ASX exchange-traded funds (ETFs) have surged in popularity among Australian investors for good reason. They offer low-cost diversification, simplicity, and easy access to a wide range of markets.

But while ETFs are beginner-friendly, that doesn’t automatically mean they’re easy to use well.

If you’re just getting started, avoiding a few common mistakes can make a meaningful difference to your long-term results.

Overcomplicating your portfolio

One of the most common errors is overcomplicating a portfolio. New investors often assume that owning more ASX ETFs automatically means better diversification. In practice, holding multiple funds that track similar global markets can create unnecessary overlap without adding real benefit.

A simpler approach often works better. A single broad-market ETF can already provide exposure to hundreds or even thousands of companies in one trade, delivering instant diversification without the clutter.

Chasing trends instead of strategy

Another trap is chasing what’s popular rather than sticking to a strategy. It’s easy to get drawn into trending themes like technology, artificial intelligence, or niche thematic ASX ETFs. While these can be exciting, they often come with higher volatility and higher fees.

A more disciplined approach is to focus on broad, low-cost index funds that track established markets. Over time, consistency tends to matter more than trying to pick the next hot theme.

Ignoring fees adds up

Fees are another factor many beginners underestimate. Even small differences in management costs can compound significantly over the long term. A fund charging 0.7% annually versus 0.2% might not look like much in isolation, but over decades it can materially reduce returns.

That’s why low-cost ASX ETFs are often the starting point for many investors. Keeping costs down is one of the few controllable factors in investing, and it directly impacts outcomes.

A simple ETF strategy to get started

For those looking for a simple starting framework, a basic ETF strategy can go a long way. Begin with one or two broad-market ASX ETFs, invest consistently through regular contributions, reinvest dividends where possible, and stay invested over the long term. This approach removes much of the emotional decision-making around timing the market.

In terms of building a core portfolio, many investors start with exposure to both domestic and international markets. For Australian shares, an ETF tracking the S&P/ASX 200 Index (ASX: XJO) like BetaShares Australia 200 ETF (ASX: A200) provides access to the country’s largest companies, including major banks, miners, and healthcare stocks.

To diversify globally, the Vanguard MSCI Index International Shares ETF (ASX: VGS) is a popular option, offering exposure to thousands of companies across developed markets. This helps reduce reliance on the Australian economy and adds exposure to global sectors like technology and consumer brands that are underrepresented locally.

For investors focused on income, dividend-oriented ASX ETFs, such as the Vanguard Australian Shares High Yield ETF (ASX: VHY), can provide regular cash distributions, though they often lean more heavily toward sectors such as financials and resources.

Foolish Takeaway

Ultimately, ASX ETF investing doesn’t need to be complex to be effective. In fact, simplicity is often the edge. By avoiding common beginner mistakes like over-diversifying, chasing trends, and ignoring fees, investors can build strong long-term portfolios with minimal effort.

Start small, stay consistent, and think long term. That’s often where the real advantage lies.

The post Building wealth with ASX ETFs? Don’t make these errors appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Vanguard Australian Shares High Yield ETF and Vanguard Msci Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

With inflation back on the boil and the Reserve Bank of Australia pulling the trigger on multiple interest rate hikes, should you still buy ASX shares?

I won’t leave you hanging.

While higher costs and rates will impact market dynamics, my answer remains a resounding yes.

But you may wish to target a different basket of ASX shares than you might buy in a falling rate environment.

We’ll look at a few you may want to consider adding to your portfolio below.

But first…

What on earth is happening with interest rates in Australia?

Inflation down under was already ticking higher in the latter months of 2025 and into 2026 before the onset of the Iran war at the end of February.

That resurgent inflation was partially spurred by greater capacity pressures. But with energy costs rocketing amid the Middle East conflict, cost of living pressures are likely to ramp significantly higher before we see any relief.

In an effort to get ahead of the curve, this saw the RBA boost Australia’s official interest rate by another 0.25% on Tuesday. This third consecutive hike from the central bank sees the official interest rate at 4.35%. That’s back at its 2024 peak, and it matches the highest rate levels since 2011.

