Best Shares To Buy In 2010

Buying shares over the past couple of years has certainly been a hair-raising experience for most of us. It's been an extraordinary roller coaster ride. The All Ordinaries index started 2008 at 4,882 before reaching a low of 3201 in November of that year. Then in March of 2009 we got lower still - down to 3,090 in March before finishing the year at 4,882. Overall in 2009 the index gained more than 33% or around 58% since the low point in March but that was a shocker of a year in 2008.

2008/2009 Share Price Graph

So what can we expect from the Australian stock market in 2010? Well quite frankly, your guess is as good as mine. But I think it's worth putting what we learned in 2008 and 2009 into practice in 2010.

Australian Stock Market Investing

Investing vs Speculating on the Australian Stock Market.

What is the difference between investment and speculation? Unfortunately many people tend to confuse the terms and even use the two interchangeably. In this post I'd like to put forward my views on what the difference is and how it applies to the Australian Stock Market.

In his book, Security Analysis, Benjamin Graham discusses the difference between investing and speculating at length. Graham describes the difference between the two succinctly using the following words:

"An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative."

I think this sums it up nicely. If you approach each stock market investment with Graham's words in mind, you cannot help but do well over the long term.

The concern I have with speculation is that there is not normally any fundamental basis for entering a particular investment. A stock is bought because there is an expectation that the price will rise (normally over the short term) and it can then be sold at a profit. The problem lies in the fact that the expectation of a rise in price is based on observations of whether the price is rising or falling, or on what the price has done in the past. It seems to be solely about identifying patterns in price and volume.

The issue I have with this approach is that price does not necessarily reflect the value in the company. Over the course of weeks or even days a company's share price can fluctuate wildly without any news from the company in question. Is it possible that the fundamentals of the company have changed so dramatically over such a short period of time? In most cases it's unlikely. Sure - there are cases where a major change in the company's fortunes becomes known to the stock market leading to a change in valuation of the company's shares. But in most cases it's just investor sentiment driving prices.

So the next time you consider the purchase of a company's shares you should bear Graham's words in mind. Do you understand the company well enough to be confident of it's fortunes into the future? Is there sufficient value present to justify the price being asked? If you can't answer yes to both of these questions, should you really be investing? Remember that you can afford to pick and choose. The Australian stock market continues the throw up opportunities for patient investors.

How To Invest In Gold

How To Invest In Gold.

Lots of new investors want to know how to invest in gold, especially with the recent resources boom on the Australian stock market. In this post I will discuss some of the methods available to investors who don't currently have exposure to gold, and who want to learn how to invest in gold.

Before we get started, I just want to make it perfectly clear that this article is about how to invest in gold. I'm not making any recommendations as to whether now is a good time to invest in gold. With gold currently trading at over $1,000 per ounce, it is certainly a long way from it's low point, but who knows how much higher it can go?

Invest In Gold Producing Companies.

There are many gold producing companies listed on the Australian Stock Market, not to mention a plethora of junior explorers if you are looking for a more speculative investment in gold. Buying a gold producer will give you exposure to rising gold prices as well as any upside in the specific company. This may include exploration potential and efficiency gains.

The downside to investing directly in gold producing companies is the company specific risk you will take on. An individual company may underperform the gold price for many reasons. In the worst case scenario, insolvency is not out out of the question. Recall Sons Of Gwalia.

A couple of the larger gold producing companies listed on the ASX include:

• Newcrest Mining Limited (ASX:NCM)
  
• Sino Gold Limited (ASX:SGX)
  

Invest In An ETF.

Investors can gain direct exposure to the price of gold bullion by investing in a gold exchange traded fund. The only gold ETF I know of listed on the ASX trades under the symbol GOLD. Through this vehicle, investors gain beneficial ownership of 1/10th of an ounce of gold bullion for each GOLD share held. Read more about investing in GOLD shares.

Buying an ETF is like buying any other share. They offer liquidity since they are easily traded on the stock market. And if you want to know how to invest in gold with little money, you can investigate the use of leverage with ETF's. Margin lending among other lending products may let you get started with just a small amount of your own money.

Invest In Gold Bullion or Coins.

You can also invest in gold by buying gold directly from gold dealers in Australia. Gold can be bought in a variety of forms including different sized gold bars and coins. Dealers will normally buy at the spot price then charge a commission plus a delivery fee, but there are a few different variations.

Unless you want to want to actually be able to see and touch the gold, ETF's are probably a better option as they will give you the same exposure to the gold price but you don't need to worry about storage and handling.

If you really want to know how to invest in gold coinage, I would suggest you speak directly to a dealer about your specific needs. They will be able to tell you how to invest in gold coins.