How to invest in margins and margaritas


People typically invest in the stock market for growth, income or both. However, it may surprise you to learn that the primary goal of 48% of current investors and 48% of those looking to invest is, to go on a holiday, according to the 2023 ASX investor survey.

It certainly surprised me given that I believe investing is about building wealth and planning for your future, whilst going on a holiday is about saving money separate from your investments.

While I am all for going on a dream holiday, there is a way you can achieve this while still building wealth.

how to invest in margins and margaritas

To begin with, you need to have a clear vision of the holiday you want to experience and your goals for building wealth. This provides you with the targets you need to achieve as you work towards saving money and investing for the future.

For example, if you want to spend $10,000 on a holiday in two years' time, you need to save $417 a month. If your goal is to also have $10,000 invested in two years, you would have the same amount going towards your investments.

Knowing this information also helps you to develop a realistic budget, as you need to review your income and expenses to determine if you can achieve your goals in the required timeframe. Once you create a budget, you'll be able to identify if you need to adjust your goals or your current spending habits.

One of the best ways that allows you to achieve your financial goals, and potentially go on a holiday much sooner, is to invest in the stock market, as it is very liquid, has good capital growth, and you can receive income from dividends.

The trick is not to invest in the short term, hoping you'll earn enough to go on a holiday only to find your stocks are worth less than you paid for them. It is important that your investment strategy aligns with your risk tolerance and time horizon because while there is the potential for higher returns in the stock market, it also comes with higher risks.

To manage the risk, it's important to diversify into a concentrated portfolio of eight to 12 high-quality stocks in the top 100 on the ASX. As your portfolio grows and you lock in profits, you can decide if you want to reinvest the money into other stocks or take a portion of the profits to contribute to saving for a holiday.

Remember, you should invest over the long term because if it is done well, you can achieve wealth and still be sipping cocktails on the beach.

The best and worst-performing sectors this week

The best-performing sectors include Energy up more than 2% followed by Communication services and Consumer Discretionary, as they are both up more than 1%.

The worst-performing sectors include Information Technology, down more than 1%, followed by Healthcare and Consumer Staples, which are both just in the red for the week.

The best-performing stocks in the ASX top 100 include James Hardie Industries, up more than 14%, followed by Pilbara Minerals, up more than 7%, while Lynas Rare Earths and Whitehaven Coal are both up more than 5%.

The worst-performing stocks include Resmed, down more than 11%, followed by Block, down more than 10%, and Virgin Money, down more than 5%.

What's next for the Australian stock market

Currently, the Australian stock market is in positive territory for the week and looking good, although it is too early to tell if the current move up is sustainable. I say this because over the past 16 weeks, the All Ordinaries Index has closed lower than it opened on nine of those weeks, yet the current price of the market is almost the same.

The positive news is that since mid-July the Australian market is up over 4% and looking more bullish than bearish.

If the Australian stock market closes higher than it opened this week and continues to rise into next week, I believe the market will rise over the coming month and possibly challenge the all-time high set back in January 2022.

There are many stocks in the Healthcare and Energy sectors that are presenting good opportunities, while stocks in the Financials and Materials sectors are also looking good.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.