While many ASX shares initially sank on the RBA’s afternoon announcement on Tuesday, the All Ordinaries Index (ASX: XAO) clawed back those losses to close the day around where it was before the rate hike news hit the wires.

Buying ASX shares in a higher interest rate environment

Commenting on the RBA’s latest interest rate increase, and how investors should respond, Josh Gilbert, lead analyst for APAC at eToro, said:

The takeaway for portfolios is that boring can be brilliant in this environment. Focus on quality balance sheets and pricing power, because companies that can pass costs through without losing volume are the ones that can hold up best with the current macro backdrop.

One ASX share that looks to fit this bill is Transurban Group (ASX: TCL).

While the toll road owner and operator won’t be immune to the impacts of higher energy prices on its traffic volumes, Transurban is able to increase prices to match inflation across many of its toll roads. Indeed, the company reported that more than 90% of its revenue is either CPI-linked or with fixed escalations.

Other ASX shares that could perform well amid rising inflation and rates are insurance stocks.

Companies like QBE Insurance Group Ltd (ASX: QBE) and Suncorp Group Ltd (ASX: SUN) generally hold a sizeable pool of cash and bonds, which should offer an income boost amid higher interest rates.

And don’t lose track of the Aussie dollar.

With Australian interest rates outpacing those in the United States, the Aussie dollar hit four-year highs this week, recently trading for 72.4 US cents. That’s up from 64.3 US cents a year ago.

This big shakeup in currency exchange rates should tend to favour importers over exporters. Imported goods will be cheaper in Aussie dollar terms while exported goods will be more expensive for buyers paying in US dollars.

The post Should you still buy ASX shares amid fast-rising inflation and interest rates? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. The Motley Fool Australia has positions in and has recommended Transurban Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Commonwealth Bank of Australia (ASX: CBA) shares have been one of the most popular investments on the ASX for a very long time.

It’s not hard to understand why.

CBA is Australia’s largest bank, it has a powerful retail banking franchise, a strong digital offering, and a long history of rewarding shareholders with dividends. 

For many investors, it is the kind of blue-chip share that sits at the core of a portfolio rather than on the speculative edge.

But after such a strong run, it is fair to ask what a $10,000 investment in CBA shares could become over the next year.

Why CBA shares remain so popular

CBA has a special place in the Australian share market.

It is widely owned by retail investors, super funds, income investors, and institutions. Part of that comes down to its size and stability. But I think the bigger reason is its track record.

Over long periods, CBA has shown an ability to generate strong profits, pay dividends, and maintain a premium position among the major banks.

It has also invested heavily in its technology and customer experience. I think that has helped it defend its market position at a time when banking has become more competitive.

The bank is still exposed to the usual risks. Mortgage competition, bad debts, funding costs, regulation, and the broader economy all matter.

But CBA has generally been viewed as the highest-quality of the major banks, and the market often prices it accordingly.

The return history

Over the last 10 years, CBA shares have delivered an average total return of 11.45% per annum.

That total return includes both share price growth and dividends, which is important. With a bank like CBA, dividends have historically been a major part of the investment case.

However, I would be careful about assuming the next year will look like the last decade.

A 10-year average can be useful, but it does not predict what happens in any single year. Share prices can move sharply in both directions over 12 months, even for high-quality blue chips.

A more realistic assumption

The broader share market has often been assumed to return around 9% per annum over the long term.

That is not guaranteed either, but I think it is a more balanced number to use when thinking about future returns.

CBA could do better than that. It could also do worse.

Its valuation, interest rates, credit conditions, dividend outlook, and investor sentiment will all influence what happens over the next year.

That is why I would treat the numbers as scenarios rather than forecasts.

What the numbers show

If CBA were to repeat its 10-year average total return of 11.45% over the next year, a $10,000 investment would grow to approximately $11,145.

That would mean a gain of around $1,145, including dividends and capital growth.

If the investment instead returned 9%, which may be a more realistic long-term market-style assumption, $10,000 would grow to approximately $10,900.

That would represent a gain of around $900.

Neither outcome is guaranteed. A weak year for bank shares could leave the investment worth less than $10,000. A strong year could push it well above these figures.

