If you’re looking for the biggest market casualties of 2022 so far, look no further than online fashion retailer ASOS (LSE: ASC) shares. Today, I’m reflecting on just how bad the damage has been and what chinks of light there are for holders… like me.

Big loser

As I type, ASOS shares have crashed by 74% year to date. So a £1,000 investment in January would now be worth around £260 (taking into account the costs involved in buying the stock). This brutal result is made even worse by the fact it doesn’t pay dividends.

All told, it’s the sort of performance that’s probably enough to put off some would-be investors.

I’m not about to accuse the market of being wrong here. Like many of its peers, ASOS has seen profits evaporate as a result of shoppers tightening their belts. Even those still buying are returning more items than before. Add in increased costs and a stretched balance sheet and I think the price crash can be justified.

I did buy ASOS shares!

Thankfully, I didn’t buy ASOS shares at the beginning of the year. However, I did dip my toe in a couple of months ago. Do I regret it? Yes and no.

On the one hand, I’d far rather not be underwater. No one likes to wake up to a big splurge of red in their portfolio, even if that’s been the norm in 2022. As much as I don’t attempt to ‘time the market’, my timing could clearly have been a lot better.

On the flip side, I’m satisfied that I invested according to my risk profile by only forking out a very small amount and ensuring I was already adequately diversified elsewhere.

My plan was to add to my holding as the months passed and business (hopefully) bounced back. Is this too optimistic?

The only way is up?

Well, ASOS shares are up 12% over the last five trading days. There are likely a few reasons for this, but none are related to trading.

First, there was news that serial bargain hunter Mike Ashley had now accumulated a 5.1% stake in the business via Frasers Group (where he remains the biggest shareholder). Might a full takeover be in the pipeline, or is the move just about developing “relationships and partnerships with other retailers” as the latter claimed? Regardless, it’s got people wondering if ASOS shares are now good value.

A second potential reason for the sudden jump in the price is that some short sellers (those betting that the price will fall) have been hurrying to close their positions. That said, ASOS is still the second most shorted stock in the UK.

Third, there is a sense that new CEO José Antonio Ramos Calamonte understands that the company has overreached itself. His plans (made public earlier in October) involve reducing costs, improving inventory management, stabilising its financial position and “refreshing the culture“. The market seems to approve of this strategy.

Patience required

These are tough times at ASOS and I don’t expect trading to improve anytime soon. Nevertheless, any slight cooling of inflation could see sentiment return to the retail sector as fear is replaced by greed. Perhaps we really have seen the bottom.

I’m content to hold for now.

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Paul Summers owns shares in ASOS. The Motley Fool UK has recommended ASOS. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The question is not whether the Bank of England will raise interest rates again when it meets early next month; the question is by how much. Right now, a hike of 0.75% appears to be the consensus forecast among economists and the media.

Regardless, things are only going one way. By the end of the year, the base rate is expected to be above 4%. By July 2023, it could be as high as 5.5%.

Does all this mean I should aim to hold a bigger proportion of my wealth in cash? Not a bit of it.

The benefits of cash

Now, don’t get me wrong — there are a couple of very valid reasons for tucking some of my money away in the bank.

One of these is the idea of having an emergency fund for life’s little (or not-so-little) emergencies. Whether it’s a broken boiler, a car repair, or a temporary period of unemployment, having cash to cushion the blow makes perfect sense.

Even if I don’t need to use this cash, there’s something very comforting about knowing the balance of my account won’t change between going to bed one night and waking up the next day.

Given this, I would certainly make a point of seeking out the best rate I could get. Staying in an account where the interest rate isn’t competitive doesn’t make sense to me, especially as transferring over to a new provider doesn’t take much effort.

The silent killer

Beyond having an emergency fund, however, I don’t hold cash. The main reason for this has been one of the main talking points in 2022.

Right now, any money in the bank is being (rapidly) eroded by inflation. Just in case you weren’t aware, the latter hit 10.1% in September. In other words, I could have my money in the best instant-access saving account on the market (currently 2.5%) and it would still be losing a lot of value.

This is why the vast majority of my wealth is in stocks, including a few that generate truly passive income in the form of dividends. It’s these that are looking particularly attractive at the moment.

Why shares are my priority

Right now, there are many blue-chip companies yielding far more than the interest rates on offer from savings accounts. Insurer Legal & General is forecast to yield 8.4%. Telecommunications titan Vodafone offers 7.9%. Many UK housebuilders have double-digit dividend yields!

