Category: Stock Market

Investing legend Charlie Munger, Warren Buffett’s long-term business partner, is famous for his witty and wise quotes. He once said, “Show me the incentive, and I will show you the outcome.”

This quote emphasises the importance of aligning incentives with desired outcomes, highlighting how compensation structures can drive behaviour and decisions.

High pay for management can be a powerful motivational tool when wisely designed to link to business performance. However, it may be a yellow flag for shareholders when there’s a disconnect between compensation and business results.

With this in mind, let’s examine the S&P/ASX 200 Index (ASX: XJO) CEO compensation as reflected in the FY23 financial reports.

ASX 200 CEO pay table for FY23

Every July, the Australian Council of Superannuation Investors (ACSI) publishes an annual survey of CEO pay in Australia’s largest listed companies based on the previous financial year’s data.

Some of the interesting findings from ACSI’s 2024 report, released on Friday, include:

• The median CEO total realised pay for ASX 100 companies fell from $3.93 million to $3.87 million, which is the lowest median in the 10 years.
• In FY23, ASX 100 CEOs received a bonus at 66.3% of the maximum, while for the ASX 101-200 companies, the median bonus outcome was 60.7% of the maximum.
• CEOs in companies listed on ASX but based in the US tend to have higher realised pay outcomes.
• The highest termination payment in FY23 was $7.61 million for former CSL Ltd (ASX: CSL) CEO Paul Perreault.

The top 10 highest-paid CEOs are as follows:

Rank	Company	CEO	Realised pay
1	Resmed CDI (ASX: RMD)	Mick Farrell	$47.58 million
2	News Corporation CDI (ASX: NWS)	Robert Thomson	$41.53 million
3	Goodman Group (ASX: GMG)	Greg Goodman	$27.34 million
4	Macquarie Group Ltd (ASX: MQG)	Shemara Wikramanayake	$25.32 million
5	BHP Group Ltd (ASX: BHP)	Mike Henry	$19.68 million
6	Commonwealth Bank of Australia (ASX: CBA)	Matt Comyn	$10.52 million
7	Rio Tinto Ltd (ASX: RIO)	Jakob Stausholm	$10.47 million
8	Wesfarmers Ltd (ASX: WES)	Rob Scott	$9.57 million
9	Amcor CDI (ASX: AMC)	Ron Delia	$9.33 million
10	Sonic Healthcare Ltd (ASX: SHL)	Colin Goldschmidt	$8.35 million

Greg Goodman of Goodman Group remains the highest-paid domestic CEO with a realised pay of $27.34 million. Macquarie’s Shemara Wikramanayake was in second place, with a realised pay of $25.32 million.

Why should ASX share investors care about CEO pay?

In recent years, the topic of CEO compensation has increasingly come under scrutiny. We often hear about CEOs earning exorbitant salaries and bonuses, disconnected from the company’s performance or the shareholders return.

This misalignment between management pay and company outcomes is especially important for minority shareholders like us. It can create a disconnect between the interests of the executives and those of the stakeholders they are meant to serve. This misalignment can result in decisions that prioritise short-term gains over long-term sustainability, potentially jeopardising the company’s future.

The key is whether the incentive structure is objective and well-aligned with business performance.

One of the best ways to avoid these issues is to invest in companies with high insider ownership. For larger companies with widespread share ownership, it’s often beneficial to review the management remuneration section in the annual reports.

The post Investing in ASX shares? Why CEO pay DOES matter when misaligned appeared first on The Motley Fool Australia.

More reading

• Could investing $10,000 in ASX shares make you a millionaire?
• How I’d aim to build a $75,000 income from ASX shares and never work again!
• These ASX 200 stocks turned $20,000 into $100,000+ in 10 years
• Why mum and dad investors aren’t buying ASX bank shares like they used to
• Will the BHP share price keep falling?

Motley Fool contributor Kate Lee 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 CSL, Goodman Group, Macquarie Group, ResMed, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Amcor Plc, Macquarie Group, ResMed, and Wesfarmers. The Motley Fool Australia has recommended CSL, Goodman Group, and Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX exchange-traded funds (ETFs) provide an easy way for Aussie investors to gain exposure to global shares without the hassle of having to trade on several different international exchanges.

