If you're lucky enough to have a spare $20,000 floating around you won't want to stick it in the bank due to the diabolical interest rates currently available on cash deposits.
The Commonwealth Bank of Australia (ASX: CBA) is currently offering a "bonus" savings rate of just 2.55% on cash deposits, which won't bring home the bacon by any stretch of the imagination.
If you want to get ahead you have to grow your wealth, and the share market offers the best returns to investors with a long-term focus.
There are plenty of good quality businesses on the ASX that currently offer income above the banks' savings rates (not hard) and decent prospects of capital growth.
Below, I pick three shares where I would invest $20,000 today.
Ramsay Health Care Limited (ASX: RHC) is the world's fifth-largest private hospital operator with an outstanding track record of profit and dividend growth in part thanks to the tailwinds supporting the healthcare sector. The group can grow organically (price rises, etc), by redeveloping existing sites, developing new sites, or by acquisition.
Its management team has a great track record in executing the business model, while managing the balance sheet and rewarding shareholders. The stock is not cheap on 26x analysts' estimates for FY 2017's earnings per share, but at $69.11 today, with a yield close to 2% it looks a buy. I would invest $10,000 in Ramsay shares thanks to its moat and defensive earnings streams.
Dicker Data Ltd (ASX: DDR) is a founder-led company that operates as a distributor of IT hardware from its Sydney base to businesses all around Australia and New Zealand. It has an excellent track record of growth thanks to its dominant market position and excellent management team that has heavy levels of insider share ownership.
The company is expecting to deliver 16.4 cents in dividends per share over FY 2017, which places it on a yield of 7% plus franking credits when selling for $2.34 today. Dicker Data is also forecasting more decent growth in FY 2017, yet trades on just 14x trailing earnings per share. Given the value and bumper yield I would invest $8,000 in Dicker Data today.
Catapult Group International Ltd (ASX: CAT) is the sports analytics business that is a global market leader with serious potential to lift its revenues and profits over the decade ahead. The stock has been belted recently off the back of a weaker-than-expected update for the quarter ending March 31 2017, although the sell off may be a window of opportunity to grab shares at $1.61 today. Given its current financials, Catapult is a high risk / high return bet so I would allocate $2,000 of my available funds to it today.
The above portfolio contains stocks on reasonable valuations and would yield in the region of 5% plus franking credits with plenty of opportunity for capital growth over the next 3 to 5 years in my opinion.
Of course all stocks are risky and the value of your investment can fall as well as rise, but you won't catch me leaving too much cash in the bank with opportunities like this available.
