults.

Here's how you can effectively invest in yourself for a lifetime of dividends.

3 ways to effectively invest in yourself

1. Invest in colleagues, friends and family

There's a saying — which I believe to be true — that you are the average of your five closest friends, colleagues or family members. I don't know about you but I spent a big part of my life escaping toxic or cynical people.

I remember when I was young and impressionable an older family member told me one night, "don't look up at the stars, most of them are satellites."

Another said (about my high school sweetheart — now wife), "at your age, it's not worth having a girlfriend — go out and enjoy yourself".

I'm not chasing a crowd of people to agree with me — I think groupthink is very dangerous to a person's wealth and health. You can do that on social media with a 'like' or a 'follow' button, if you are so inclined.

However, I believe it's important to separate yourself from overly negative or cynical people. It's easier said than done, of course, especially with family. But, candidly, simply because someone is family does not mean you need to like them, hang around with them or — most importantly — be influenced by them.

I'm actively looking for people who can improve my level of happiness and my skill in investing — not drag it down.

2. Pay yourself an hour each day.

Billionaire Charlie Munger, a lawyer and the long-time investing partner of Warren Buffett, believes that successful people "compound time". Farnam Street, which is likely one of the world's best blogs, quoted him as saying, "Go to bed smarter than you woke up."

But that's not all, like my first point above, you owe this time to your friends, family and colleagues.

Here's Charlie again: "the best thing a human being can do is to help another human being know more."

The easiest way to do that is to pay yourself an hour each day. Use it to read a book, paper, blog or — of course, this is the best idea of all — my articles.

You may also simply need time to clear your mind and go for a run, walk, yoga, gym, etc.

"Doing nothing can sometimes be more important than doing something" – Joe Hyams.

I (try to) read an hour each day before work. It's not easy and I'm a slow reader, but it's a great way to start each day.

3. Learn for reward

You're busy. I'm busy. Everyone is busy. However, you must invest some time to your intellectual development if you plan to get ahead.

Don't drop the spanner to become a surgeon right now. But if you're like me and procrastinate it might be a good idea to enrol in formal education part time or online.

Australians have no excuse. Our education system is one of the best in the world and — for all intents and purposes — it's free. Sure, HECs comes off your tax bill. But you only pay tax if you earn money. And you only pay HECs if you earn good money.

Foolish Takeaway

You probably clicked on this article looking for my view on some ASX share like Commonwealth Bank of Australia (ASX: CBA) or a 'hidden gem' small cap.

If you engage your brain and apply it to investing in another sense nothing will compound as fast as your knowledge.

But, heck, some people just want the answers, right…

The post Is this the best investment you'll ever make? appeared first on The Motley Fool Australia.

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• 5 years ago, $10,000 bought 111 CBA shares. But how many would it buy now?
• Want to fast-track retirement? These ASX ETFs could get you there
• Here are the top 10 ASX 200 shares today
• ASX 200 drops again. This is what's starting to worry investors

Australia's S&P/ASX 200 (Index: ^AXJO)(ASX: XJO) and ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) indices finished higher on Friday.

Here's a quick recap of the Aussie market:

• S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) up 0.2%
• ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) up 0.1%
• AUD/USD at US 78.46 cents
• Gold at US$1,294 an ounce, up 0.6%
• Oil at US$51.59 a barrel, down 1.3%

Amongst the best-performing shares during Friday's session were Lend Lease Group (ASX: LLC), which rose 2.3%, and APA Group (ASX: APA), which jumped 2.1%. However, neither company released any material news to the market.

Further down the market, shares of Vocus Group Ltd (ASX: VOC) continued to rally, up 7%, to over $2.81. The telecommunications company was recently subject to two failed takeovers, but its share price has since rallied beyond the proposed offer prices. With the traded volume up strongly today, someone big might be buying shares in the embattled telco company.

Meanwhile, Flight Centre Travel Group Ltd (ASX: FLT) shares bounced another 3.5% higher while Metcash Limited (ASX: MTS), the owner of IGA supermarkets, rallied 2.7%.