There are hundreds of global shares ETFs to choose from on the ASX. Some track indexes like the MSCI World Index, the NASDAQ-100 Index (NASDAQ: NDX) and the CRSP US Total Market Index. Some are sector-based. But most ETFs have specific strategies designed by the providers, who seek to beat the market’s benchmark returns.

Some global shares did better than ASX shares in FY24.

In the United States, the Nasdaq Composite Index (NASDAQ: .IXIC) rose by 28.61%, the S&P 500 Index (SP: .INX) ascended by 22.7%, and the Dow Jones Industrial Average Index (DJX: .DJI) lifted by 13.69%. The MSCI World Index rose by 18.37%.

By comparison, the S&P/ASX 200 Index (ASX: XJO) rose by 7.83% (or 12.1% with dividends included).

Global shares ETFs give Aussie investors immediate diversification in terms of stocks and geography in a single trade. The disparities in the performances of ASX shares and US shares outlined above demonstrate how useful geographical diversification can be, with or without hedging to the Australian dollar.

So, which ASX global shares ETFs delivered the best total returns in FY24?

New figures just released by the ASX reveal the top performers of the year. Let’s take a look.

Top 6 ASX global shares ETFs for total returns

This article focuses on ETFs that invest in global shares. They include index-based and sector-based ETFs, as well as those operating under a specific strategy designed by their ETF provider.

We’ve included each ETF’s management expense ratio (MER), which is the fee you pay every year. Fees can vary widely between providers, so this is always useful research information.

According to the data, here are the top six global shares ETFs for FY24.

Betashares Crypto Innovators ETF (ASX: CRYP)

The Betashares Crypto Innovators ETF returned 68.49% in FY24. The historical distribution yield is 0%, and the MER is 0.67%.

Global X Ultra Long Nasdaq 100 Complex ETF (ASX: LNAS)

The Global X Ultra Long Nasdaq 100 Complex ETF returned 65.59% in FY24. The historical distribution yield is 24.44%. The MER is 1%.

Global X Semiconductor ETF (ASX: SEMI)

The Global X Semiconductor ETF returned 58.86% in FY24. The historical distribution yield is 3.39%, and the MER is 0.57%.

Betashares Global Uranium ETF (ASX: URNM)

The Betashares Global Uranium ETF returned 57.34% in FY24. The historical distribution yield is 2.04%, and the MER is 0.69%.

Global X Fang+ ETF (ASX: FANG)

The Global X Fang+ ETF returned 51.02% in FY24. The historical distribution yield is 5.27%, and the MER is 0.35%.

Geared US Equity Fund – Currency Hedged (Hedge Fund) (ASX: GGUS)

The Geared US Equity Fund – Currency Hedged ETF returned 49.03% in FY24. The historical distribution yield is 0%, and the MER is 0.80%.

The post These top ASX global shares ETFs delivered stunning returns of 50% to 70% last year appeared first on The Motley Fool Australia.

More reading

• 5 excellent ASX ETFs to buy this month
• The 5 best ASX ETFs of FY24 revealed!
• Here’s the outlook for 3 ASX artificial intelligence (AI) shares in FY25
• Top ASX shares to buy in July 2024
• 4 of the best ASX ETFs to buy in July

Motley Fool contributor Bronwyn Allen 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 Betashares Global Uranium Etf. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

By all accounts, ASX shares have had a pretty good year in 2024 so far. As it currently stands, the S&P/ASX 200 Index (ASX: XJO) has added around a healthy 4.35% this year to date, which doesn’t even include the extra boost that dividend returns would be providing. What’s more, the ASX 200 has, as of yesterday, just reached a new all-time record. And that is good news for our superannuation funds.

If your super is invested in the popular ‘balanced’ option, it’s likely that between 40-60% of your super wealth is invested in stocks. So recent record highs for both the US and ASX share markets bode well for our retirement savings.

But balanced funds are so named because they invest in a wide variety of different assets. These include shares, as we’ve just established. But they also include more defensive assets like cash term deposits and government bonds. This is done in order to mitigate the stock market volatility that many Australians hate to see in their super funds.

