Due to the power of compounding, I believe buy and hold investing is one of the best ways to grow your wealth.
Compounding is earning interest on interest in a bank account or returns on returns with investments.
It explains why an average 10% return per annum will double an initial investment in just over 7 years and more than triple it in 12 years. After which, it takes only 3 more years to quadruple that investment.
Clearly, this demonstrates that the longer you're invested, the greater your potential returns.
With that in mind, here are three top ASX shares which I think would be great buy and hold options:
Ramsay Health Care Limited (ASX: RHC)
I think Ramsay Health Care would be a great buy and hold option. While trading conditions remain tough in the private hospital sector, I remain very positive on its long term outlook. This is due to the ageing global population and increased chronic disease burden. I expect this to lead to a sustained increase in demand for its services over the 2020s and beyond. Combined with potential earnings accretive acquisitions, I believe Ramsay can grow at a solid rate over the long term.
Xero Limited (ASX: XRO)
This cloud-based business and accounting software provider could be a fantastic buy and hold option. Xero has been growing at a very strong rate over the last few years thanks to the increasing adoption of its software by small businesses across the globe. Pleasingly, with less than 20% of the global English-speaking target market estimated to be using cloud-based accounting software at present, it still has a very long runway for growth. Especially given the overwhelming benefits of cloud-based software over alternatives like an Excel spreadsheet. I expect this to lead to more businesses switching to the cloud in the coming years.
Zip Co Ltd (ASX: Z1P)
I think this payments company would be worth considering after a sharp pullback in its share price. Zip has been a very strong performer in 2020, delivering very impressive sales, customer, and merchant growth. I believe it is well-positioned to continue this strong form in the coming years, especially if it makes a success of its expansion into the United States with its recently acquired QuadPay business.