At the other end of the market, shares of Healthscope Ltd (ASX: HSO) fell 2.9% while Pilbara Minerals Ltd (ASX: PLS) fell 2.6%.

Here are today's top stories:

• Question: How many ASX shares should I buy?
• Here's what one of Australia's best small cap investors is buying
• Why I think Netcomm Wireless Ltd has great growth prospects

The post ALL ORDINARIES finishes higher Friday: 7 shares you missed appeared first on The Motley Fool Australia.

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• ASX 200 drops again. This is what's starting to worry investors

I often get asked the question: Should I sell my Commonwealth Bank of Australia (ASX: CBA) shares?

To which I reply: "I'm not sure. I can't give you personal advice but how many shares do you own?"

"I dunno. I think I inherited about a 1,000 or so. So, like $70,000."

"Wow, that's not what I meant. How many different shares do you own? How many companies?"

"I don't understand the question."

"Do you own just Commbank shares? Or others, like National Australia Bank Ltd. (ASX: NAB) and BHP Billiton Ltd (ASX: BHP) shares?"

"No, just CBA shares."

"Gotcha. We've got work to do."

How many ASX shares should I buy?

Unfortunately, most people who inherit shares have no idea that holding just a few can be very risky. Of course, companies like Commbank won't disappear overnight.

But the concept of "diversification" is very important, especially for beginners. 

If you think about it like a house or apartment it's easier to explain. Imagine you buy two investment properties in the same, bushfire prone suburb. If a bushfire comes along 100% of your investments are wiped out.

But if you bought just one property in the bushfire-prone suburb and another property in a suburb far away, your risk of 'bushfire' is cut in half (50%). The good thing about it is that you lower your risk but still have the same investment potential. 

The same concept applies to shares.

Ultimately, academic studies have shown that after about 30 diverse investments the benefit of diversification wears out. So some stock professionals say that for new investors it is a 'race to 30 stocks'.

However, studies have also shown that 70% of the benefit from diversification can be captured with just 10 diverse shares. Therefore, some investors opt for a more 'concentrated' portfolio of just 10-20 shares.

Personally, I don't have the intellectual capacity to deal with 30 investments. Heck, even 20 is pushing it.

To me, it makes sense to add more money to your 10th, 11th, 12th…or even 15th best idea before you add a 30th position.

Therefore, I believe about 20 investments is enough.

Of course, if you have only $500 to invest it may take time to build up to a suitable number of shares.

Foolish Takeaway

Between 20 to 30 investments is the commonly accepted number amongst professionals. However, it's important that you consider diversifying your stock market investments across industries, sectors, sizes and geographies. For example, investing more than 30% of your portfolio just in bank shares might be too much risk, in my view.

The post Question: How many ASX shares should I buy? appeared first on The Motley Fool Australia.

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• Why I think investors should buy and hold CBA shares for 10 years

Academic evidence tells us that owning part of the Vanguard ASX 300 ETF (ASX: VAS) and/or Vanguard MSCI Index International Shares (Hedged) ETF (ASX: VGAD) is the best way to invest.

What is underperformance?

If investing in shares isn't your thing (e.g. "they are too risky", "I can't be bothered") you might be surprised to know that you don't need to 'pick stocks' to be more successful than 80% of professional stock pickers.

Underperformance occurs when you buy investments which perform worse than 'the market average', or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) if you're investing in Australia.

For example, your investment portfolio returns 10% in a year but the 'market' goes up 12%. That's 2% underperformance. 

Why is underperformance such a big deal?

Underperforming the market over many years is a big deal because it means you will retire with less than someone who has performed 'average'. Even 1% or 2% underperformance can result in tragically different outcomes once you hit retirement. Over 20 years, for example, the difference between a 9% average return per year and 10% average return per year is around 20% less. That is, a 1% drop in returns per year is 20% less at retirement.

But here's the important part: locking in an 'average' return could be the best and cheapest investment an ASX investor will ever make.

Why?

By investing in an index fund ETF like Vanguard's ASX 300 ETF or International Shares ETF — which cost just 0.14% and 0.21% per year, respectively, to manage — you will get the market/index's return.

How?

