Christmas is a great time of year to kick your feet up, relax with family and do all the things you didn't have time to do during the year.
For some that means watching the cricket, mowing the lawns or going shopping.
However after years of writing on finance and the share market, I've found a lot of Australians will use the festive period to sit down, set goals and plan for the year ahead.
For those already in the share market, that could mean readjusting portfolio weightings.
Whilst prospective investors will likely be drawing up a budget and deciding how much they'll commit to certain investments.
I think it's always a good idea to sit down and prepare your finances for what the future may hold.
However if there's one thing I've noticed about the financial goals people set this time of year, it's this…
Like the influx of members at your local gym in January each year, too many people have unrealistic expectations of what they can achieve. Too many people think they can enter the sharemarket and make life-changing amounts of money in a day, month or year.
You might get lucky and see gains in the first few months. But good things take time.
Trust me, if you can get through your first year of share market investing and not lose money, you're doing pretty well.
In my first, I lost much more than I'd care to admit by trying to find 'the next big thing'. Well, just between you and me, I lost nearly 50% of my portfolio in my first year…
And this is what it could mean to me over the long-term…
If a conservative investor achieves a 5% return per year, the speculator (who lost 50% in their first year) must make 10% per year for 17 years, just to break-even!
So the way I see it, there are two ways to approach the sharemarket for the first time:
- Set high goals, and likely lose money.
- Be conservative, remember it's a marathon not a sprint, and maybe you'll come out ahead at the end of your first year.
Indeed if you've got years to invest, focus on finding solid companies with reliable dividends and long-term growth potential. Not some speculative biotech or resources stock with endless potential.
5 of the best growth stocks for 2015 and beyond
To make it easy, if you're planning to set some financial goals for 2015 and beyond this Christmas, here are five great stock ideas for you to consider.
- Slater & Gordon Limited (ASX: SGH) is Australia's leading personal injury law firm. The company pays a small dividend but its long-term growth potential is first class. In the year ahead, it expects to continue its strong growth in the UK market and will push into general legal services locally.
- Ardent Leisure Group (ASX: AAD) is the owner of popular leisure and entertainment assets such as Goodlife Health Clubs, AMF and Kingpin Bowling and Dreamworld. It'll be a beneficiary of a falling AUD in more ways than one in 2015. It also offers a great dividend and long-term organic growth potential in Australia and the USA.
- Up 1,600% in five years, G8 Education Ltd's (ASX: GEM) most rapid growth may be behind it, but at today's prices it continues to present compelling growth and income potential. At just north of $4.20 per share, it's trading on a forecast 4% fully franked dividend.
- Village Roadshow Ltd (ASX: VRL) is perhaps a surprising 'growth' pick because many people believe piracy, the prevalence of low-cost home entertainment and streaming services are structurally challenging cinema operators. I disagree. In addition to part-ownership of Village Cinemas and film production and distribution, Village Roadshow owns popular attractions like Wet'n'Wild, Sea World and Movie World. A recent 20% share price drop has provided an opportunity for long-term focused investors, in my opinion.
- Another company which some commentators have labelled as 'ex-growth' is share registry business Computershare Limited (ASX: CPU). Other than being a company with a fantastically wide economic moat (competitive advantage), it'll benefit significantly from a falling AUD and rising interest rates in the US.
Christmas is a great time of year to set out your financial goals. My advice is to do it conservatively, at first. Remember that investing is a marathon, not a sprint. Learn what you need to learn, then pick great companies which will grow modestly, but sustainably, over the ultra-long-term and wait for the juicy dividends to roll in.
