I think that buy and hold investing 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 stocks, 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:
Aristocrat Leisure Limited (ASX: ALL)
The first ASX 200 stock that we are going to look at is Aristocrat Leisure. It is one of the world's leading gaming technology companies.
Over the last decade, its shares have smashed the market with some very strong gains. This has been underpinned by its leadership position in the poker machine market, its expansion into digital gaming, and several acquisitions.
This has led to Aristocrat Leisure's shares delivering its shareholders an average total return of 26.4% per annum since 2014. This would have turned a $20,000 investment in its shares 10 years ago into ~$208,000 today.
Cochlear Limited (ASX: COH)
Another ASX 200 stock that has delivered market-beating returns for its shareholders is Cochlear. It is a leading designer, manufacturer, and distributor of cochlear implantable devices for the hearing-impaired.
Thanks to its industry-leading position, significant (and ongoing) investment in research and development, its global distribution network, and the ageing population tailwind, Cochlear has been able to report solid earnings and sales growth over the last decade.
This has unsurprisingly caught the eye of investors and helped drive its shares higher and higher since 2014. This has led to Cochlear's shares providing investors with an average total return of 18.9% per annum over the period. This would have turned a $20,000 investment into almost ~$113,000 today.
Goodman Group (ASX: GMG)
A third ASX 200 stock that has turned $20,000 into more than $100,000 in 10 years is Goodman Group.
It is a global integrated industrial property company focused on building sustainable properties that are close to consumers and provide essential infrastructure for the digital economy.
This strategy has been incredibly successful and underpinned consistently strong earnings growth over the last decade. This has put a rocket under its shares and led to Goodman shares recording an average total return of 22.3% per annum since 2014. This would have seen a $20,000 investment turn into almost $150,000 over the period.
Overall, I believe this demonstrates that buying quality companies with a long term view could make you wealthy.