However, if you select what’s known as a growth fund, rather than a balanced fund, chances are your returns over 2024 have been even higher.

That’s because a growth fund doesn’t attempt to mitigate portfolio volatility like a balanced fund does. Instead, it goes all in on ‘growth‘ assets like ASX and international shares. These investments make up almost all of a growth super fund.

Balancing growth in your superannuation fund

Earlier this month, we looked at the average return for the typical balanced superannuation fund. These funds returned an average of 7.2% over the 12 months to 31 May. Over three years, the average return was 4.1% per annum. This went up to 5.1% per annum over five years and 5.3% over ten years.

But what about growth funds?

Well, using the same analysis from super research firm Chant West, we get the answer.

According to this firm, the average growth superannuation fund (containing 61%-80% growth assets) in Australia returned 9.4% over the 12 months to 31 May.

Over the prior three years, these funds averaged 5.3% per annum, rising to 6.7% per annum over five years and 6.8% over ten years.

For a high-growth fund (81-95% growth assets), the returns were higher still. These funds managed to hit 11.5% over the 12 months to 31 May. Their three-year returns averaged 6.2% per annum, and the five-year returns, 8.1%. That rose to 8.3% per annum over ten years.

Chris Brycki, CEO of Stockspot, said that the average returns from super in FY2024 should be prompting all of us to check up on our own funds:

If your balanced or growth fund returned less than 10% this year [FY2024], it’s important to question your super fund about it. Are the fees too high? Are they paying fund managers for unsuccessful stock picks? Are they invested in illiquid unlisted assets that are facing devaluations?

The trend of indexed super funds outperforming active ones is likely to persist as scrutiny increases over the valuation processes of unlisted assets by regulators like APRA, and as trustees adopt more realistic valuations of these assets

So just by comparing the returns from growth and balanced funds, you can see the advantage of opting for a high-growth fund. That’s provided it fits your individual financial circumstances, of course.

The post What are the average returns for growth superannuation funds? appeared first on The Motley Fool Australia.

More reading

• These top ASX global shares ETFs delivered stunning returns of 50% to 70% last year
• Could investing $10,000 in ASX shares make you a millionaire?
• Top 5 investment themes exciting ASX shares investors in FY25
• Looking to boost your retirement with extra passive income? Try this!
• 3 ASX dividend shares to buy next week

Motley Fool contributor Sebastian Bowen 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 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.

Many readers are likely to aspire to being a millionaire one day.

While there are many ways to achieving this goal, one method that has created countless millionaires is investing in ASX shares.

But could you really get there by investing $10,000? Well, the answer is yet, depending on your investment time horizon.

Turning $10,000 into $1 million with ASX shares

The power of compounding and time are your two best friends when it comes to investing. When these two combine, good things happen.

Historically, the share market has generated an average annual return of 10% including dividends.

Were it to do the same again in the future, a single investment in $10,000 could grow into something significant in time if you’re patient enough.

For example, thanks to time and compounding, $10,000 would turn into over $40,000 in 15 years if you averaged a return of 10% per annum and reinvested your dividends.

But clearly, $40,000 is still a long way from that millionaire status we are aspiring to.

Well, unfortunately, without making any further contributions, you would have to sit very patiently to reach this level.

In fact, it would take just over 48 years in total to grow $10,000 into $1 million with ASX shares and a 10% per annum return.

If you’re 21, then this means that you could have a million-dollar portfolio around the time you reach retirement age. That certainly would be a nice nest egg to combine with your superannuation.

But what if you wanted to get there sooner? Let’s look at making extra contributions.

Making a million quicker

Getting to $1 million quicker will depend upon your available income.

If you are able to start with a $10,000 investment and then make $500 contributions each month, it would take approximately 28 years to get there.

Think you could manage $1,000 investments each month? Great, because that would knock off about six years and take just over 22 years to get to $1 million.

Finally, if you’re lucky enough to have $2,000 available to invest monthly, then you need a touch of 16 years to grow your portfolio to millionaire status.

Which ASX shares should you buy?

History has shown that a focus on high-quality companies with strong business models has delivered great results.