Foolish takeaway

CBA shares are not likely to turn $10,000 into a fortune in a single year.

But for me, the attraction is owning a proven ASX blue chip that has rewarded patient investors over many years through a combination of dividends and capital growth.

The next 12 months could be better or worse than the long-term average, but I think CBA remains a quality share to consider for investors who are focused on building wealth steadily rather than chasing quick gains.

The post What could $10,000 invested in CBA shares become in 1 year? appeared first on The Motley Fool Australia.

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• Money to invest? I’d follow Warren Buffett to get rich
• How to build a $1,000 a month passive income from the ASX
• The ASX 200 just suffered its biggest fall in 7 weeks. Here’s what’s going on
• Warning! Experts name 3 ASX 200 shares to sell
• Why the ASX 200 is charging higher today

Motley Fool contributor Grace Alvino has positions in Commonwealth Bank Of Australia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

For ASX investors looking to build an ultimate retirement portfolio, it’s the dividends that are going to be the key factor when deciding on a potential investment.

You’ve got your classic dividend stocks that most investors will consider, such as Westpac Banking Corp (ASX: WBC), Telstra Group Ltd (ASX: TLS) and BHP Group Ltd (ASX: BHP). But I think many investors looking to build the ultimate retirement portfolio would be more partial to monthly dividend payers.

Retirees obviously need a good source of passive income, delivered regularly and reliably. That’s why I think these two monthly ASX dividend payers are well worth a look for those trying to build a solid retirement portfolio.

Ultimate retirement portfolio: 2 ASX dividend stocks that pay income monthly

First off, let’s start with an exchange-traded fund (ETF). The BetaShares S&P Australian Shares High Yield ETF (ASX: HYLD) is an ETF that is specifically designed to provide high levels of franked dividend income to ASX investors. It does this by holding an underlying portfolio filled with top ASX dividend shares. At the most recent numbers, these included Rio Tinto Ltd (ASX: RIO), ANZ Group Holdings Ltd (ASX: ANZ), Macquarie Group Ltd (ASX: MQG) and Transurban Group (ASX: TCL), amongst many others.

HYLD uses this portfolio to fund monthly dividends for its investors. This does tend to fluctuate. However, as of 31 March, the provider told investors that HYLD was trading on a trailing dividend yield of about 4.2%. Like any income stock, there is no guarantee that this will continue or increase going forward, of course. But given the quality of HYLD’s underlying portfolio, I think this is a great stock to consider for the ultimate retirement portfolio.

Next up, let’s talk about Plato Income Maximiser Ltd (ASX: PL8). Plato is a listed investment company (LIC), meaning that, similar to an ETF, it holds an underlying portfolio of investments that it manages on behalf of its shareholders. Unlike an ETF, though, Plato has far more discretion over its dividend payments, which it tends to keep consistent over time.

Plato’s portfolio holds many of the companies that can be found in HYLD, including BHP, ANZ and Telstra. It also currently features Coles Group Ltd (ASX: COL), Medibank Private Ltd (ASX: MPL) and Woodside Energy Group Ltd (ASX: WDS).

Plato also pays out monthly dividends, which tend to come fully franked as a bonus. At recent pricing, this ASX dividend stock was trading on a healthy yield of about 4.85%.

The post Build the ultimate retirement portfolio with these 2 monthly ASX dividend stocks appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in Plato Income Maximiser. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and Transurban Group. The Motley Fool Australia has positions in and has recommended Macquarie Group, Telstra Group, and Transurban Group. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Tech stocks have had a volatile start to 2026.

After a strong run in previous years, many high-quality names have pulled back amid shifting interest rate expectations and a broader rotation away from growth. 

That kind of environment can make it uncomfortable to invest, but it can also create opportunities.

Right now, these are three ASX tech stocks I think are worth considering if you have $3,000 to invest.

Megaport Ltd (ASX: MP1)

Megaport is building critical infrastructure for the cloud economy.

Its platform allows businesses to connect to cloud providers and data centres on demand, creating a flexible alternative to traditional networking. 

As more companies shift workloads to the cloud, the need for fast, scalable connectivity continues to grow.

