I’m a big advocate of buy and hold investing and believe this investment strategy has the potential to generate outsized returns for investors over the long term if they can identify companies with quality business models and solid growth prospects.
To demonstrate how rewarding the strategy can be, I’ve pick out a few popular shares to show how much a $20,000 investment 10 years ago would be worth today.
A few highlights over the period include the following:
The Magellan Financial Group Ltd (ASX: MFG) share price has provided its lucky shareholders with an average annual total return of 61.1% over the last 10 years. This means that if you had invested $20,000 in the fund manager’s shares 10 years ago it would have grown to be worth over $2.3 million today.
The Altium Limited (ASX: ALU) share price wasn’t far behind and provided its shareholders with an average annual total return of 59.8% over the last decade. A $20,000 investment in the electronic design software company would now be worth just under $2.2 million.
The MNF Group Ltd (ASX: MNF) share price may have had a tough 12 months, but it has still carved out a stunning average total return of 53.1% per annum during the last 10 years. This would have turned a $20,000 investment in the voice over IP provider into $1.4 million today.
The Breville Group Ltd (ASX: BRG) share price has been an impressive performer over the last decade, providing investors with an average total return of 44.2% per annum. A $20,000 investment in the appliance manufacturer would now be worth $780,000.
The REA Group Limited (ASX: REA) share price has rewarded its long-term shareholders with an average annual total return of 35.7% over the last decade. This means that a $20,000 investment in the operator of the realestate.com.au website would have grown to be worth $420,000.
The Webjet Limited (ASX: WEB) share price has also been a strong performer over the last 10 years, generating an average total return of 33.4% per annum. A $20,000 investment in the online travel agent would now be worth $356,000.
Finally, the Commonwealth Bank of Australia (ASX: CBA) share price has been the best performer amongst the big four banks over the last 10 years. During this time Australia’s biggest bank has provided an average annual total return of 13.9%. Which means a $20,000 investment would have grown to be worth just under $73,500.
Whilst these returns are admittedly rare, they do happen. And I feel confident that there are a number of shares on the market today that have the potential to do the same. The key will be identifying them before they take off.
With that in mind, here are three shares that have recently been tipped as strong performers over the long term.
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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 and has recommended MNF Group Limited. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended REA Group Limited 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.