What’s more, holding everything in a Stocks and Shares ISA ensures I won’t pay any tax on this income or any profit I make if the bits of companies I own are worth more when I eventually sell.

Please note that tax treatment depends on the individual circumstances of each individual and may be subject to future change. The content of this article is provided for information purposes only. It is not intended to be, neither does is constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

No sure thing

Naturally, there are some ‘costs’ I always need to keep in mind as I continue to buy. As has been evident in 2022, stock prices can be volatile. Those dividends can’t be guaranteed either, particularly if a company goes through a sticky-patch trading-wise.

And this is precisely why I adopt a long-term mentality when it comes to investing. I’d much rather endure these things now and benefit from the brilliance of compounding later down the line.

I’ll be watching next month’s decision with interest. But moving my money to the perceived ‘safety’ of a cash savings account isn’t on my ‘to-do’ list.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It goes without saying that the vast majority of growth-focused funds haven’t had a great year. Nevertheless, I’ve been taking this as a chance to load up on more Scottish Mortgage (LSE: SMT) shares in preparation for better times.

Today, I’m asking whether I should also be taking a position in another investment trust.

A worthy rival?

Like its better-known rival, Allianz Technology Trust (LSE: ATT) is all about finding the best growth stocks management can find in the disruptive tech space. It’s certainly picked a good location to conduct its search. Allianz’s team is based in San Francisco — close to Silicon Valley.

Performance-wise, this relatively concentrated trust (47 holdings) has done well. Despite falling by a third in value in 2022, the shares have still managed to more than double since October 2017.

For me, this underlines the importance of looking at the long-term performance of any potential investment rather than making a judgement based on just a few weeks or months. It’s what being a Fool is all about.

Having said this, the five-year performance for Scottish Mortgage shares is not as impressive. Here, we see a capital gain of a little over 70%. Moreover, SMT has fallen more than its peer in 2022 (down 41%).

So should I be prioritising the Allianz trust over my position in Scottish Mortgage, especially as the former now trades at a 12% discount to the value of its investments?

Time to hold both?

Well, holding both would give me access to two management teams and their stock-picking prowess. With a market-cap still under £1bn compared to SMT’s £11bn, it can also be argued that ATT is more nimble in its approach and, consequently, possesses greater growth potential.

But there are issues with this strategy. One danger of holding both funds is that my portfolio becomes overly concentrated in one sector. That’s fine when things are going well. But it’s less easy to stomach when other parts of the market are generating better returns. Theoretically, the Allianz fund could also prove more volatile because it holds fewer stocks.

In addition to this, some overlap of holdings is inevitable. Electric car maker Tesla, for example, is SMT’s second-biggest position and the fourth-biggest of Allianz Technology Trust. Am I happy with this much exposure? Elon Musk may have defied his critics to date but the last few months have been tricky for holders to say the least.

Another important thing to highlight is the costs involved. Baille Gifford charges investors only 0.32% for managing Scottish Mortgage. As well as being low for an active fund that deviates substantially from the underlying benchmark, it’s also less than half the ongoing charge of the Allianz trust (0.8%). What may seem like a small difference can really impact returns over the years. And here at Fool UK, we’re big fans of keeping costs as low as possible.

Staying put

As things stand, I’m happy to stick with Scottish Mortgage shares as my main exposure to technology stocks. Maintaining a balanced portfolio (and ensuring a good night’s sleep) means more to me than shooting for the moon.

Even so, it will be interesting to see if both trusts rally to the same extent when market confidence inevitably returns.

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Paul Summers owns shares in Scottish Mortgage Investment Trust. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It’s never nice to see the value of my portfolio tumble as it has in 2022. One way I can cushion the blow is to own dependable dividend stocks that pay out a proportion of profits to their owners. Doing this means I’ll at least get paid while waiting for the market to recover.

Here are two I’d be quite happy to buy now and hold for the next 10 years.

Top dividend stock

I’ve been wanting to buy shares in Tritax Big Box (LSE: BBOX) for a while now. Unfortunately, they always seemed too expensive for me to pull the trigger with confidence. Thankfully, that situation has now changed.

Tritax is a real estate investment trust (REIT). It owns, develops, and manages logistics buildings (like warehouses) for customers such as Tesco, Next, and Amazon on long leases. That’s generally good news for income seekers, even if no dividend stream can be truly guaranteed. The Covid-19 pandemic served as a reminder of that.