Megaport has not always had a smooth journey, but recent progress around profitability and cost control has been encouraging. As has its acquisition of Latitude, which recently announced a big contract win.

If it can continue improving margins while growing its global footprint, there is clear upside over time.

After the recent tech sell-off, I think it looks like a more interesting entry point than it did previously.

TechnologyOne Ltd (ASX: TNE)

TechnologyOne is a very different type of tech company. It is not trying to disrupt everything overnight. 

Instead, it has built a steady, highly profitable enterprise software business serving government, education, and large organisations.

Its transition to a SaaS model has improved revenue visibility and margins, and it continues to expand internationally. While the shares have pulled back from recent highs, the underlying business keeps executing.

For me, TechnologyOne is one of the more reliable growth names on the ASX, which makes any weakness worth paying attention to.

Catapult Sports Ltd (ASX: CAT)

Catapult Sports is another ASX tech stock I would consider in May.

The company provides performance technology and analytics software for elite sports teams. Its products help clubs and organisations monitor athletes, manage workloads, analyse performance, and make better decisions.

What I like about Catapult is that it operates in a niche with global potential. Professional sport is becoming more data-driven, and teams are looking for every possible edge. That creates demand for tools that can help improve performance, reduce injury risk, and support coaching decisions.

Catapult has also been working to improve the quality of its earnings, with more focus on recurring revenue and disciplined growth.

This is still a smaller and higher-risk technology business compared with TechnologyOne, but I think the opportunity is attractive.

If it can keep expanding across elite sport and deepen its relationships with customers, Catapult could become a much larger business over time.

Foolish Takeaway

Tech sell-offs can be uncomfortable, but they can also create better entry points into businesses that still have years of growth ahead.

That is why I would not ignore this part of the market in May.

Megaport, TechnologyOne, and Catapult Sports each offer exposure to a different kind of technology demand, from cloud connectivity to enterprise software to elite sport.

For investors willing to think beyond the next few months, I think all three deserve a closer look.

The post 3 super ASX tech stocks I’d buy in May with $3,000 appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Catapult Sports, Megaport, and Technology One. The Motley Fool Australia has positions in and has recommended Catapult Sports. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If I had $5,000 to invest across ASX tech stocks today, I would want a mix of proven quality, recurring revenue, and long-term upside.

Technology shares can move around sharply, especially when investors are worried about valuations, interest rates, or artificial intelligence (AI). But I still think the right companies can be excellent long-term investments.

Rather than putting the full amount into one stock, I would spread it across three different ASX tech names: Pro Medicus Ltd (ASX: PME), SiteMinder Ltd (ASX: SDR), and Megaport Ltd (ASX: MP1).

Pro Medicus shares: $2,000

I would put the largest slice into Pro Medicus.

This is the quality anchor of the group, in my opinion. The company provides medical imaging software used by hospitals, radiologists, and healthcare networks. That might sound niche, but it is a critical part of modern healthcare.

What I like is how deeply embedded Pro Medicus can become once it wins a customer. Medical imaging systems need to be fast, reliable, and able to handle huge volumes of data. Hospitals cannot afford disruption in that part of the workflow.

That gives the business a strong position.

I also think Pro Medicus still has a significant runway in the US healthcare market. It has already won major customers, but the opportunity remains much larger than its current footprint.

The risk is valuation. Pro Medicus often trades on a premium PE ratio, so I would not expect it to be immune from pullbacks. But if I were investing with a 5-to-10-year mindset, I would still want exposure to this type of high-margin healthcare technology business.

SiteMinder shares: $1,500

I would then put $1,500 into SiteMinder.

This is a different kind of software story. SiteMinder helps hotels manage bookings, distribution, and revenue across multiple channels.

I think the appeal here is the size and fragmentation of the hotel industry.

Many hotels still need better digital tools to compete. They need to manage direct bookings, online travel agents, pricing, availability, and customer demand across different markets. SiteMinder sits inside that process.

What makes the business interesting to me is that it does not need to dominate one country to win. Its opportunity is global.

