If you haven’t been investing long, or haven’t started yet, I’m sure you wish you had started 10 years ago. Hopefully, in another 10 years, you won’t be wishing the same thing.

Investing in the ASX has been a great tool to build wealth over time. To show just how powerful a tool it can be, rather than examining a specific company, we’re going to look at a hypothetical case. Just how much would a $50,000 investment 10 years ago be worth today if it followed the returns of the S&P/ASX 200 Index (ASX: XJO)?

An investment in the ASX 200 

An investment 10 years ago that tracked the ASX 200 would have returned approximately 30% today. So your hypothetical $50,000 investment would now be worth $65,000. Are you feeling a little underwhelmed? Then I suggest you continue reading, because that’s not the full story.

This return is despite the ASX 200 having just surged out of the global financial crisis lows. Not to mention the index is currently sitting around 19% below its February high. However, and more importantly, this does not include the return and reinvestment of dividends, which is a significant proportion of the total return for the ASX 200.

If we also include dividend return and reinvestments from the ASX 200, we see a return of around 96% across the past decade. This means your $50,000 investment would now be worth $98,000 – a gain of $48,000. This clearly shows how important dividends are when considering the total return. It’s the reinvestment of these dividends where we see the wonder of compounding at work.

In fact, if we were to go back even further, we would get an even better idea of just how powerful the compounding effect is.

Going back 15 years, the ASX 200 with reinvested dividends has increased 172%. This size of return would turn your $50,000 into $136,000, giving you a capital gain of $86,000. That’s a significant additional gain when we only added 5 years to the time period.

To highlight the benefit of dividend return and reinvestment, the chart below covering the last 15 years of ASX 200 growth clearly shows the advantage of compounding as the return ‘gap’ widens.

Data from Investing.com. Chart by author

Can you do even better investing in ASX shares?

The above hypothetical returns are fantastic, particularly considering not much thought is required if you simply wanted to track the returns of the ASX 200. There are a number of ETFs such as BetaShares Australia 200 ETF (ASX: A200), which make this task easy. However, it is possible to do even better if you manage to choose a company or group of companies that can outperform the market over the long term. 

Even outperforming the ASX 200 by 1% or 2% each year can have a dramatic effect when these returns are compounded over a decade or two. The difference between an 8% annual return and a 10% annual return when compounded over 15 years is 100% – an 8% average return will increase your portfolio by 3.17 times and a 10% average return will increase your portfolio 4.17 times.

That means if you can consistently beat the market by 2% a year, then after 15 years your investment of $50,000 would be $50,000 better off than the market. Well worth pursuing the extra few percent I would say!

A couple of ASX shares to potentially invest in which I believe will outperform the market in the coming decade are Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Nearmap Ltd (ASX: NEA).

More reading

• 3 ASX shares Warren Buffett couldn’t ignore today
• Is the Transurban share price a buy today?
• Should you ever buy ASX shares at an all-time high?
• Have $4,000? Invest in these 4 ASX shares right now
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Michael Tonon owns shares of Nearmap Ltd. and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. and Washington H. Soul Pattinson and Company Limited. 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 What would $50,000 invested in the ASX 200 a decade ago be worth today? appeared first on Motley Fool Australia.

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The Transurban Group (ASX: TCL) share price is down 3.82% this year. But is the Aussie infrastructure group in the buy zone?

What’s happened to the Transurban share price?

Transurban hit a new 52-week high of $16.44 per share in mid-February prior to the coronavirus pandemic response kicking in. Following the implementation of widespread lockdown restrictions, the Aussie toll road operator’s shares fell to a 52-week low of $9.10 on 23 March. But are they headed higher now?

The Transurban share price has rebounded strongly and is now up more than 40% since mid-March.

Normally, I would consider toll roads as delivering non-cyclical earnings. However, the nature of the pandemic has forced Aussies to stay home. This has reduced traffic (and revenue) for operators like Transurban.

It has also spooked investors, sending the Transurban share price plummeting in late February and throughout most of March.

Is Transurban’s value set to soar?

Things are looking up for the Aussie infrastructure group with the easing of restrictions. Given the S&P/ASX 200 Index (ASX: XJO) has slumped 13.60% lower, Transurban is outperforming by nearly 10% this year. 

