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

Investing $5,000 may not seem like it has the potential to be a life-changer, but if done on a consistent basis it certainly can be.

If you invest $5,000 into the share market each year for 30 years and earn an average return of 8% per annum, in 30 years you’d have accumulated a sum of $612,000.

If you have time on your side and can make it 40 years, this sum increases to $1.4 million.

While investors could simply invest this money in an index fund in order to match the market return, they could also look at individual shares that could potentially beat the market.

Three which I think are capable of doing this over the long term are listed below. Here’s why I would consider investing $5,000 into these shares:

Bellamy’s Australia Ltd (ASX: BAL)

The Bellamy’s share price has come under significant selling pressure in the last few months after delays to its CNCA accreditation and the disruption caused by the launch of a new formulation means that its sales figures are going to underwhelm in FY 2019. While this is undoubtedly disappointing, management remains confident that it can hit sales of $500 million by the end of FY 2021. This will be an increase of 52% on last year’s result. Overall, I think investors ought to look beyond this short term blip and to the company’s promising long-term future.

NEXTDC Ltd (ASX: NXT)

Although NEXTDC’s shares trade on extremely high multiples and therefore carry a lot of risk, I believe this is justified due to its strong long-term earnings growth potential thanks to its exposure to the cloud computing boom. This was evident last week when the company reported a surge in demand at its Sydney S2 centre. So much so, management has had to pull forward capacity expansion plans to satisfy the demand.

ResMed Inc. (ASX: RMD)

This medical device company has a long track record of creating wealth for its shareholders. Over the last 10 years its shares have been market-beaters and provided an average annual return of 19.1%. While I don’t necessarily expect this level of outperformance to continue over the next 10 years, I believe its leading position in a market that is expected to grow strongly over the long-term could still make it a market-beater and well worth considering today.

Looking for ideas for the next $5,000? Then check out these blue chip growth shares that have been tipped for big things.

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. 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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