If SiteMinder can keep adding properties, increasing revenue per customer, and improving its platform, I think earnings could grow meaningfully over time.

It is still a developing business, so execution risk is higher than with Pro Medicus. But I like the combination of recurring revenue, global reach, and a large addressable market.

Megaport shares: $1,500

The final $1,500 would go into Megaport.

Megaport gives this mini portfolio exposure to digital infrastructure. The company provides network-as-a-service technology, allowing customers to connect quickly and flexibly to cloud providers, data centres, and other digital services.

I think this is becoming more relevant as businesses use multiple clouds, move data between environments, and build more complex digital systems.

Megaport is not simply selling connectivity. It is selling flexibility.

That could become increasingly valuable as cloud adoption, artificial intelligence workloads, and global data usage continue to expand.

The company’s Latitude.sh acquisition also adds an interesting layer. It gives Megaport exposure to bare metal cloud infrastructure, which could broaden its role in helping customers manage demanding workloads.

This is the more speculative pick of the three, but I think the upside is attractive if adoption continues to build.

Foolish takeaway

If I were investing $5,000 across ASX tech stocks, I would split it between quality, global software, and digital infrastructure.

Pro Medicus would be my largest position because of its profitability and strong niche in healthcare technology. SiteMinder would give me exposure to the global hotel software market. Megaport would add a higher-upside infrastructure angle.

Together, I think they offer a useful blend of resilience and growth potential for patient investors.

The post How I’d invest $5,000 across ASX tech stocks appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Megaport and SiteMinder. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Pro Medicus. The Motley Fool Australia has positions in and has recommended SiteMinder. The Motley Fool Australia has recommended Pro Medicus. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It can be challenging to invest in ASX shares when interest rates are rising because it can lead to volatility across a variety of sectors.

I want to focus on two businesses that I think are likely to see their earnings largely unaffected during this difficult period.

If I were looking for long-term investment ideas, the two below are ones I’d heavily consider today.

Lovisa Holdings Ltd (ASX: LOV)

Lovisa is fast-growing jewellery business with a sizeable presence in numerous markets including Australia, New Zealand, Singapore, Malaysia, South Africa, the UK, France, Germany, the Netherlands, Poland, Italy, the US and Canada.

One of the main reasons I think Lovisa could perform strongly during this period is because of its target market, which is a relatively young demographic. Rising interest rates is a problem for borrowers, which is a significant chunk of Australians and in citizens Lovisa’s other important markets.

But, young shoppers don’t usually have a mortgage or other forms of debt, so Lovisa’s consumer base may not be as impacted during this period.

The company performed resiliently a few years ago and I’m expecting it to do well again during this period. Plus, the business continues to expand its global store network, giving it the potential to further grow its total sales, even if comparable sales growth for its existing stores may slow (or go negative) in the time being.

In the FY26 half-year result, the business reported its Lovisa store network increased 15.5% to 1,089, underlying revenue grew 22.7% to $498.1 million and net profit after tax (NPAT) rose 20.4% to $109.1 million.

In five years, I think this ASX share will have a much larger store network, stronger scale benefits and pleasingly higher revenue.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts is a diversified investment house, with a defensive portfolio, which positions it well for the current situation.

For starters, it has a large investment in ASX energy share New Hope Corporation Ltd (ASX: NHC), which could see higher earnings amid the disrupted energy supply situation in the Middle East.

Soul Patts is also invested in a number of other sectors that could see resilient or growing earnings such as industrial properties, swimming schools, agriculture, telecommunications and credit.

I was impressed by the company’s FY26 half-year result. Net cash flow from investments rose 15.4% year-over-year, the pre-tax net asset value (NAV) return was 9.7% and the interim dividend per share was hiked by 9.1%.

On top of that, remember that as an investment house, Soul Patts has the ability to buy (and sell) investments and take advantage of price changes.

Soul Patts has been an effective investment company for many decades and I’m expecting it to continue to perform for many years to come because of its smart investment strategy and its ability to adjust its portfolio.

The post 2 amazing ASX shares I’d buy amid rising interest rates appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Lovisa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

I’m always on the hunt for ASX share opportunities, and I’m going to highlight two stocks that brokers think are buys.

