If you had invested $10,000 in the Australian share market three decades ago and earned the market return of 9.1% per annum, your single investment would have grown to be worth almost $140,000 today.
And if you had invested the same amount each year over the period, then you would have generated a return in excess of $1.5 million today.
I believe this demonstrates how rewarding buy and hold investing can be.
With that in mind, if I had $10,000 sitting in a savings account, I would consider putting it to work in the share market. Here’s where I would invest these funds:
A2 Milk Company Ltd (ASX: A2M)
This infant formula and fresh milk company could be a great place to invest that $10,000. I’ve been very impressed with the company’s growth over the last few years and was pleased to see it continue in FY 2019. The company recently released its third quarter update which revealed that revenue for the first nine months of FY 2019 had increased 42% on the prior corresponding period to NZ$938 million. This has been driven by increasing demand for its products in China and its expansion in the United States. I expect more of the same in FY 2020 and beyond, potentially making it a great buy and hold option.
Altium Limited (ASX: ALU)
Thanks to the Internet of Things (IoT) boom, I think Altium is one of the best buy and hold options on the Australian share market. This is because Altium is a leading provider of printed circuit board (PCB) design software and the majority of IoT devices require PCBs inside them to function. I expect this to lead to increasing demand for its award-winning software, which is likely to lead to strong profit growth as the company scales. Another under-appreciated part of the business that I believe has significant potential is its Octopart business, which is a search engine for electronic and industrial parts. All in all, I think Altium is well-placed to continue its above-average growth for the next decade.
Xero Limited (ASX: XRO)
Another top option for that $10,000 investment could be this cloud-based business and accounting software provider. Thanks to its international expansion, the quality and stickiness of its product, and the shift to online accounting, Xero has been growing its subscriber numbers and revenue at a very strong rate over the last few years. In the first half of FY 2019 the company’s Annualised Monthly Recurring Revenue (AMRR) reached NZ$589 million, representing growth of 40% on the prior corresponding period. I think Xero is well-positioned to achieve more of the same in FY 2020, potentially making it one of the best tech options on the local market.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Altium and Xero. The Motley Fool Australia owns shares of A2 Milk. 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.