If you've hit the big 'four-oh' and find your savings decidedly lacking, I'd look at buying ASX shares for passive income and capital growth.
On the capital growth side, the S&P/ASX 200 Index (ASX: XJO) has gained 19% over the past five years.
At 40, you've still got at least 25 years before retirement. So there's plenty of time to invest in quality ASX shares at a good price to begin building that wealth.
As for the passive income, that comes courtesy of the dividends paid out by many leading ASX companies.
To give you an idea of the sizeable difference that passive income can make to your wealth, the S&P/ASX 200 Gross Total Return Index (ASX: XJT) has gained 33% over the last five years. This index includes all cash dividends reinvested on the ex-dividend date.
Better still, many ASX shares provide full franking credits on their dividends. Meaning you may well be able to hold onto more of that passive income come tax time.
So, if I had no savings at 40, here's how I'd get rolling.
Dividend paying ASX shares for passive income and capital gains
Without a ready pool of savings, I'm not going to be able to build my retirement wealth overnight.
But that's fine.
Investing isn't a get rich quick scheme. It takes time.
If I invest just a few hundred dollars per month in the right ASX dividend shares and reinvest as much of that passive income as possible to make the most of the magic of compounding, my diligence should pay off handsomely over the years.
Now obviously, there are no guarantees the stock market will go up over time. But with history as my guide, I strongly believe most of today's leading ASX shares will see their share prices gain over the years.
With that said, here are three ASX 200 stocks I'd snap up for their passive income and capital gains potential:
- ASX 200 retail stock JB Hi-Fi Ltd (ASX: JBH)
- ASX 200 oil and gas stock Woodside Energy Group Ltd (ASX: WDS)
- ASX 200 bank stock Commonwealth Bank of Australia (ASX: CBA)
JB Hi-Fi trades on a fully franked trailing yield of 8.2%. Atop that handy passive income, the JB Hi-Fi share price is up 83% over five years.
Woodside trades on a fully franked trailing yield of 10.8%. On the capital gains front, the Woodside share price has gained 4% over five years.
And CBA shares are also sought out by passive income investors for their 4.3% fully franked trailing yield. And CBA shares have helped ASX investors build their wealth, gaining 40% over the last five years.
Now, I wouldn't stick with only these three stocks.
Over time, I'd diversify my portfolio across at least 10 ASX dividend stocks operating in various sectors. That will help decrease the risk of my whole portfolio taking an unexpected hit at the same time.
