If you’re starting out with investing, don’t worry if you don’t have tens of thousands of dollars to invest in the share market.
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 ~9.5% 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 $824,000 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)
One quality option for that first $5,000 investment is a2 Milk Company. Whilst the explosive growth of the last few years may not be achievable in the future, I remain confident that it is well-placed to grow its earnings at a strong rate over the next decade. This is thanks to solid demand for its infant formula in China, its strong pricing power, and the growing footprint of its fresh milk business in the United States.
Altium Limited (ASX: ALU)
Altium is a printed circuit board-focused design software company that I believe is well-positioned to be a long-term market-beater. I’m very bullish on Altium due to its award-winning platform which is exposed to the growing Internet of Things (IoT) market. According to a recent presentation, global technology spending on IoT is expected to reach US$1.2 trillion in 2022. And as the vast majority of IoT devices have printed circuit boards inside them, this bodes well for Altium’s growth.
Xero Limited (ASX: XRO)
Xero is a cloud-based business and accounting software platform provider. It has been an impressive performer in recent years, delivering explosive sales and customer growth. Another highlight for me has been its ultra-low churn rates. I believe these demonstrate the quality and stickiness of its product. I feel its bodes well for the future and expect it to result in further strong growth in the coming years.
And if you have a further $5,000 to invest, then these highly rated shares could be the ones to buy for strong returns.
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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 WiseTech Global. 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.