The ETFs are designed to track the market average. Simple as that. Vanguard has computers which take investors' money and put it straight into the ETF.

Is ASX share market investing a waste of time?

Over time, research has shown that professional stock pickers have a poor track record when its comes to outperforming the market. Depending on the research and data, it is estimated that between 80% and 99% of professional investors fail to perform better than average, once their fees are taken into account.

Foolish Takeaway

It would seem that being able to get great investing results for a fraction of the cost of professional stock pickers is a no-brainer and the more rational thing to do. But, like dieting and exercise, people don't always do what is rational and good for them.

For those people, it is worth the risk picking individual stocks to potentially be in the 20% of professionals that outperform the market. Admittedly, I also believe it is worth the risk if you know what you are doing.

The post Is ASX share market investing a complete waste of time? appeared first on The Motley Fool Australia.

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Earlier this week I took the opportunity to listen to a great portfolio manager give a presentation at a microcap investing conference in Melbourne.

He is one of my favourite Australian investors (probably my favourite), so when he talks I listen.

His personal and professional track records are impressive, to say the least.

This portfolio manager spoke comprehensively about investing in smaller companies on Australia's ASX, things to look for when doing so, and potential pitfalls.  

Here are three of my favourite takeaways from his presentation.

1. Almost all great investments start small.

When you think of the best investments on the planet, what do they have in common?

Companies like Amazon, Netflix and Apple probably spring to mind. Although they are today's tech giants, they weren't always the biggest companies — they started small.

To an extent, the same could be said of Australia's Commonwealth Bank of Australia (ASX: CBA) or Woolworths Limited (ASX: WOW).

2. You don't need to be first

Catching ahold of one of these potential monsters isn't easy. Many people will go a lifetime without getting onto one truly life-changing investment.

However, one of the reasons many people missed out on Netflix's rise, for example, is due to the fact that it had already risen so quickly.

Meaning, shares of a2 Milk Company Ltd (ASX: A2M) have jumped more than 1,100% in five years. Many good investors might see that growth and dismiss its shares as being expensive. However, if the rise and rise and rise of the monsters have taught us anything it's that you don't need to be first.

One big reason good investors think these companies are overvalued can be attributed to our valuation techniques. Specifically, we underestimate a company's ability to grow exponentially over time and in doing so miss a great opportunity.

3. "The Opportunity" cost

As anyone will tell you, investing in small companies is a like walking through a minefield to find gold.

Put simply, you should be cautious of company management teams who only talk about the 'size of the opportunity'. You see this all the time in mining, biotech or technology.

Be critical of any company which needs to tout its 'potential for growth' — rather than its actual growth.

Foolish Takeaway

Having been at the investing conference it's clear that 95% of small companies wouldn't stand up to this first-class investor's basic selection criteria, let alone closer scrutiny.

Small cap investing is about how many rocks you turn over, I suppose.

The post Here's what one of Australia's best small cap investors is buying appeared first on The Motley Fool Australia.

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• Why I think investors should buy and hold CBA shares for 10 years

Australia's S&P/ASX 200 (Index: ^AXJO)(ASX: XJO) and ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) indices finished higher on Monday.

Here's a quick recap of the Aussie market:

• S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) up 0.6%
• ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) up 0.6%
• AUD/USD at US 78.73 cents
• Gold at US$1,304 an ounce, up 0.6%
• Oil at US$51.73 a barrel, up 1.6%

Amongst the best-performing shares during Monday's session were steel companies Rio Tinto Limited (ASX: RIO) and BlueScope Steel Ltd (ASX: BSL). Neither company released material news to the market. However, iron ore prices surged 4% higher over the weekend to $62.53 per tonne.

• Rio Tinto: up 3.4%
• BlueScope Steel: up 3.1%
• Origin Energy Ltd (ASX: ORG): up 2.5%
• BHP Billiton Limited (ASX: BHP): up 2.2%

Further down the market, Galaxy Resources Ltd (ASX: GXY) continued its stellar run, rising 7.3% despite no news. Pilbara Minerals Limited (ASX: PLS) rose 6.2%.

