The Sirius Minerals (LSE: SXX) share price was hit hard last week on news the wannabe potash miner has decided to suspend its planned $500m bond offering “due to current market conditions.”
Investors want too much interest for taking on the risk of buying bonds from Sirius Minerals, and I don’t blame them. The firm’s plans to build a potash mine under the North York Moors are capital-intensive and fraught with uncertainty. It’s always risky investing in profitless, jam-tomorrow enterprises because the story might not play out as we expect.
Avoiding too much risk
That’s why I’m reluctant to pile into the shares. I’ve argued for some time a better entry point could arrive when the mine’s infrastructure is substantially complete and production is much closer. If a better opportunity to buy the shares fails to materialise, there are plenty of other, less risky propositions on the London stock market for me to invest in.
Meanwhile, the price of gold has been shooting up this year, maybe I should jump into that. Many see the shiny yellow stuff as a decent store of value and a hedge in uncertain economic times. But I see it as a lump of yellow metal without much practical use. It doesn’t do anything to generate value. It just moves up and down in price according to the whims of speculators.
Then there’s Bitcoin, which has been on a tear. But that’s even worse than gold because it isn’t even shiny, or yellow, or anything in the real world. Again, the price is driven by speculation and the higher it goes the further it has the potential to fall, in my opinion.
I wouldn’t go anywhere near either gold or Bitcoin after their recent advances, and I certainly wouldn’t aim to make a million by risking the money I have got on them. The downside risk looks enormous to me right now.
Less speculation, more quality
Instead, I’m aiming to make a million by investing in quality shares on the stock market. Over the long haul, shares have outperformed all other major classes of assets such as cash savings, bonds and commodities. One day, I reckon shares will even be counted as out-performing cryptocurrencies such as Bitcoin.
There’s a lot to like about shares. They’re backed by underlying enterprises that can earn growing profits and increase their assets. The value can grow in a business when you hold its shares, and that can reflect in a rising share price and a stream of income from an escalating dividend payment.
One of the big downfalls of speculative investments such as Sirius Minerals, gold and Bitcoin is the dreaded price-reversal. We are seeing it now with Sirius, and I’m sure we’ll see it again with gold and Bitcoin down the line.
General share prices aren’t immune from price reversals, even when they’re backed by decent, profit-earning enterprises. But with shares, you have the ability to reinvest that stream of dividends, which will help you compound your investment even in the teeth of a volatile share price. To me, buying and holding quality shares on the stock market is a well-trodden path towards aiming for a million.