Long-term growth

Of course, the relative stability of Tritax’s business model doesn’t mean that all investors will stick around in a crisis. As evidence of this, shares have almost halved in value in 2022 alone.

That said, this has succeeded in bringing the valuation down to a more palatable level. Shares now trade on an appealingly low price-to-book value relative to the rest of the market.

Naturally, it’s hard to say when things might begin to recover. With a raft of economic issues in the UK, Tritax could be dragged lower regardless of management doing all the right things.

However, I’m fine with gradual capital gains. I also can’t see demand for the sort of assets Tritax owns going out of fashion anytime soon. Consumers may be tightening their belts temporarily but the growth of online shopping will surely continue.

Perhaps most importantly, a 5.3% dividend yield is sufficiently chunky, even if it’s clearly not enough to outgun inflation.

Consistent performer

As interested as I am in finally buying a slice of Tritax, I know that running a diversified portfolio remains essential. That’s why my second pick to hold for a decade (or more) is a million miles away from real estate.

FTSE 250-listed drinks firm Britvic (LSE: BVIC) might not get the pulse racing but, thanks to owning a portfolio of brands that people habitually buy even in troubled times, it’s been a solid performer for dividend hunters for many years. In addition to money consistently hitting holders’ accounts, the payout has been hiked nearly every year (2020 was a rare exception).

Right now, Britvic shares offer a forecast dividend yield of just over 4%. Could I get a bigger yield elsewhere in the UK market? Of course! However, a general rule of thumb for me is that sky-high dividend stocks carry more risk of that passive income being cut. It’s often the case that the yield is large only because the share price has tumbled as a result of concerns about the business. In contrast, Britvic’s payout looks set to be safely covered twice by expected profit.

At a price-to-earnings ratio of 12, I’m considering adding this defensive dividend stock to my portfolio when I have the funds to do so.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon, Britvic, Tesco, and Tritax Big Box REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As the colder weather draws in, the news flow from some of the biggest UK companies heats up. And this could mean their share prices are set for some big moves in November.

In which direction? Well, that’s open to debate.

Next

Reporting early next month is clothing and home retailer Next (LSE: NXT).

The fact that it scores consistently well on quality metrics suggests the £6bn cap is one of the best retailers in the entire UK market. Unfortunately, this is easily forgotten in a period of market malaise such as the one we’re in. The shares were down 41% year-to-date by the end of Friday.

This isn’t hard to fathom. As a general rule, any company that relies on discretionary spending tends to do badly during recessions. I don’t see Next being the exception here. And if sales have been even worse than anticipated, there could be more pain to come for existing holders. Full-year profit guidance was already reduced by £20m to £840m in September.

On the flip side, even a slightly better-than-expected statement on 2 November could be warmly received by a market desperate for something to smile about.

I’m content to watch rather than buy Next shares for now.

Taylor Wimpey

Top league housebuilder Taylor Wimpey (LSE: TW) delivers its latest update on 9 November. After halving in value in 2022, investors will be hoping for something, anything, to stabilise the share price.

I think they may be disappointed, at least as far as the outlook for trading is concerned. While completions may have been fairly steady over the summer, the recent rise in interest rates is likely to be impacting demand for new homes.

How much of all this is priced in? I suspect a fair bit. The stock already changes hands on a seriously low price-to-earnings (P/E) ratio of five. What’s more, it yields a forecast 11%, at least for now.

That last bit is important. While earnings should cover the payout, I’m wary of relying too much on Taylor Wimpey for generating passive income going forward.

Again, I’m keeping my powder dry until after that statement.

Halma

Last on today’s list of FTSE 100 stocks that I’ll be watching is Halma (LSE: HLMA). Of the three I’ve highlighted today, I’d say this company is the least cyclical. Halma specialises in life-saving technologies across three market areas: Safety, Environment and Health– not the sort of things that employers can afford to ignore thanks to increasing regulation.

Notwithstanding this, 2022 hasn’t been a vintage year for those already holding. The company’s valuation has sunk 35%.

Despite this fall, Halma shares still change hands at a P/E of 29. That’s still high, at least relative to many/most other UK-listed shares. While I do think this premium can be justified to some extent (Halma has an unbroken record of increasing its dividend by 5% or more for the last 43 years!), it’s still not ideal in the current climate. There’s a risk we could see a big move in the price if the half-year numbers on 17 November disappoint.

