I think buy and hold investing is one of the best ways for investors to grow their wealth.
To demonstrate how successful it can be, every so often I like to pick out a number of popular ASX shares to see how much a single $20,000 investment ten years ago would be worth today.
This time around I have picked out the four shares that are listed below:
ARB Corporation Limited (ASX: ARB) is a designer, manufacturer, distributor, and seller of four-wheel drive vehicle accessories. Thanks to a combination of successful product development and increasing demand both at home and in export markets, ARB has delivered consistently solid sales and earnings growth over the last decade. This has led to its shares generating an average total return of 18.1% per annum over the period, which would have turned a $20,000 investment in its shares 10 years ago into $105,500 today.
The Aristocrat Leisure Limited (ASX: ALL) share price has been a market-beater over the last decade thanks to the development of extremely popular pokie machines, market share gains, and its successful foray into the mobile and social gaming markets. This has led to the company growing sales and earnings by an average of 13.3% and 18.1% per annum, respectively, over the last 10 years. Unsurprisingly, this strong earnings growth has sent its shares hurtling higher, leading to an average annual total return of 21% over the period. This means a $20,000 investment would be worth $134,500 today.
Anyone lucky enough to have bought REA Group Limited (ASX: REA) shares 10 years ago and held onto them until today would have done exceptionally well. Thanks to a shift from print ads to online ads, REA Group’s realestate.com.au website has become the leader in property listings in Australia. Combined with a property market boom, this has allowed REA Group to grow its profits at a very strong rate for many years. In light of this, its shares have been impressive performers and generated an average total return of 31.3% per annum over the last decade. This return would have turned a single $20,000 in REA Group shares into a whopping $304,500 today.
As with REA Group, Webjet Limited (ASX: WEB) has benefited greatly from changes in consumer behaviour. Instead of going to brick and mortar travel agents, consumers are increasingly using online travel agents like Webjet to make their travel bookings. This shift, and the growing popularity of Webjet’s numerous travel booking brands, has led to Webjet delivering explosive earnings growth over the last 10 years. As a result, its shares have generated an average total return of 24.15% per annum over the period, which would have turned a $20,000 investment into a sizeable $174,000.
But that was then and this is now. So which shares are going to provide market beating returns over the next 10 years? My money would be on these top growth shares due to their positive outlooks and attractive valuations.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ARB Limited, 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.