As I’ve mentioned previously here, a $5,000 investment once a year for a long enough period of time has the potential to grow into a significant sum due to the power of compounding interest.
Based on an average return of 8% per annum, an investment of $5,000 each year for a period of 30 years would grow to be worth a total of $612,000.
I believe this demonstrates how rewarding long-term buy and hold investing can be.
With that in mind, here are three shares to buy with that first $5,000:
Altium Limited (ASX: ALU)
Altium is an award-winning printed circuit board (PCB) design software provider. I’m a big fan of the company and feel it is a great long-term option for investors due to its exposure to the fast-growing Internet of Things market. I believe its impressive software and its fledgling Octopart business has put it in a strong position to achieve its target of at least US$200 million in revenue by FY 2020. This compares to revenue of US$140 million in FY 2018.
ResMed Inc. (ASX: RMD)
Although this sleep treatment focused medical device company’s shares have just reached an all-time high, I don’t believe it is too late to invest if you’re prepared to hold on for the long-term, especially after today’s pullback. In my opinion ResMed is one of the highest quality companies on the ASX and has outstanding long-term growth potential due to the quality of its products, its growing addressable market, and recent acquisitions. In the first quarter of FY 2019 ResMed posted a 23% increase in net income thanks to strong demand for its products and services.
Webjet Limited (ASX: WEB)
Another quality option for that first $5,000 could be this online travel agent. It has been growing at an impressive rate over the last decade and shows no signs of slowing. In fact, at its annual general meeting late last year management reiterated its bookings growth target for the next three years. Webjet is targeting B2B bookings growth of more than five times the underlying market growth. Due to the popularity of its brands and the shift to online booking, I expect the company to achieve its targets, underpinning its earnings growth over the coming years.
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended ResMed Inc. and Webjet Ltd. 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.