On the other side of the ledger, Ramsay Healthcare Group Ltd (ASX: RHC) and Qantas Airways Limited (ASX: QAN) fell 1%.

In the mid-cap space, shares of OceanaGold Corporation (ASX: OGC) fell 3%.

Here are today's top stories:

• Should you buy oOh!Media Ltd at this share price?
• Are Ramsay Health Care Limited shares a buy?

The post ALL ORDINARIES finishes higher Monday: 9 shares you missed appeared first on The Motley Fool Australia.

More reading

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• 5 years ago, $10,000 bought 111 CBA shares. But how many would it buy now?
• Want to fast-track retirement? These ASX ETFs could get you there
• Here are the top 10 ASX 200 shares today
• ASX 200 drops again. This is what's starting to worry investors

TPG Telecom Ltd (ASX: TPM) shares offer franking credits and potential growth, in one investment.

TPG Telecom V. ASX 200

TPG, Australia's third-largest telecommunications company, has underperformed the broader market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), in recent years. However, over the long run, the company's share price has hugely outperformed the market.

In addition, TPG has paid a rising stream of dividends to shareholders over the past decade.

2 reasons to have dividend shares like TPG Telecom Ltd on your watchlist

1. (tax effective) Income

Despite competition concerns and fears that the NBN will damage its business, analysts expect TPG to pay a very modest dividend in the year ahead. However, that's on account of increased investment in its mobiles business in Australia and Singapore. If that investment is successful, long-term income-seeking shareholders could stand to benefit.

With full franking credits, Australian residents may also be eligible to benefit from 'tax credits' to hold TPG shares.

2. Growth

If you invest in bonds (not many people do it directly), you can receive a reliable stream of income from your investment. But the level of income normally won't change from the time you buy the bond until you sell it.

Conversely, although TPG shares offer a small yield now, its dividends may grow strongly over time. It's not guaranteed, of course, but if it can return to its previous level of profitability and shareholder dividends, it might still be a great investment for income.

Foolish Takeaway

Medium-sized growing companies like TPG, Greencross Limited (ASX: GXL) and Flight Centre Travel Group Ltd (ASX: FLT) have shown that over the long run investing for dividends and growth can be very lucrative. However, while TPG shares appear tempting at today's prices, I have it firmly on my watchlist until I am offered a more compelling entry point.  

The post 2 reasons to have dividend shares like TPG Telecom Ltd on your watchlist appeared first on The Motley Fool Australia.

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Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) are stable businesses, providing a service for millions of Australians. But should they be in your portfolio?

Woolworths V. Wesfarmers since the GFC

Since the depths of the Global Financial Crisis (GFC), the performance of Woolies and Wesfarmers has been at odds.

Wesfarmers, the owner of Kmart, Target, Coles, Bunnings and more, has more than doubled to become a near $50 billion company. Meanwhile, Woolworths, having failed at its attempt to break into the hardware market, hasn't done much at all.

Wesfarmers

Bunnings Warehouse is rapidly becoming the jewel in the crown for Wesfarmers. With its local dominance now almost set in stone thanks to the departure of Masters, Bunnings is taking to the Irish and UK markets. Coles, still the company's primary revenue generator, has thrived under Wesfarmers' guidance since 2007.

In the year ahead, Wesfarmers is tipped to pay dividends equivalent to 5% fully franked.

Woolworths

Having closed Masters and sold Home Timber and Hardware Woolworths is getting back to what it does best: supermarkets and liquor. Unfortunately, its Big W business continues to lag behind its key rival Kmart.

In recent years, profit from Woolworths' Australian supermarkets has fallen as it lowered profit margins in an attempt to stymie the growth of Coles and Aldi. In the year ahead it is forecast to pay dividends of 3.4% fully franked.

Foolish Takeaway

As I showed here, I do not think Woolworths shares are good value at current prices. And the same could said of Wesfarmers. While Wesfarmers is certainly my pick of the two, I can't get passed its current valuation. Not when there are plenty of other quality companies listed on the ASX and internationally.

The post Better buy: Woolworths Limited or Wesfarmers Ltd appeared first on The Motley Fool Australia.

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