If you’re starting out with investing, don’t worry if you don’t have tens of thousands of dollars to invest. This is because if you are able to invest $5,000 per year, you can still generate significant wealth if you do it over a long period of time.
For example, research by Fidelity shows that the Australian share market has generated an average total return of 9.1% per annum over the last three decades. This means an investment of $5,000 each year for the last 30 years would have grown to be worth a total of $760,000 today if it earned the market return.
I think this demonstrates just how rewarding long-term buy and hold investing can be.
With that in mind, here are three shares I would buy with that first $5,000:
a2 Milk Company Ltd (ASX: A2M)
This New Zealand-based fresh milk and infant formula company could be a great place to invest that $5,000 due to its positive long-term outlook. I’m a big fan of the company due to its ongoing expansion in the United States and the increasing demand for its infant formula products in the China market. The latter has been a key driver of growth in FY 2019, leading to the company reporting a 42% increase in revenue for the first nine months to NZ$938 million. The good news is that I believe its relatively small market share in China and differentiated brand means a2 Milk Company still has a significant long-term growth opportunity.
Appen Ltd (ASX: APX)
I think Appen is one of the best buy and hold options on the Australian share market due to its leading position as a developer of high-quality, human-annotated training data for the fast-growing machine learning and artificial intelligence (AI) industry. Given the importance of AI for businesses across the globe, I believe Appen is well-placed to continue growing at an above-average rate for the next decade. Especially following its recent acquisitions which I expect to cement its leadership position and improve margins greatly in the future.
Pro Medicus Limited (ASX: PME)
Whilst its shares are looking fully valued now, I think Pro Medicus could still be a very rewarding long-term investment. Pro Medicus provides a full range of radiology IT software and services to hospitals, imaging centres, and healthcare groups worldwide. The company has experienced strong demand for its software again this year, leading to it posting an impressive 59.4% increase in half-year revenue to $25.3 million and a massive 79.9% jump in underlying half-year net profit after tax to $9.2 million.
And for your next $5,000, I would consider these high quality blue chip shares which have growing earnings and dividends.
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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 and recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of A2 Milk and Appen Ltd. The Motley Fool Australia has recommended Pro Medicus 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.