Fortunes have been made via buy-to-let property, Bitcoin and gold. And some investors swear by investing in a diverse range of assets. So, for example, their portfolios may contain some property investments; cryptocurrencies such as Bitcoin; vehicles linked to the price of gold; debt instruments such as bonds; and equities.
My simple approach to aiming for a million
But I’m all for keeping my investment life as simple as possible. Therefore, I’m aiming for a million by investing in that final asset class mentioned — equities. Or, to give it its simpler name, stocks and shares.
The first reason for choosing equities is that the stock market has delivered gains over the long term that surpass the returns from all those other major classes of assets. And I think the primary driver is that businesses are what I’d describe as active assets whereas the others are passive.
Indeed, when I buy shares in a business, the enterprise can work hard to increase value for me. It can, for example, expand, grow its earnings, build up its assets and enhance its own intrinsic worth in many different ways. And in that sense, the asset class of stocks and shares is active.
On the other hand, Bitcoin, gold, buy-to-let property and bonds can’t do that. Instead, they merely fluctuate in price (and hopefully, they go up, thus providing investors with a positive return).
The second reason for choosing equities is that stocks and shares can cover a diverse range of sectors, including property, cryptocurrencies, bonds, gold and more. So, I really don’t need to stray beyond stocks and shares to satisfy any of my investment opinions or convictions at any particular time.
For example, I can invest in the cryptocurrency sector by selecting stocks such as crypto miner Argo Blockchain. Or my investments could be influenced by the price of gold through choosing gold mining stocks such as Shanta Gold. And to address the property and letting market I’d head for stocks such as Secure Income REIT among many others.
Why I favour individual businesses
These days, it’s possible to aim for most investment themes by targeting some of the many exchange-traded funds listed on stock exchanges. Whether I’m looking for managed funds, trackers or niche investment themes, there’s often a fund trading as a stock — all I need do is simply buy some of the shares to participate.
But my quest for a million favours investing mainly in the shares of individual businesses. And that’s because there’s often higher potential for larger annual gains from a single business if it’s trading well and expanding.
But that’s not always the case. All businesses can run into trading difficulties from time to time. And negative news will likely weaken its share price causing a loss of invested money. But along with the risks inherent in shares, there’s often positive potential. And the way I’m aiming to find the nuggets is by carrying out thorough research into each stock opportunity.