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Where I would invest $20,000 in the share market

At the end of 2017 the Australian share market had provided an average annual return of 9.8% over the last 30 years according to research by Fidelity.

This means that a single investment of $20,000 into the market 30 years ago would have grown to be worth approximately $330,000 today if it had matched the market return.

I believe this demonstrates why investing with a long-term view can be incredibly rewarding.

With that in mind, here is where I would invest $20,000 in the market today:

A2 Milk Company Ltd (ASX: A2M)

This infant formula and dairy company has been growing its sales and earnings at an explosive rate over the last few years thanks largely to the insatiable demand for its infant formula products in China. While sales growth in China is likely to moderate in the coming years as the market matures, I still expect a2 Milk Company to deliver above-average earnings growth that could propel its share price notably higher. This could make it a great buy and hold option, especially after a recent pullback in its share price.

Appen Ltd (ASX: APX)

One of the highlights of last month’s earnings season for me was Appen’s half year result. Appen is a global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence. Demand has been so strong for its Content Relevance services that the company posted a 106% lift in revenue to $152.8 million and a 119% increase in underlying net profit after tax to $17.8 million. I expect more of the same in the second half and beyond, which I feel makes Appen a great long-term investment option. Though it is worth remembering that its shares are trading at a significant premium to the market average, making it a reasonably high risk share.

ResMed Inc. (ASX: RMD)

I think that this sleep treatment company would be a great long-term investment option. Due to the quality of ResMed’s products I believe it is in a great position to win a growing share of a market that is tipped to grow at a robust rate over the next decade. In addition to this, I believe management’s focus on the fast-growing cloud-connected medical device market will underpin the growth of its core business in the coming years.

Finally, here is a bonus fourth share that could provide market beating returns in the coming years.

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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 A2 Milk and Appen Ltd. The Motley Fool Australia has recommended ResMed Inc. 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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