I can see why they’re attractive opportunities – their valuations are a lot lower and they have compelling growth plans that could power their earnings higher.

Experts rate the below businesses as a buy, and I’m excited by their potential.

Nick Scali Ltd (ASX: NCK)

Nick Scali is a furniture business with stores in Australia, New Zealand and the UK. It also operates Plush stores in Australia.

According to CMC Invest, of eight recent analyst ratings on the business, five of those were buys. The average price target of those ratings is $21.38, suggesting it could rise by around 45%, from the time of writing, over the next 12 months.

I do think the Nick Scali share price is significantly undervalued, considering it has fallen more than 40% since its 2026 high in January. If there’s a ‘right’ time to buy a retailer, it’s when market is worried about consumer spending for the foreseeable future.

Nick Scali is a great business, with a solid return on equity (ROE), an impressive gross profit margin and significant growth plans across its existing markets. It plans to add dozens of stores in the coming years in Australia and the UK, which should significantly help its gross profit margin and other margins.

Just like earlier this decade, I don’t think this high inflation period is going to last forever, so I’d use this period of temporary share price weakness with the ASX share to buy. It may take longer than a year to deliver a 40% return, but I’m optimistic it will regain that lost ground when interest rates are heading down rather than upwards.

Collins Foods Ltd (ASX: CKF)

Collins Foods is a large franchisee of KFC outlets in Australia, Germany and the Netherlands.

According to CMC Invest, of 11 recent analyst ratings on the business, eight of those were buys. The average price target of those ratings is $12. That suggests a possible rise of 43%, at the time of writing, over the next year.

Collins Foods is another ASX share that’s suffered a decline – it’s down around 30% from the height in November 2025.

I think the business has significant room to expand its European and Australian networks, particularly in Europe, through both a mixture of acquisitions and new locations.

The business is continuing to grow at a pleasing pace. In mid-March, the company gave a trading update. In the second half of FY26, Australian total sales increased by 6.2%, German sales increased 9.1% and Dutch sales grew 4.1%.

It said it’s expecting its FY26 underlying net profit after tax (NPAT) to grow in the “mid-to-high teens”.

According to the projections on Commsec, the Collins Foods share price is valued at 16x FY26’s estimated earnings and it could grow earnings by another 31% in FY27.

The post Brokers say these 2 ASX shares are highly undervalued — here’s why I agree appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods and Nick Scali. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There are plenty of wonderful S&P/ASX 200 Index (ASX: XJO) shares that could be excellent investments in May thanks to their quality and valuation.

Some blue chips have an incredible ability to regularly deliver profit growth, unlocking long-term capital growth and rising dividends.

Let’s look at two of the highest-quality blue chips that experts have rated as buys.

Macquarie Group Ltd (ASX: MQG)

Macquarie is a global investment bank that is rapidly becoming a major player in Australia’s banking scene, too.

It has four divisions that help generate earnings for the business in different economic conditions. There’s the banking and financial services (BFS) segment, the global investment bank division, Macquarie Asset Management (MAM), and the commodities and global markets (CGM) division.

The global investment bank and CGM segments can see significant volatility, depending on what’s happening in the global economy, while BFS and MAM typically don’t see large declines in their profitability.

Excitingly, FY26 profit growth was very strong for the ASX 200 share and showed it’s able to perform even during difficult economic conditions.

FY26 net profit jumped 30% year over year, to $4.85 billion, with the FY26 second half net profit rising by 93% to $3.2 billion. It decided to pay a final ordinary dividend per share of $4.20, while the FY26 final dividend came to $7 per share.

The CGM business saw net profit soar 49% to $4.2 billion, MAM net profit increased 27% to $2.6 billion, BFS net profit rose 17% to $1.6 billion, and Macquarie Capital net profit soared 43% to $1 billion.

At the time of writing, according to CMC Markets, there are currently five buy ratings on the business, with the highest price target being $270, suggesting a 14% rise (at the time of writing) within the next year.

Transurban Group (ASX: TCL)

Transurban is one of the world’s largest listed toll road operators, with roads in NSW, Queensland, Victoria, and North America.