Companies like CSL Ltd (ASX: CSL), Goodman Group (ASX: GMG), and Xero Limited (ASX: XRO) could tick these boxes and may be worth further investigation.

But the main key to success is to find the plan that suits you (and your budget) and stick with it through the long term. You will no doubt be thanking yourself for doing so in the future as your wealth builds.

The post Could investing $10,000 in ASX shares make you a millionaire? appeared first on The Motley Fool Australia.

More reading

• These ASX 200 stocks turned $20,000 into $100,000+ in 10 years
• Xero shares doubled the ASX 200 return in FY24. What’s next in FY25?
• ASX 200 re-writes history. Which companies are leading the charge?
• How a $10,000 investment in this ASX 200 stock ballooned to $17,460 in FY24!
• CBA and 7 other ASX 200 shares smashing new highs on Thursday

Motley Fool contributor James Mickleboro has positions in CSL and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Goodman Group, and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended CSL and Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Gold and electric vehicles (EV) top the list of investment themes inspiring ASX shares investors in FY25, according to a survey of 2,000 Aussie investors conducted by online trading platform, Stake.

Let’s find out what other themes are exciting investors as we head into the new financial year.

Top 5 positive investment themes for FY25

Gold

Gold was the most popular investment theme for FY25, with 49% of survey respondents feeling positive about the commodity.

And no wonder, really. The gold price skyrocketed in the first half of 2024, ascending from US$2,034 per ounce on 28 February to an all-time high of US$2,449.89 on 21 May.

Examples of ASX gold shares include Newmont Corporation CDI (ASX: NEM), Northern Star Resources Ltd (ASX: NST), Bellevue Gold Ltd (ASX: BGL), and ASX gold ETF Global X Physical Gold ETF (ASX: GOLD).

EVs

The survey found 46% of Australian investors are still positive on EVs, despite reports of softening global demand. In terms of stocks, Tesla Inc (NASDAQ: TSLA) is the most obvious direct way to invest in EVs. However, among ASX shares, investors can gain exposure to the theme by purchasing ASX lithium shares.

Examples of lithium stocks include Pilbara Minerals Ltd (ASX: PLS), IGO Ltd (ASX: IGO), Core Lithium Ltd (ASX: CXO), Arcadium Lithium CDI (ASX: LTM), and Liontown Resources Ltd (ASX: LTR).

Artificial intelligence (AI)

The survey found 44% of investors are optimistic about the artificial intelligence (AI) investment theme.

There are other ways to gain exposure to AI besides buying big-tech US stocks like Nvidia Corp (NASDAQ: NVDA).

For example, AI was a significant driver of the 73.1% rise in Goodman Group (ASX: GMG) shares last year. Australia’s largest real estate investment trust (REIT) is busy building data centres all over the world.

You can check out The Fool news team’s recommendations for AI stocks here.

Lithium

Lithium commodity values have plunged over the past two years, so it’s interesting to see lithium remaining top of mind for ASX shares investors, with 42% of respondents still positive on the theme.

Copper

The red metal is set to play a significant role in the world’s decarbonisation. This is because it’s a cheap and effective electricity conductor used in EVs, wind turbines, solar energy systems, and data centres.

According to the survey, 41% of ASX shares investors like the copper theme. The commodity price has risen by more than 15% in 2024 so far.

Examples of ASX copper shares include Sandfire Resources Ltd (ASX: SFR), Aeris Resources Ltd (ASX: AIS), WA1 Resources Ltd (ASX: WA1), and FireFly Metals Ltd (ASX: FFM).

The post Top 5 investment themes exciting ASX shares investors in FY25 appeared first on The Motley Fool Australia.

More reading

• Here 3 ASX lithium shares to watch for FY25
• Here are the top 10 ASX 200 shares today
• Are Liontown Resources shares a buy after surging 9% this week?
• Why did Goldman Sachs just upgrade Core Lithium shares?
• Is it time to dive back into ASX lithium shares?

Motley Fool contributor Bronwyn Allen has positions in Core Lithium and Goodman Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman Group, Nvidia, and Tesla. The Motley Fool Australia has recommended Goodman Group and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Just an extra $100 of additional passive income a week could make a big difference during your retirement years.

