One of the best things about Australia's wealth and retirement system is system is superannuation, which offers a lower tax rate compared to someone working full-time. Superannuation is great for passive income, whether that's in retirement or building wealth towards retirement.
If I were investing $8,000 into superannuation, I'd look for ideas that offer long-term growth potential, while still providing a high dividend yield. Investing in superannuation should mean we can put the money to work for many years, giving it more time for compounding.
I'll run through a couple of investments that I think could be excellent long-term buys. If an investor had $8,000 to invest (or more), I'd definitely recommend the following ideas.
Image source: Getty Images
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
I think Soul Patts may be the very best idea for superannuation investing.
The investment house has the ASX record for the longest streak of annual dividend increases – it has grown its regular payout every year for 28 years in a row!
If I were investing in a business for passive income, I'd want to choose a name I'd be extremely confident is likely to pay more next year. I wouldn't want a payout cut when I'm relying on that income. Plus, the regular dividend growth helps offset (and outpace) inflation.
Another benefit of Soul Patts is that it has a diversified portfolio across a number of industries like energy, resources, telecommunications, property, swimming schools, agriculture and electrification, among many others.
With steadily growing investment cash flow, Soul Patts can fund larger dividends to investors. It regularly makes new investments too, helping its portfolio grow in value, which is a tailwind for the Soul Patts share price.
I think it has a solid starting dividend yield, which can rise over time. Its current grossed-up dividend yield, including franking credits, is 3.5%. I believe that's a good starting point for superannuation.
WCM Quality Global Growth Fund (ASX: WCMQ)
Another ASX investment I really want to highlight is this exchange-traded fund (ETF) which gives investors exposure to a compelling portfolio of international shares.
There are a few very appealing index funds that have low fees while providing exposure to strong global companies. Many of these ETFs are also becoming increasingly concentrated on just a few large US tech shares. That has both its positives (great businesses) and negatives (concentration risk).
However, the WCMQ ETF looks to invest in a portfolio of between 20 to 40 high-quality stocks that have expanding economic moats. In other words, their competitive advantages are getting stronger as time goes on. Additionally, the WCM investment team wants to see that the business has a corporate culture that can support improvements of the competitive advantages.
The fund as returned an average of 15.1% per year since August 2018 and it targets a minimum annualised cash yield of 5% per year.
These two investments, along with other ASX shares, could be an excellent buy for the long-term in superannuation.