There is, however, something to be positive about here. Unlike Next, Halma retained its full-year guidance in September. Perhaps the worst is over.

Regardless, I still remain very interested in opening a position here.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

UK housebuilders have been savaged in 2022. Persimmon (LSE: PSN) shares, for example, had tumbled 58% by Friday’s close.

That gets my inner contrarian twitching. Is this now a wonderful opportunity to load up?

Temptingly cheap

One reason to think this might be the case is that Persimmon already trades at just five times forecast earnings. That’s seriously cheap relative to the UK market as a whole.

Currently, Persimmon shares also boast a monster 19% forecast dividend yield. When even the best instant-access cash savings account still only generates a paltry 2.75% in interest, that’s got to be worth the added risk that comes with buying stocks and shares, right? After all, it would cover inflation (10.1% in September) and then some.

Aside from having an emergency fund, locking money up in the bank doesn’t appeal. But things aren’t quite that simple.

How safe is that payout?

One of the challenges facing any investor wanting income is judging the odds of actually receiving that income. Sadly, there can be no guarantees. As a general rule however, a sky-high dividend yield is usually something to be wary of rather than embraced. It’s often just the result of a company’s share price falling because the market is concerned about what’s coming.

I think this is true to some extent here, even though Persimmon had a higher-than-average yield long before the multiple crises of 2022 unfolded. The economic background is hardly bullish for the sector, especially if interest rates keep climbing. The latter, when combined with squeezed incomes, will likely put (some) people off buying a new home. That doesn’t bode well, especially as earnings at Persimmon are expected to only just cover this year’s total cash return.

So I do think there’s a real risk that Persimmon might reach for the scissors. The question I’m asking is how much this would bother me?

In better health

My personal view is that what’s happening in 2022 doesn’t feel like a repeat of what came to pass during the Great Financial Crisis. Back in 2007, housebuilders saw their valuations plummet as their very survival was under question. These days, the balance sheets of the UK’s biggest builders — including Persimmon — are looking far more robust.

Because of this, I can’t see dividends being wiped out completely. Even if a cut were made, there’s a good chance that the stock will still generate a sizeable amount of passive income and probably a lot more than they’d get from a bog-standard FTSE 100 tracker.

Of course, one advantage of holding the latter over Persimmon shares would be the diversification that it brings. “You pays your money and you takes your choice“, as the saying goes. This is why correctly judging my own tolerance to risk is so vital.

Watchlist-bound

All things considered, I’m tempted to buy at the current level. However, this would be conditional on me being able to accept that the share price could have further to fall and the dividend stream might be reduced.

If I were to dip my toe in, I’d also wait until after the firm’s next trading update, due 8 November. For now, Persimmon goes on my watchlist.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The last 10 months or so have been pretty dire for UK investors. And while I still firmly believe that the best time to load up on FTSE stocks is when there’s more than a whiff of fear in the air, I also think there could be more pain to come for some.

That pain could come in November.

Howdens Joinery

One FTSE stock that could have a difficult month is kitchen supplier Howdens Joinery (LSE: HWDN).

Now, I’m actually a fan of this company. It’s a big player in its market and has a history of generating above-average returns on the money it puts to work.

Unfortunately, it’s easy to overlook these qualities in the current climate. With inflation running high and a housing market now treading water, demand must surely have softened over the summer. We’ll find out when it reports on recent trading on 3 November.

The question is, how much of this is already priced in? Well, the near-halving of Howden’s share price in 2022 would suggest quite a bit. Interestingly, there also seems little interest from short sellers as things stand. This suggests that expectations might actually match reality. If so, there’s no guarantee that we will see another drop next month.

That said, I’m prepared to wait for the numbers before deciding whether to strike.

Marks and Spencer

Interim results from Marks and Spencer (LSE: MKS) will be published on 9 November. Like Howdens, its stock has tanked in value year-to-date.

I can’t say I’m surprised. Having almost overcome the challenge of shaking its tired image, the tightening of purse strings is another hurdle for the business. News that inflation returned to double-digits in September is hardly an encouraging development. A recent update from Ocado (its joint venture partner in the UK), and the reaction to it, don’t bode well either.

On the flip side, the shares look cheap, changing hands at a price-to-earnings (P/E) ratio of a little less than seven. One might also argue that M&S stands to benefit from fewer people eating out but perhaps spending a little more on eating in. And, no, I don’t believe every M&S shopper has suddenly migrated to shopping at a German discounter for their groceries.