Of course, $200 or $300 a week would be even more welcome.

That could open the door to extra travels in your golden years. Or you may choose to spend some on gifts for your partner, or your kids or grandkids. Or perhaps just spoil yourself.

However you may choose to put the extra funds to use, here’s how I’d go about securing that passive income stream today.

Building passive income for retirement

I think ASX dividend shares offer one of the best means for Aussies to secure potentially life-changing passive income in their retirement.

One of the advantages offered by many leading ASX dividend shares is that they come with franking credits. That’s something you won’t get on most international exchanges, including in the United States.

With 100% franking, you’ll get the full credit for the 30% corporate tax the company has already paid, which could reduce your own tax burden. That can be an extra big bonus for self-funded retirees with a low annual income, who can receive franking credits as cash refunds.

Another thing to keep in mind when building your retirement-enhancing passive income stream is that the sooner you get started, the larger that extra income pool is likely to be.

For example, let’s say you invest $5,000 a year and achieve 5% capital gains and 5% dividend yields for a 10% average annual gain.

After 10 years, you’ll have invested $50,000, and your ASX portfolio will be worth $92,656.

But if you keep at it for 30 years, you’ll have invested $150,000, and your ASX portfolio will have grown to $909,717.

At that point, you could stop investing and begin drawing out your weekly passive income.

From the 5% dividend yield alone, that would equate to $45,856 a year or some $875 a week.

Finally, when looking for retirement-boosting ASX passive income stocks, you’ll want to invest in a diverse range of companies operating in various sectors and, ideally, across different geographic locations.

That will help reduce the risk of your overall portfolio taking a big hit if any one company or sector hits some turbulence.

One ASX dividend share with instant diversity

I think it’s worth finding a range of top ASX dividend gems to buy and hold in your passive income portfolio.

But one simpler way to get rolling is to invest in the BetaShares Australian Dividend Harvester Fund (ASX: HVST).

The ASX exchange traded fund (ETF) holds anywhere from 40 to 60 blue-chip ASX dividend shares at any given time, offering instant diversity.

The ASX ETF’s top four holdings at the time of writing are Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), CSL Ltd (ASX: CSL) and Rio Tinto Ltd (ASX: RIO).

On the passive income front, the ETF makes convenient monthly payments.

As at 28 June, HVST had a 12-month gross dividend yield of 8.4%. The gross yield incorporates the 78.5% in franking credits.

As of the same date, the BetaShares Australian Dividend Harvester Fund had delivered 14.0% in gross returns after fees over 12 months.

The post Looking to boost your retirement with extra passive income? Try this! appeared first on The Motley Fool Australia.

More reading

• 3 ASX dividend shares to buy next week
• How I’d aim to build a $75,000 income from ASX shares and never work again!
• These ASX 200 stocks turned $20,000 into $100,000+ in 10 years
• Why mum and dad investors aren’t buying ASX bank shares like they used to
• Xero shares doubled the ASX 200 return in FY24. What’s next in FY25?

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 CSL. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Are you looking for some income options for when the market reopens next week?

If you are, then check out these ASX dividend shares listed below. They have recently been tipped as buys by analysts. Here’s what they are saying about them:

Challenger Ltd (ASX: CGF)

Goldman Sachs is tipping this annuities company as be an ASX dividend share to buy.

It likes the company due to its exposure to the massive superannuation market and the favourable outlook for annuities demand. It explains:

CGF is Australia’s largest retail and institutional annuity provider across Term and Lifetime annuities with a funds management business. We are Buy rated on the stock. We like CGF because: 1) it has exposure to the growing superannuation market across Life and Funds Management; 2) higher yields should drive a favorable sales environment for retail annuities as well as an improvement in margins; 3) its annuity book growth looks well supported through a diversified distribution strategy.

In respect to dividends, the broker is forecasting fully franked dividends of 26 cents per share in FY 2024 and 27 cents per share in FY 2025. Based on the current Challenger share price of $6.89, this will mean dividend yields of 3.8% and 3.9%, respectively.

The broker currently has a buy rating and $7.50 price target on its shares.

