I'm a big fan of buy and hold investing ASX 200 shares and believe it is the best way to grow your wealth in the share market.
There are a few key reasons for this, which I will detail below.
The potential for high returns
Historically, shares have provided higher returns than other investments such as bonds and cash over the long term. While past performance is not indicative of future results, investing in ASX 200 shares could potentially lead to higher returns compared to less risky investments.
Compounding
When you earn a return on your investment, you have the opportunity to reinvest that return. This can lead to compound returns, where the returns earned in one period are reinvested to potentially earn even more in the future. Compounding explains why generating a 10% return each year turns $1,000 into $1,100 in one year but $2,000 in a touch over seven years.
Inflation protection
Another reason to invest in ASX 200 shares over the long term is inflation. Inflation can erode the value of cash over time, but shares have the potential to increase in value along with inflation. This can potentially help protect your purchasing power over the long term.
But which ASX 200 shares are buy and hold candidates?
Late last year, Bell Potter released its "champion stocks" list. These are the ASX 200 shares that the broker believes would be great long term options for investors. It explained:
These Champion Stocks all have a long term positive thematic, which should drive superior earnings growth and shareholder value over the coming years, notwithstanding inevitable disruptions in the economic and investment environment such as COVID-19 as well as some corporate stumbles from time to time.
Among its champion stocks list you'll find biotherapeutics giant CSL Limited (ASX: CSL), industrial property company Goodman Group (ASX: GMG), and wealth management platform provider Netwealth Group Ltd (ASX: NWL).