Australia’s major cities’ populations continue growing, increasing the number of vehicles on the road. This makes Transurban’s roads increasingly valuable, particularly for its ability to offer significant time-saving routes for drivers, making the tolls worthwhile where that time is valuable.

In the three months to March 2026, the ASX 200 share reported total average daily traffic (ADT) of 3% across its roads, including 0.7% growth in Sydney and 1.4% growth in Melbourne during the month of March, despite the impacts of the Middle East conflict.

I’m expecting revenue to grow strongly in FY27 if inflation remains elevated during the rest of 2026. Additionally, the occasional expansion of Transurban’s toll road portfolio can further grow earnings and cash flow.

With rising cash flow, the business can deliver rising payouts, which could be attractive during this uncertain period.

According to CMC Invest, there are three buy ratings on the business, with the highest price target at $16.10, suggesting (at the time of writing) a possible 11% rise within a year.

The post 2 high-quality ASX 200 shares experts rate as buys appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and Transurban Group. The Motley Fool Australia has positions in and has recommended Macquarie Group and Transurban Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Term deposits can be appealing to savers wanting to protect their capital while generating a bit of passive income. However, there are a few reasons why ASX dividend shares appeal to me more.

Currently, it seems like an appealing time for term deposits since RBA has raised interest rates several times this year. This has lifted the potential interest rate that Aussies can get from their financial institution. It’s quite easy to find a term deposit offering a 5.5% interest rate these days.

However, I don’t think term deposits are the right choice for me to build wealth.

Capital growth

While a term deposit may protect money from volatility and declines, it also means there’s no chance of delivering long-term capital growth either.

When we invest in growing (ASX) shares that are increasing their underlying value, the investment can appreciate over time.

As someone in their 30s, if I’m investing for passive income, I’d rather invest $10,000 in an ASX share that could rise to $11,000 in value over a year (and more in the longer-term) compared to putting $10,000 into a term deposit which is guaranteed to stay valued at $10,000 after the term, excluding the generated passive income.

Compounding is a very powerful tool and I plan to utilise that as much as I can in the years ahead. But, I’ll note that I do have a separate cash amount as an emergency fund in a high interest savings account.

One of the ASX dividend shares I’m very optimistic of capital growth is the exchange-traded fund (ETF) WCM Quality Global Growth Fund – Active ETF (ASX: WCMQ). It targets a 5% distribution yield and aims for businesses with strengthening economic moats and a corporate culture that fosters the strengthening of those competitive culture.

WCMQ ETF’s long-term investment returns have been compelling, enabling for capital growth of the fund value while still paying its 5% distribution yield.

Dividend growth

The other great reason to own ASX dividend shares is because they can offer growth of the passive income without needing to retain the money to earn mor.

Let’s run through why term deposits aren’t attractive to me on the income side. Let’s say there’s a $10,000 term deposit with a 5% interest rate, it would make $500 of annual passive income. If the saver wanted to spend that $500, the $10,000 could only generate another $500 over the next year. Term deposit holders can re-invest the interest, but then there’s no useable cash for spending.

With an ASX dividend share, a business can pay its dividend and organically grow its payout because of business growth. With $10,000 in an ASX dividend share with a 5% dividend yield, it would generate $500 of passive income and an investor could spend that. The business could hike its dividend by 10%, unlocking $550 of passive income, without any re-investment needed.

Of course, re-investing the dividends would mean supercharging wealth building and the annual dividend flow.

One of my favourite ideas for dividend growth is MFF Capital Investments Ltd (ASX: MFF), a listed investment company (LIC) that targets a global portfolio of high-quality, growing shares. Its guided FY26 dividend translates into a grossed-up dividend yield of 6.3%, including franking credits. Its FY26 payout is 23% higher than FY25 and I believe it could increase its annual dividend by another 19% in FY26.

But, there are plenty of ASX dividend shares out there offering the potential for both dividend growth and capital growth, of course.

The post Forget term deposits! I’d buy these ASX dividend shares instead appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Mff Capital Investments and Wcm Quality Global Growth Fund. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Mff Capital Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.