History has proven investing in the stock market to have been one of the greatest ways an investor can grow their wealth exponentially over the years. By buying shares trading at reasonable prices and then letting them climb steadily in value over time, many investors have even been known to retire by the time they're 50 – some even earlier.
However, constructing a solid portfolio can be a tricky task at the best of times, let alone when the S&P/ASX 200 Index (INDEXASX: XJO) is trading at a six-year high. So I thought I'd put together a list of six companies I believe investors could buy today with just $20,000 of capital to recognise superior returns in the years to come.
Build a solid foundation (you'll thank me later).
A good bulk of your cash should be put into solid, well established blue chip stocks which offer decent dividend yields, provided they are reasonably priced…
- Coca-Cola Amatil Ltd (ASX: CCL) is, in my opinion, one of the best blue chips an investor could buy today. With shares down nearly 40% in the last 18 months, investors are focused on short-term issues facing the business and forgetting about the strength of its stable of brands and dominance in the beverage industry. Based on forecasts for 2015, the stock currently yields 4.9%.
- Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is an investment conglomerate and the second-oldest listed company on the Australian Stock Exchange. As such, it has well and truly proven its resilience to market gyrations by now. As its investments continue to increase their dividends, so too should Soul Patts over the coming years. Currently, it offers a yield of 3.2% fully franked.
Targeting growth
Every great portfolio needs exposure to growth stocks too. These generally carry a higher level of risk than blue chips but also offer significantly greater upside potential…
- Greencross Limited (ASX: GXL) is one of my favourite stocks right now. As a provider of veterinary services, Greencross is set to benefit as pet owners become increasingly willing to pay for the best care for their loved ones. As it continues to expand by acquiring more vet clinics and retail brands, strong growth is anticipated for years to come.
- Slater & Gordon Limited (ASX: SGH) also deserves a position in your $20,000 portfolio. The company, which once employed ex-prime minister Julia Gillard, is Australia's largest Personal Injury law firm. It today showed its true form after it announced a massive 47.2% increase in net profit for the year ending 30 June 2014. As it pushes into other practice areas and expands internationally, Slater & Gordon could be a real winner in the long term.
- Cash Converters International Ltd (ASX: CCV) is another good way to spend your money. It would be a mistake to assume that it is simply a retailer of second-hand goods as it actually derives most of its earnings from its financial services division. The company boasts significant growth potential (for instance, its Carboodle business is growing very nicely), while it is also trading at a very reasonable price. In addition, it offers a fat, fully franked dividend yield.
The high-risk/high-reward play
Most investors also like to undertake the occasional speculative buy. These are the high-risk stocks investors hope to reap massive rewards from…
- ADMEDUS FPO (ASX: AHZ) is probably your best bet. Admedus is a small-cap diversified biotechnology company which has recently begun selling its flagship Cardiocel product, which is a cardiovascular tissue regeneration technology. The company looks set for a very bright future, and with shares trading at just 14 cents, now could be the time to buy.
The Motley Fool's top growth stock for 2014-15 – FREE!
Greencross, Slater & Gordon and Cash Converters are all amongst my favourite growth plays, but there is another stock which is posing as an even better buy. It offers just as much growth potential while it also offers a juicy, fully franked dividend yield.
