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Where I would invest $5,000 in the share market

While $5,000 might not sound like it could be a life-changing amount of money to invest, if you can afford to invest this sum of money on an annual basis for an extended period it certainly could be.

According to Fidelity, the local share market has provided an average annual return of 9.8% over the last three decades.

This means that if you had invested $5,000 each year over the last 30 years it would have grown to be worth just short of $875,000 today. Two years later, if the returns stayed the same, this figure would have made you a millionaire with a small fortune of approximately $1,065,000.

While there is no guarantee that the market will provide the same level of return over the next three decades, I’m optimistic that it will.

With that in mind, here are two shares which I think could provide market-beating returns over the long term:

CSL Limited (ASX: CSL)

CSL is a global biotech company which I believe is one of the best buy and hold investment options on the Australian market. This high-quality company has been a consistently strong performer over the long term and shows no signs of breaking the trend in the near future. During August the company reported its full year results and posted a 15% increase in revenue to US$7.6 billion and a 29% jump in net profit after tax to US$1.73 billion. Management appears confident that its positive performance will continue in FY 2019 and has provided guidance of net profit after tax in the range of US$1,880 million to US$1,950 million.

Xero Limited (ASX: XRO)

Xero is an accounting software company growing at an impressively strong rate thanks to the increasing popularity of its high-quality product. At the last count there were 1.4 million users of its software, putting the company on an annualised monthly recurring revenue (AMRR) of $484.4 million. These subscriber numbers could be given a major lift if it can successfully penetrate the massive U.S. market. While progress has been slower than many had expected, I believe in time it will carve out a meaningful slice of the lucrative market. I think Xero is a standout pick in the industry and a far better option than rivals MYOB Group Ltd (ASX: MYO) and Reckon Limited (ASX: RKN).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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