Dexus Industria REIT (ASX: DXI)

Analysts at Morgans see Dexus Industria as an ASX dividend share to buy when the market reopens. It is a real estate investment trust with a focus on industrial warehouses.

Morgans believes the company is positioned to benefit from solid demand for industrial property, its development pipeline, and the positive rental growth outlook. It said:

The portfolio is valued at $1.6bn across +90 properties with 89% of the portfolio weighted towards industrial assets (WACR 5.38%). The portfolio’s WALE is around 6 years and occupancy 97.5%. Across the portfolio 50% of leases are linked to CPI with the balance on fixed increases between 3-3.5%. While we expect cap rates to expand further in the near term, DXI’s industrial portfolio remains robust with the outlook positive for rental growth. The development pipeline also provides near and medium-term upside potential and post asset sales there is balance sheet capacity to execute.

As for income, Morgans is forecasting dividends per share of 16.4 cents in FY 2024 and then 16.6 cents in FY 2025. Based on the current Dexus Industria share price of $2.89, this will mean dividend yields of 5.7% and 5.75%, respectively.

The broker has an add rating and $3.20 price target on its shares.

Worley Ltd (ASX: WOR)

The team at Goldman Sachs is also positive on this engineering company.

It believes the company is well-positioned to benefit from the decarbonisation megatrend and sees a lot of value in its shares at current levels. It said:

WOR is well positioned to play a role in enabling the transition from fossil fuels to a more sustainable energy mix in the LT, leveraging its experience in providing engineering and maintenance services for complex energy/chemicals works, existing client relationships, and management’s stated focus on expanding the company’s transition footprint. We expect the energy transition segment to gain increased investor attention as Covid-19 related impacts fade and the company continues to highlight the strong growth potential of the business via increased disclosure. We expect WOR’s ST/MT margins to improve with an incrementally positive operating environment. Vs the S&P/ASX 200, WOR is trading broadly in line with market vs a premium in the last 3yr/5yr.

Goldman is forecasting dividends per share of 52 cents in FY 2024 and then 58 cents in FY 2025. Based on its current share price of $14.73, this equates to dividend yields of 3.5% and 3.9%, respectively.

The post 3 ASX dividend shares to buy next week appeared first on The Motley Fool Australia.

More reading

• 2 outstanding blue chip ASX 200 stocks to buy for FY25
• Forget CBA and buy these ASX dividend stocks
• Brokers says these ASX 300 dividend shares are top buys
• 3 ASX dividend shares to buy with 5%+ yields
• 3 ASX dividend stocks to buy with 5% to 7% yields

Motley Fool contributor James Mickleboro 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 Goldman Sachs Group. The Motley Fool Australia has recommended Challenger. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Passive income from ASX shares can be a great way to build up a second income and eventually achieve financial independence from relying on the work paycheque.

According to the Australian Bureau of Statistics (ABS), the average weekly total earnings for an Australian employee translates into annualised earnings of around $75,000. To receive that level of annual dividends, we’re talking about building up a large portfolio value.

To get a satisfactory wealth level, I’d want to build up investments that can achieve good underlying growth themselves.

How I’d build towards $75,000 of annual passive income

Unless someone wins the lottery or inherits significant wealth, it will take time, patience and a lot of compounding to grow to $75,000 of investment income.

Therefore, I’d suggest focusing on businesses that are investing in their operations to ensure they are supporting their own dividend and earnings growth.

If a business is paying out all of its profit each year (with a 100% dividend payout ratio), it’s unlikely the profit will grow much if it’s not reinvesting for more growth. For example, an 8% dividend yield could remain at that level forever, whereas other businesses deliver impressive long-term growth.

I’d want to invest in those growing investments, even if the upfront dividend yield isn’t that high. The yield-on-cost in the future could grow substantially.

For example, the investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is a century-old company that is steadily adding to its growing portfolio of business holdings. The ASX share has grown its annual ordinary dividend every year since 2000. In FY13, it paid an annual dividend of 46 cents per share, and in FY23, it paid an annual dividend of 87 cents – an increase of 89% over a decade. That’s the type of investment, in my opinion, that can result in significant organic growth of my portfolio’s value and dividends.

