Bank shares remain enormously popular investments on the ASX in 2024. So much so that chances are high that almost any ASX investor you talk to will own (or at least have owned at one point) one of the four major bank stocks.
This is understandable. The ASX banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corporation (ASX: WBC) are large and powerful businesses with entrenched market dominance and rusted-on customer bases. All four have delivered hefty dividend income to shareholders for decades, a trait they are undeniably most well-known for.
If the primary goal of my portfolio was maximising dividend income, the banks would arguably be essential investments in a diversified income portfolio.
Yet, maximising income is not my primary goal. Building my overall net worth as fast as possible is. As such, I do not rely on ASX bank shares to do the heavy lifting in my portfolio, and I don't think most ASX investors pursuing a similar investment strategy should either.
Here are three stocks I'd pick over the ASX bank shares instead.
3 ASX shares to buy over bank shares today
First, the Vanguard Australian Shares High Yield ETF (ASX: VHY) would be a great alternative to the ASX banks. This exchange-traded fund (ETF) holds the bank shares as a significant core of its portfolio.
However, this portfolio also includes around 70 different ASX shares, all of which have strong track records of delivering income.
I think this diversity adds significantly more capital growth opportunities than just investing in bank shares alone.
Next, I'd consider Washington H. Soul Pattinson and Co Ltd (ASX: SOL). Soul Patts is one of my favourite ASX shares. It, too, holds an underlying portfolio of diversified assets, which the company manages on behalf of shareholders.
These include a portfolio of blue-chip shares and chunky stakes in a select group of other stocks, including TPG Telecom Ltd (ASX: TPG) and New Hope Corporation Ltd (ASX: NHC).
Soul Patts has an enviable track record of delivering strong capital growth and dividend income. In May, it confirmed its investors had enjoyed a total shareholder return (growth and dividends) of 12% per annum over the 20 years to 30 April 2024. I would choose this over a bank stock any day of the week.
Some international diversity
Finally, I'd much rather own the listed investment company (LIC), MFF Capital Investments Ltd (ASX: MFF), than a bank stock right now. MFF also runs an underlying portfolio of assets on behalf of its investors. However, these assets are mostly international shares. MFF is run by Chris Mackay, who is an investor in the Warren Buffett mould.
As such, MFF tends to buy and hold a small number of high-quality shares and enjoy the effects of compounding over many years. Some of its current investments include Visa, Mastercard, Alphabet and Home Depot.
These are some of the best stocks in the world, and I think they have far more potential to grow one's net worth than an ASX bank right now.
