I'm a big fan of buy and hold investing and believe it is one of the best ways to grow your wealth.
This is because it allows investors to take advantage of the power of compounding. This is what happens when you generate returns on top of returns.
To demonstrate just how successful this investment strategy can be with ASX 200 shares, I like to look at how much a single $20,000 investment in certain shares 10 years ago would be worth today.
Let's now see how investments in these three shares have fared during this time:
Image source: Getty Images
Cochlear Limited (ASX: COH)
It is fair to say that this manufacturer and distributor of cochlear implantable devices for the hearing-impaired has been a great ASX 200 share to own over the last decade.
Due to its industry-leading position, sizeable investment in research and development, its wide distribution network, and ageing populations across the globe, Cochlear has delivered consistently strong sales and earnings growth.
This has led to Cochlear's shares providing investors with an average total return of 19.4% per annum over the last 10 years. This would have turned a $20,000 investment into almost ~$120,000 today.
NextDC Ltd (ASX: NXT)
Another ASX 200 share that has been lighting up the ASX boards over the past decade has been data centre operator, NextDC.
Thanks to strong demand for capacity in its data centres due to the structural shift to the cloud, and now the artificial intelligence boom, its revenue and operating earnings have been growing at a rapid rate.
This has led to the ASX 200 share outperforming the market since 2014 with an average total return of 26.1% per annum. This means that a $20,000 investment in NextDC shares back then would have grown to be worth just over $200,000 today.
Northern Star Resources Ltd (ASX: NST)
Finally, this gold mining giant has been a star performer on the ASX 200 over the past 10 years.
This has been underpinned by the company's transformation from a relatively small gold miner to one of the largest in the industry. A booming gold price has also been very helpful in recent times, driving its shares 30% higher over the last six months.
This has led to the company's shares smashing the market return since 2014. Over the period, Northern Star's shares have generated an average return of 30.5% per annum. This would have turned a $20,000 investment into almost $290,000 today.
