There are certain investments on the stock market that could deliver significant returns over many years and help us achieve an amazing result for our net worth. I'm going to highlight three of my favourite ASX stocks.
Owning a good investment forever can be a very powerful tool. If it performs well, then it can help grow wealth and potentially unlock larger dividends.
Owning it forever can mean getting the best out of the power of compounding, while ensuring the wealth building isn't slowed down by capital gains tax. If we never sell, we won't have to pay tax on those great gains.
Which ASX investments could we own forever? I'd back the following three ASX stocks.
Wesfarmers Ltd (ASX: WES)
I'd describe Wesfarmers as one of the most impressive businesses on the ASX. It doesn't just have one leading business, but two: Bunnings and Kmart.
Kmart and Bunnings provide consumers with great value products, while delivering a high return on capital (ROC), allowing the parent business achieve a return on equity (ROE) of more than 30%. In other words, they make a high level of profit for the amount of money Wesfarmers has invested.
The ASX stock has strong core earnings and it's using that to diversify its operations, which is one of the reasons why I'm comfortable suggesting owning it forever.
The company can buy into and sell out of industries, depending on the outlook. For example, it has sold coal assets and invested in a lithium project. Wesfarmers is also investing in the healthcare industry, which is a huge and growing sector, giving the company a long growth runway to expand in if it chooses to.
Currently, the initiative I'm most excited about is the Anko stores that the ASX stock is opening in the Philippines. Geographic expansion of the Kmart brand seems like a smart move.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This exchange-traded fund (ETF) is one of my favouites for long-term investing because the fund itself invests with a long-term mindset.
The MOAT ETF targets (US) shares that it believes have strong competitive advantages (also called an economic moat) that will allow the business to generate good profits almost certainly for the next decade and more likely than not for the next two decades.
Added to that, the fund only invests in these great businesses when they're trading at a price that's noticeably lower than how much Morningstar analysts think they're worth.
The strategy appears to be working – in the past decade it has delivered an average return per year of 15.4%. Past performance is not a guarantee of future performance of course.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
This list wouldn't be complete without the ASX stock I'm most optimistic about for the long-term.
I'm not expecting huge returns, but a steady long-term compounding of capital value combined with a rising dividend.
The business has already operated for 120 years, and I believe the investment house will be successful for decades to come.
It has built a resilient portfolio of assets that produces an attractive level of cash flow each year. It has investments across resources, telecommunications, energy, swimming schools, agriculture, electrification, financial services, credit, building products, industrial property and more.
The ASX stock adds to its investment portfolio each year and this is increasing the potential of its future compounding ability.
This business could be worth a lot more in 20 years, in my view, making now a great time to invest. The 27-year streak of dividend increases helps being a forever shareholder. I'm planning to buy more of this business in 2026.