Globally focused exchange-traded funds (ETFs) could also be excellent long-term investments to help build a portfolio value up towards the required wealth to make $75,000 of annual passive income. I’d be thinking about quality global ETFs like Betashares Global Quality Leaders ETF (ASX: QLTY), VanEck MSCI International Quality ETF (ASX: QUAL), or Vanguard MSCI Index International Shares ETF (ASX: VGS). Reinvesting dividends can help with compounding.

If someone were able to invest an average of $1,500 per month and the portfolio generated an average return of 10% per year over 25 years, it would reach $1.77 million at the end of that 25-year period. Someone who is 25 could reach that figure by 50.

Choose the right dividend yield from ASX shares

Someone with a portfolio value of $1.77 million would need a dividend yield of approximately 4.25% to make $75,000 of annual dividends.

In my opinion, it’s important to choose investments that can continue to deliver growth over our lifetimes. Our portfolios may need to last many decades, and inflation means the required amount of dividends is probably going to keep rising to keep up with rising costs.

Once I reach a portfolio value that could generate a yearly income of $75,000, my strategy would be to choose investments that provide a decent yield but still deliver underlying growth.

Washington H. Soul Pattinson, Wesfarmers Ltd (ASX: WES) and Brickworks Limited (ASX: BKW) are ASX shares that may offer that mix of yield and long-term compounding.

I don’t know what the ASX will look like in 25 years, but at the moment, real estate investment trusts (REITs) like Rural Funds Group (ASX: RFF), Charter Hall Long WALE REIT (ASX: CLW) and Centuria Industrial REIT (ASX: CIP) all have appealing starting distribution yields and are seeing underlying rental income growth.

Or, another strategy to generate passive income could be to stick with the sort of global ETFs I mentioned before, like the QUAL ETF, and just sell 4.25% of the ETF’s value each year and unlock cash flow that way. Hopefully, the ETF’s long-term capital growth could outperform 4.25% per year, and investors could see both wealth growth and good cash flow.

The post How I’d aim to build a $75,000 income from ASX shares and never work again! appeared first on The Motley Fool Australia.

More reading

• Top high-yield ASX shares to buy in July 2024
• Buying shares and 5 other ways investors intend to spend tax cuts: report
• ASX 200 re-writes history. Which companies are leading the charge?
• Wesfarmers vs Woolworths: Which are the best ASX shares to buy today?
• The 5 most popular ASX shares bought by investors

Motley Fool contributor Tristan Harrison has positions in Brickworks, Rural Funds Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Brickworks, Rural Funds Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has recommended 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.

I think that buy and hold investing is one of the best ways to grow your wealth.

This is because it allows investors to take advantage of the power of compounding. This is what happens when you generate returns on top of returns.

To demonstrate just how successful this investment strategy can be with ASX 200 stocks, I like to look at how much a single $20,000 investment in certain shares 10 years ago would be worth today.

Let’s now see how investments in these three shares have fared during this time:

Aristocrat Leisure Limited (ASX: ALL)

The first ASX 200 stock that we are going to look at is Aristocrat Leisure. It is one of the world’s leading gaming technology companies.

Over the last decade, its shares have smashed the market with some very strong gains. This has been underpinned by its leadership position in the poker machine market, its expansion into digital gaming, and several acquisitions.

This has led to Aristocrat Leisure’s shares delivering its shareholders an average total return of 26.4% per annum since 2014. This would have turned a $20,000 investment in its shares 10 years ago into ~$208,000 today.

Cochlear Limited (ASX: COH)

Another ASX 200 stock that has delivered market-beating returns for its shareholders is Cochlear. It is a leading designer, manufacturer, and distributor of cochlear implantable devices for the hearing-impaired.

Thanks to its industry-leading position, significant (and ongoing) investment in research and development, its global distribution network, and the ageing population tailwind, Cochlear has been able to report solid earnings and sales growth over the last decade.

This has unsurprisingly caught the eye of investors and helped drive its shares higher and higher since 2014. This has led to Cochlear’s shares providing investors with an average total return of 18.9% per annum over the period. This would have turned a $20,000 investment into almost ~$113,000 today.