Even so, I can’t see a catalyst for a recovery to begin in November. For this reason, I’m happy to watch from the sidelines.

AO World

Down 57%, as I type, electrical goods seller AO World (LSE: AO) has been another big casualty in 2022.

With interim results out on 22 November, I just can’t see how management has been able to turn this still-not-consistently-profitable business around. Like M&S, AO operates in a hyper-competitive environment. And while white goods and gadgets need to be replaced from time to time, many people will avoid doing so in a recessionary environment unless completely necessary.

It seems I’m not alone in being bearish. Broker Canaccord Genuity currently has a ‘sell’ rating on the stock with a target price of just 31p. It’s currently 45p.

Management is clearly trying. The decision to leave the German market and concentrate on the UK, while overdue, does make a lot of sense.

Even so, I still can’t see the attraction of me investing here. They don’t make bargepoles long enough.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Howden Joinery Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Things haven’t been particularly pretty for the domestically-focused FTSE 250 in 2022, so far. Since January, the index has tumbled almost 30% in value as multiple economic issues have sent investors scrambling for the exits.

It’s grim, to be sure. However, I’m not selling a single thing. In fact, I’m looking to top up on some quality stocks that now look even better value and could bounce back strongly in 2023.

Almost 50% down!

Nearly halving in value year-to-date, shares in baked goods retailer Greggs (LSE: GRG) have fared far worse than the FTSE 250 index. That’s been sufficient to completely eradicate all my tasty paper profit and send me back underwater.

Could things get worse before they get better? Absolutely. The political shenanigans we saw last week look set to continue, leaving investors scratching their heads as to what to do next. And the one thing we can be absolutely sure about is that the stock market absolutely hates uncertainty.

But I’m looking for positives. Greggs has repeatedly shown itself to be a great business that’s survived many a period of market malaise. And while it certainly isn’t the only option for hungry shoppers and travellers, its value-focused offering is likely to appeal more than most in difficult times.

Trading well

Perhaps most importantly, the food-on-the-go retailer has been trading in line with expectations. Total sales were up almost 15% in Q3. The company also elected to keep its guidance on cost inflation steady at roughly 9%. So long as it can maintain this form, I’m increasingly confident that the Greggs share price could fly back over 3000p again in 2023.

In the meantime, there’s a secure 3.5% dividend yield for those holding the stock. As always, I fully intend to reinvest this back into the market, thus benefiting as much as I can from compound interest.

Quality going cheap

But Greggs isn’t the only FTSE 250 firm whose share price I think (hope) will bounce back to form in 2023.

Having made good money on the stock in the past, I’m also taking advantage of a huge dip in the company’s value to re-build a stake in fantasy figurine maker Games Workshop (LSE: GAW).

Again, this company’s stock has underperformed its index, dropping almost 40%. But, again, I’m looking at the fundamental business, not a constantly-moving valuation driven by near-term sentiment. And in my mind, there are few better UK firms.

While I do confess to not knowing an awful lot about its fantastical world, I do know that Games Workshop possesses a dominant presence in a niche market, a bulletproof balance sheet, and massive margins. All this makes a price-to-earnings (P/E) ratio of 16 — far below the five-year average of 23 — feel very reasonable indeed.

Don’t bottom-pick

Granted, there are still risks here. Even the most devoted followers of Warhammer 40,000 seem to be cutting back. Pre-tax profit in the most recent quarter fell to £39m (from £45m in 2021). Although expected by management, that’s not ideal.

But, paradoxically, it’s this temporary ‘pain’ that’s the Fool’s best friend. And when that recovery does arrive (and investors want to buy growth stocks again), I want to be on board rather than trying to pick the bottom and inevitably missing it.

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Paul Summers owns shares in Greggs and Games Workshop. The Motley Fool UK has recommended Games Workshop. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Few UK stocks probably get as much attention from retail investors as FTSE 100 telecommunications giant BT (LSE: BT-A). But, as I’ve said before, attention doesn’t equate to a great investment. So, just how kind have BT shares been to anyone holding them since the start of 2022?

In a couple of words, ‘not very’.

BT shares have tanked

BT shares are down 26% in 2022. So, £1,000 invested here would now be worth around £740, without factoring in the costs of buying the position.

Clearly, we need to put this in context. Thanks to galloping inflation and the invasion of Ukraine, global markets have been in a funk. Many FTSE 100 members have seen their values fall by far more than BT. Housebuilder Persimmon, for example, has dropped by more than 50%. Ocado is down almost 70%!

