Many readers are hoping to enjoy a strong ASX share portfolio in retirement. It's certainly a goal for me, even if it is many years away — reaching a cool $1 million would be wonderful.
We each will have a different timeline on when we might be able to retire with $1 million. It depends on a range of factors, such as age and the amount of money we are able to invest.
Starting from scratch with $0 would obviously take longer than starting with $100,000 or $250,000. The first $100,000 is usually the most difficult. Once the ball is rolling, it's easier to grow wealth. A $10,000 portfolio that rises 10% only adds $1,000. A $100,000 portfolio that rises 10% would add $10,000 in value.
I'm going to talk about three of my favourite picks that could deliver good growth over the long term.
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TechnologyOne Ltd (ASX: TNE)
This ASX tech share describes itself as Australia's largest enterprise software company, with locations across six countries. It provides a global software as a service (SaaS) enterprise resource planning (EPR) solution that "transforms business and makes life simple" for customers.
TechnologyOne has 1,300 leading corporations, government agencies, local councils and universities as clients.
The company aims to double in size (meaning its profit) every five years. This can come from both revenue and profit growth. Not only is the number of customers increasing, but the company is doing well at growing revenue from its existing customers. The net revenue retention (NRR) was 119% in FY23, which is a strong organic growth rate. Gaining an extra 19% of revenue from existing customers is a promising sign.
At the last update, its total annual recurring revenue (ARR) was $392.2 million and it aims to grow its underlying profit before tax margin of 30% to 35% in the coming years.
The company has also steadily grown its dividend over the past decade, which is a bonus.
Over the past five years, TechnologyOne shares have delivered total shareholder returns (TSR) of an average of 18% per annum.
Betashares Global Quality Leaders ETF (ASX: QLTY)
This exchange-traded fund (ETF) is all about investing in quality businesses from around the world.
I think the global share market has proven what a good wealth-creator it can be. I'd encourage most investors to get exposure to businesses outside Australia, and the QLTY ETF could be the way to do it.
It invests in businesses that rank well on four characteristics – return on equity (ROE), debt to capital, cash flow generation ability and earnings stability. I think this is a powerful combination.
Around two-thirds of the portfolio is from the United States, with other countries like Japan, the Netherlands, France and Denmark having good representation with the allocations.
Past performance is not a guarantee of future returns, but the index the QLTY ETF tracks has returned an average of 14.6% per annum over the past decade, and the ETF has returned 15.4% per annum in the last five years.
Johns Lyng Group Ltd (ASX: JLG)
This ASX share specialises in rebuilding and restoring a variety of properties and contents after damage by insured events, including impact, weather and fire events.
With Johns Lyng growing its exposure to catastrophe work, its scale, revenue and profits are increasing. There are strong tailwinds here, considering there seems to be an increasing number of damaging and costly storms.
I also like that the business is expanding into areas where it can create synergies, such as body corporate/strata services and repairs, as well as electrical, gas and fire safety and compliance. These areas also come with more defensive and consistent earnings.
Over the past three years, Johns Lyng shares have delivered an average return per annum of around 30%.
Get to $1 million in retirement with ASX shares
I'm not sure what the returns of these three potential investments will be in the future – and it's important to build a diversified portfolio – but I do think they all have the ability to outperform over the long term.
Starting at $0, if someone can invest $1,500 per month and the portfolio returns an average of, say, 12% per annum, it would be worth $1 million in 18 years. That sounds like an exciting possibility to me.
