The share market is one of the riskier asset classes, sure, but it's also the best performing over an extended period — by a long shot.
And while many investment companies will try to flog their 'new strategy' for market-beating returns, they all too often end up leading their investors down a rabbit warren full of excessive costs and commissions.
In all my years of investing, I've found only two strategies worth pursuing in the sharemarket:
- Buy to hold low-cost index funds or ETFs which track the market – Vanguard MSCI Index International Shares ETF (ASX: VGS), iShares Europe ETF (ASX: IEU) and the iShares Global Consumer Staples ETF (ASX: IXI) are three of my favourites.
- Buy to hold great dividend-paying stocks. Don't be alarmed if you get some stock picks wrong, because if you're good you should be able to outperform the market with 6 of 10 stock picks proving to be winners, according to legendary investor Peter Lynch.
Your instant 5-stock portfolio
If you're inclined to 'go it yourself' and take option two above, here are five quality dividend-paying stock ideas to get you started.
- Telstra Corporation Ltd (ASX: TLS). Telstra is a dominant Australian business that is expected to pay a dividend of 5.3% fully franked in the next year.
- SEEK Limited (ASX: SEK). SEEK is the leading job ads website in Australia but is also growing strongly in foreign markets. Thanks to a recent fall in share price, it's expected to pay a dividend equivalent to 3% fully franked in the year ahead.
- Flight Centre Travel Group Ltd (ASX: FLT). The immediate outlook for Flight Centre may be a little shaky, but at today's discounted price it's forecast to yield a 4.16% fully franked dividend.
- WAM Capital Limited (ASX: WAM). As a market-outperforming fund manager, WAM has established a verifiable track record of generating exceptional returns for shareholders. Last year, it paid the equivalent of a 7% fully franked dividend yield to shareholders.
- Cochlear Limited (ASX: COH). The hearing aid developer isn't known for its dividends, but its defensive and growing earnings base. However, thanks to a recent sell-off in its shares, Cochlear is forecast to yield 2.55% in the year ahead.