So yes, the performance has been poor but some of this is clearly unrelated to anything the company has/hasn’t done.

I didn’t invest in BT shares back in January. But would I buy now? As usual, there are attractions and risks to consider.

Dirt cheap source of dividends

BT shares trade on a valuation of just six times forecast earnings. This makes the stock one of the cheapest in the FTSE 100. It’s also low relative to the telecoms sector as a whole.

I continue to believe that BT shares are a great source of dividends too. Sure, these can never be guaranteed but the 6% yield forecast this financial year (to the end of March 2023) is expected to be covered well over twice by profit. This makes the possibility of a cut unlikely, in my opinion. Although not enough to beat inflation on its own, that payout is also far more than the 4% offered by the FTSE 100 as a whole.

Third, the fact that French billionaire Patrick Drahi now owns almost a fifth of the company suggests that rumours of a potential bid won’t go away any time soon.

Debt-heavy

But BT is far from a home run. The recent news that FTSE 100 peer and rival Vodafone was looking to merge with Three is unlikely to be welcomed by management. Then again, there’s a possibility that the Competition and Markets Authority may veto a deal.

More problematic for me is the fact that BT remains heavily indebted. That’s not exactly attractive if interest rates continue to rise and could mean that hikes to the aforementioned dividend may remain subdued going forward.

Although margins aren’t terrible, the huge costs involved in its line of work also mean that the returns BT makes on the money put to work aren’t worth shouting about. Unfortunately, it’s this that plays a big role in helping a company (and my money) to compound in value.

Based on fundamentals, BT just doesn’t hit the spot.

My verdict

Like all stocks, I don’t know where BT shares go in the near term. Thankfully, I don’t need to care all that much. My investing horizon extends to decades, not weeks or months.

Notwithstanding this, I’m committed to buying the best businesses I can in this period of market malaise. As such, I can think of far better places to stash my cash now unless generating passive income were my one and only goal.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With a net worth of over $90bn, it’s fair to say that Warren Buffett could have retired far earlier than most. And yet the Sage of Omaha stays in the game for the sheer love of it.

Admirable as this is, I’d be happy to swap the (virtual) office for the (actual) beach as soon as possible.

Fortunately, the master investor has a few tips to help me, even if I were starting from scratch with nothing in the bank.

Building wealth requires building good habits

 “Most behavior is habitual, and they say that the chains of habit are too light to be felt until they are too heavy to be broken,” says Warren Buffett.

In reality, there’s nothing I can do about the direction of share prices. But there are some things I do have control over.

To get on the road to financial freedom, it’s vital to cultivate positive money habits. In practice, this might require a little soul-searching and learning to distinguish between spending on things that actually improve my quality of life and spending that does little more than hurt my bank balance. The money saved from cutting back on the latter can then be put to better use in the stock market.

Further down the line, it might mean funnelling some cash into my portfolio on the day my monthly pay arrives. It means not trading in and out of stocks and racking up costs in the process. You get the idea.

Achieving early retirement is hard but, as Buffett implies, it’s near impossible if I’m consistently working against myself.

Wait for the ‘fat pitch’

Some people may believe that the pursuit of early retirement is all about speed. You can’t reach financial freedom if you don’t try to accumulate wealth quicker than your average rat-race participant, right? Go, go, go!

This couldn’t be further from the truth as far as Buffett is concerned.

Taking a cue from baseball, he waits for what calls the ‘fat pitch’. This is when the odds of making a profitable investment are high enough to be worth the risk of ‘swinging’ for it. Put another way, it’s about buying shares in a great company when, for whatever reason, that company is temporarily out of favour and trading at a (very) reasonable price. The only caveat here is that it sometimes takes years for such a pitch to arrive.

But might the awful performance of markets in 2022 be such an opportunity? I think so. That’s why I’m already buying more shares, even though I know prices could have further to fall.

Sitting tight

Of course, buying when prices have fallen isn’t enough if I don’t understand exactly what it is that I’m buying. In fact, just throwing cash at anything is potentially a recipe for disaster (and most certainly not financial independence).

This is why Buffett advises that I only ever buy within my own ‘circle of competence‘. Put another way, I need to invest in things I understand.

And even if I do understand a business or sector, I still need to invest based on the level of risk I’m prepared to take. Throwing everything at just one company in the hope of retiring early smacks of gambling. Building stakes in 10-20 high-quality businesses makes much more sense.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.