At present the Commonwealth Bank of Australia (ASX: CBA) is offering a base rate on its savings account of just 0.05%. This is largely in line with what the rest of the big four are offering.
This means that if you have $5,000 sitting in one, it would gain interest of just $25 per year.
Unfortunately, with economists tipping the cash rate to remain on hold at 0.25% for the next three years, things are unlikely to get any better in the near future.
On the assumption that this base rate will stay the same for the next three years, that $5,000 would grow to be worth a touch over $5,075 in September 2023.
Historically, the share market has generated a return of ~10% per annum for investors over the long term.
If you were to invest that $5,000 into the share market and earned a 10% annual return for three years, those funds would be worth $6,655 in September 2023. That’s a difference of $1,580!
In light of this, if I had $5,000 in a savings account and no immediate use for it, I would consider investing into the share market.
But which ASX shares should you buy? Two that I like are listed below:
Appen Ltd (ASX: APX)
The first share to consider buying is Appen. It is the global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence. Given the explosive growth of these markets, I believe it is well-positioned to deliver strong earnings growth over the 2020s.
ResMed Inc. (ASX: RMD)
Another option for the $5,000 is ResMed. I believe the medical device company could be a long term market beater. This is due to its leading position in the fast-growing sleep treatment market. The vast majority of sleep apnoea sufferers are yet to be diagnosed, but education around the condition is increasing. I expect this to lead to more and more diagnoses over the next decade, supporting consistently solid earnings growth.
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More reading
- 3 ASX 200 shares to buy for strong returns
- UBS picks the best and worst ASX stocks from the reporting season
- 5 things to watch on the ASX 200 on Wednesday
- 5 things to watch on the ASX 200 on Tuesday
- Top ASX Stock Picks for September 2020
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended 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.
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