Investing in ASX stocks makes a lot of sense for building wealth and perhaps creating a stream of passive income.
That said, certain investments may work better for some investors than others, depending on their age bracket.
I'm going to outline which type of ASX stocks I'd buy for each life stage, though there's one investment that could work for everyone.
Starting in the financial world can be daunting because of the array of different investment options.
A beginner investor doesn't need to go for the riskiest ASX stocks out there. It pays to note that good companies can deliver compelling compounding returns over the long term. I believe it's better to think of the ASX stock market as the ASX business market, because there are real companies behind each ticker code.
School leavers may be interested in companies that are committed to doing good in the world while still able to deliver capital growth.
BetaShares Global Sustainability Leaders ETF (ASX: ETHI) is an exchange-traded fund (ETF) that provides exposure to a global portfolio of companies that rank well on environmental, social and governance (ESG) factors.
Similarly, Betashares Climate Change Innovation ETF (ASX: ERTH) is an ETF invested in a portfolio of companies looking to help the world reduce energy and water usage, create circular economies (such as better recycling), or innovate for better transportation.
Once people enter full-time work earning regular income, they usually also enter a higher tax bracket. At this stage, I wouldn't suggest high-yield ASX dividend shares. As an alternative, I'd want to find investments that can deliver solid returns while also having lower dividend yields.
Betashares Nasdaq 100 ETF (ASX: NDQ) is an ASX ETF that invests in 100 of the biggest companies listed on the US NASDAQ with a demonstrated record of long-term capital growth. The fund is invested in names like Microsoft and Alphabet (Google).
Another ASX stock I particularly like is Johns Lyng Group Ltd (ASX: JLG). The company provides repair and restoration services after insurable events. It's seeing huge growth in its catastrophe division and I also like its expansion into strata services and home compliance (such as smoke alarm and electrical testing).
Mortgage, married, kids
At this age bracket, household income may be strong but expenditure is also high. I think it could make sense to invest in companies that are growing earnings over the long term, but also offer a solid (and growing) dividend that could help with household cash flow.
Wesfarmers Ltd (ASX: WES) is the company that owns Bunnings, Kmart, Officeworks, and more. It's also investing in areas like lithium and healthcare and offers investors a solid grossed-up dividend yield of 5.2%.
Another share I like is Lovisa Holdings Ltd (ASX: LOV), an affordable jewellery company that is expanding its store network globally and is regularly entering new countries. It has a trailing grossed-up dividend yield of 4.9%.
Once someone has retired, they're in a much lower tax bracket and that means higher yield options and/or defensive shares make sense.
Charter Hall Long WALE REIT (ASX: CLW) is a real estate investment trust (REIT) that owns commercial property across Australia. It owns assets such as Bunnings Warehouse properties, service stations, industrial and logistics properties, and so on. According to the company's guidance, Charter Hall will pay a distribution yield of 7.8% in FY24 and has a weighted average lease expiry (WALE) of 11 years.
Sonic Healthcare Ltd (ASX: SHL) is an ASX healthcare share that provides pathology services in a number of countries. It's benefiting from Australia's growing and ageing population. Sonic has grown or maintained its dividend every year for decades (though there's no guarantee this will continue), and it has a grossed-up dividend yield of 5.1%.
One ASX stock for everyone
There's one name that could be good for everyone – the investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). Its portfolio is diversified, defensive, growing, and the company has increased its annual ordinary dividend every year since 2000. It currently offers a trailing grossed-up dividend yield of 3.7%.