Many people are focused on short-term wins in the sharemarket. A quick trade here, and a few speculative plays over there. While it sometimes works, these punters are missing out on the best part of investing – compounding.
Investing for the long-term works for so many reasons. Lower taxes. Lower transaction costs. Less effort. Most effective of all is letting those investments grow over time, rather than having to find new trading opportunities.
Here are two investments which I think are a good bet over the next decade.
Washington H. Soul Pattinson & Co. Ltd (ASX: SOL)
Soul Patts is probably the most boring growth company on the ASX. But I say that in the best possible way. Over the long term, this company has been one of the best investments you could possibly ask for.
Over the last 40 years, Soul Patts has shown a return of 16.4% per annum. Not only that, it has increased the dividend every year since 2000.
It’s very well diversified, with stakes in solid businesses such as Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPM) and New Hope Corporation Limited (ASX: NHC). Management also owns a large amount of shares giving good alignment with shareholders.
I expect Soul Patts will continue to prosper over the next 10 years and beyond. Shares are up over 50% this year, but still don’t look all that expensive to me. The current dividend yield is 3% including franking credits.
Treasury Wine Estates Ltd (ASX: TWE)
Shares in the global winemaker and distributor are down around 30% from the highs earlier in the year, making the company more attractively valued today. Earnings continue to increase, with Treasury selling more wine at higher prices, as its premium brand strategy gains momentum.
Over the last 5 years, earnings per share has grown by 17% per annum, while the dividend has also increased regularly. During FY 2019, management is expecting to deliver profit growth of 25%.
Given the strong brands in its wine portfolio and the company’s growing Asian segment, it seems likely that Treasury will be earning much more in 10 years than it is today. Shares currently trade on a dividend yield of 3.7% including franking credits.