Goodman Group (ASX: GMG)

A third ASX 200 stock that has turned $20,000 into more than $100,000 in 10 years is Goodman Group.

It is a global integrated industrial property company focused on building sustainable properties that are close to consumers and provide essential infrastructure for the digital economy.

This strategy has been incredibly successful and underpinned consistently strong earnings growth over the last decade. This has put a rocket under its shares and led to Goodman shares recording an average total return of 22.3% per annum since 2014. This would have seen a $20,000 investment turn into almost $150,000 over the period.

Overall, I believe this demonstrates that buying quality companies with a long term view could make you wealthy.

The post These ASX 200 stocks turned $20,000 into $100,000+ in 10 years appeared first on The Motley Fool Australia.

More reading

• Brokers name 3 ASX shares to buy now
• How a $10,000 investment in this ASX 200 stock ballooned to $17,460 in FY24!
• CBA and 7 other ASX 200 shares smashing new highs on Thursday
• Goldman Sachs names 1 ASX 200 stock to buy and 2 to hold
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro 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 Cochlear and Goodman Group. The Motley Fool Australia has recommended Cochlear and Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

A change of focus for retail investors may be at hand, as Australian household ownership of ASX bank shares appears to be reducing.

As reported in the Australian Financial Review, analysis by investment outfit Jarden found that retail (household) investors sold down three major ASX bank shares in the three months to 30 June 2024.

The Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and ANZ Group Holdings Ltd (ASX: ANZ) reportedly saw retail ownership levels reach a record low.

However, Jarden noted that Westpac Banking Corp (ASX: WBC) was an exception due to its “higher franked dividend yield and the appeal of its recent special dividend“.

Who is buying the ASX bank shares?

Jarden said in a note that overseas ownership of banks continued to rise quarter over quarter. ANZ’s offshore ownership increased to 30%, which is the highest among the big banks. CBA’s offshore ownership has reached 23.8%.

Jarden analyst Jeff Cai told the AFR:

Anecdotal industry feedback suggests the recent increase in offshore buying in CBA is more driven by index funds rather than active asset allocation away from Asia, but this is difficult to conclusively validate.

According to the AFR, market participants have reported that some Asian investors are exiting China and “seeking shelter” with ASX bank shares.

Tribeca Investment Partners portfolio manager Jun Bei Liu pointed out that Australia’s economy was performing quite strongly compared to other Asian markets:

Australia stacks up pretty well compared to its peers within the region. Our economy is not slowing down as fast and it’s holding up OK. And as a foreign investor, you’ll look at Australia and realise it’s a safe place to be and hence why you’re seeing this transition into a lot of foreign ownership.

Are the financial stocks actually opportunities?

Tribecca’s Liu thinks the banks continue to perform relatively well, so she is “neutral” on the ASX bank shares:

The next six months still look pretty OK for the banks, unless our economy is heading for a recession and a tail-risk event takes place.

They only continue to do better than expected, and I think they will continue to have capital return opportunities, whether it’s buybacks or special dividends. So combine all of that and you’re looking at reasonable returns.

However, the ASX bank share valuations are increasing in price/earnings (P/E) ratio terms, with their share prices rising faster than earnings in the last 12 months.

According to Commsec forecasts, the CBA share price is valued at 23x FY25’s estimated earnings; NAB is valued at 16x; Westpac is 15x, and ANZ is valued at 13x FY25’s estimated earnings.

When the P/E ratio keeps climbing, short-term returns could become more unlikely because the valuation becomes more unsustainable. In my opinion, the shorter-term earnings updates will need to be relatively positive to uphold these forward P/E ratios.

The post Why mum and dad investors aren’t buying ASX bank shares like they used to appeared first on The Motley Fool Australia.

More reading

• CBA share price rallies to become the new top dog on the block
• 3 reasons everyone’s talking about CBA shares this week
• ASX 200 re-writes history. Which companies are leading the charge?
• Do ANZ shares offer the biggest dividend yield in the ASX bank sector?
• ANZ shares hit 52-week high despite alleged $54 billion problem

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 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.