While an annual investment of $5,000 might not seem like it has life-changing potential, if you do it over an extended period of time it certainly can be.
Due to the power of compounding interest, if you invest $5,000 into the share market each year for 30 years and earn an average return of 8% per annum, in three decades your investments would have grown to be worth a total of $612,000.
With that in mind, I thought I would pick out three shares which I think would be great options for that first $5,000 investment.
They are as follows:
A2 Milk Company Ltd (ASX: A2M)
I think that this infant formula and dairy company could be a great option for that first $5,000 investment. It recently reported a 64.5% jump in net profit to NZ$86 million during the first four months of FY 2019. This strong start to the financial year was driven by insatiable demand for its infant formula products in China and market share gains in the ANZ region for its dairy products. I think this level of growth and its strong long term potential makes its shares good value despite trading at a premium of 32x estimated forward earnings.
Appen Ltd (ASX: APX)
Another top candidate for that first $5,000 investment is this global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence. I think it is one of the best options in the WAAAX group of tech shares due to its reasonable valuation. Its shares are currently changing hands at 28x estimated FY 2019 earnings, which I think is more than fair for a company with exposure to machine learning and artificial intelligence markets that are expected to grow significantly over the next decade.
Domino's Pizza Enterprises Ltd (ASX: DMP)
Domino's Pizza is another share that I would suggest investors consider. Although its shares may be reasonably volatile in the short term as the bulls and bears battle for control, I believe in the long term shareholders will be rewarded handsomely if management successfully delivers on its plan to nearly double the size of its store network over the next seven years. I'm confident that it will deliver on these plans and perhaps even go beyond them if the company expands into new territories.
