If you’re looking to start your investment journey, then I think you should look beyond short term trades and focus on investing for the long term.
This is because short term trading is a high risk endeavour and prevents investors from benefiting from the power of compounding.
What is compounding?
Compounding is what happens when you earn interest on top of interest – or rather, returns on top of returns for shares.
As of the end of June, the Australian share market has provided investors with an average total return of 8.76% per annum over the last 30 years.
This means that if you had invested $1,000 into the share market every three months ($4,000 per year) since 1990, your investments would have grown to be worth $567,000 today.
But what’s more, thanks to the power of compounding, if you carried on investing this amount of money and earned the same return for a further five years, your portfolio would grow to $888,000.
That’s a massive $321,000 added to your wealth in just five years thanks to compounding. Willing to go another five years? Then your investments would grow to be worth a staggering ~$1.4 million.
The key takeaway from this for me is that starting early gives you the best chance of creating significant wealth from the share market.
With this in mind, if you’re an investor in your 20s or 30s, I would suggest you consider starting your journey with investments in a company with very strong long term growth potential.
Which ASX shares should you buy?
A few ASX shares that spring to mind immediately are payments company Afterpay Ltd (ASX: APT), donations and engagement platform provider Pushpay Holdings Ltd (ASX: PPH), and sleep treatment-focused medical device company ResMed Inc. (ASX: RMD).
I believe all three are in a perfect position to grow their earnings at a very strong rate over the 2020s. This could lead to their shares generating market-beating returns for investors.
These 3 stocks could be the next big movers in 2020
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
Find out the names of our 3 Post COVID Stocks – For FREE!
*Returns as of 6/8/2020
More reading
- 5 things to watch on the ASX 200 on Monday
- 3 ASX tech shares to buy and hold for the next decade
- This ASX share is my top contrarian play right now
- The smartest ASX shares to buy if you have $2,000
- These ASX growth shares could be strong buys in October
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PUSHPAY FPO NZX and ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post You could become very wealthy by investing $1,000 into these ASX shares appeared first on Motley Fool Australia.
from Motley Fool Australia https://ift.tt/3jxfbhA
Leave a Reply