This optimism could push the Transurban share price higher, boosting its market capitalisation beyond $39.22 billion.

I think one big tailwind for Transurban will be the way in which we adjust to life as COVID-19 restrictions are eased. Governments are trying to reduce public transport numbers amid fears large numbers of people in close contact could spark a second wave of the pandemic. 

This should result in more people driving to work and, therefore, using Transurban’s roads. That’s good for earnings but it’s not as clear cut as it may seem.

Transurban operates 18 roads and projects across Australia and North America. This means there could still be a substantial earnings hit depending on how each region manages the easing of restrictions.

So whilst there are some strong, potential tailwinds for the Transurban share price in 2020, I feel there could be a few more ups and downs on this particular rollercoaster until the August earnings season.

Foolish takeaway

The Transurban share price could be right in the buy zone. I think it’s a speculative buy at $14.34 per share, but it does have the potential to provide both income and growth to a diversified portfolio.

More reading

• Should you ever buy ASX shares at an all-time high?
• 3 quality ASX dividend shares for income investors to buy today
• 5 things to watch on the ASX 200 on Thursday
• Is the Ampol share price in the buy zone?
• New to investing? Put $500 into these top ASX 200 shares

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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 Is the Transurban share price a buy today? appeared first on Motley Fool Australia.

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Over the last few weeks, ASX 200 shares have been on a tear, rising over 27% from the lows we saw back in March.

Accompanying this meteoric rise in the S&P/ASX 200 Index (ASX: XJO) has been a few new records – specifically some ASX shares making new, all-time highs.

Not 52-week highs, all-time highs.

It’s strange to think this is happening during these uncertain times, but it is.

Afterpay Ltd (ASX: APT), for one, hit a new all-time high above $50 per share on Tuesday. The fact that it was only in March this company was trading at under $9 per share makes this even more remarkable.

Fortescue Metals Group Ltd (ASX: FMG) wasn’t far behind, setting a new record of $14.13 per share last week.

Other ASX shares entering the record books recently include Pushpay Holdings Ltd (ASX: PPH), Evolution Mining Ltd (ASX: EVN) and Kogan.com Ltd (ASX: KGN).

Watching a share reach a new high is exciting – particularly if you already own it. But it can also be disheartening if you have a certain company on your watchlist.

But some ASX shares are seemingly at ‘all-time highs’ more often than they’re not. As an investor who has been watching CSL Limited (ASX: CSL) for years, waiting for a ‘buy-the-dip’ opportunity, I can tell you from personal experience it can be frustrating.

So is it ever ok to buy an ASX share when it’s trading at all-time highs?

Should you ever buy ASX shares at all-time highs?

Normally, I think buying shares when they are at all-time highs is a bad idea. Most ASX shares fluctuate in the eyes of the market, and thus buying opportunities often emerge sooner or later. This is particularly true for ASX resources shares and other highly cyclical companies.

But there are exceptions to this rule. After all, there was a time when Afterpay was at ‘all-time highs’ at $12 per share. Or when CSL hit $200 per share and everyone called it ‘overvalued’. Today these prices seem like bargains – but they certainly didn’t at the time.

So if you have found a company that’s growing fast, and you can see it continuing to grow well into the future, then perhaps an investment at all-time high prices is justified. But it will probably only turn out well if you have a long-term mindset. Furthermore, you really have to know the company back-to-front in order for your bullish outlook pay off.

More reading

• Is the Transurban share price a buy today?
• Have $4,000? Invest in these 4 ASX shares right now
• CSL share price on watch after Thermo Fisher deal
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 edges down, bank share prices fly

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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If you’re looking for a source of income in this low interest rate environment, then the three dividend shares listed below could be great options.

I believe all three would be great additions to a balanced portfolio. Here’s why I would buy them:

Coles Group Ltd (ASX: COL)

One of my favourite dividend shares is Coles. I believe the supermarket operator is well-positioned to grow its dividend at a solid rate over the next decade. This is thanks to its defensive earnings, refreshed strategy, expansion opportunities, and its investment in automation. Combined with its long track record of same store sales growth, I believe the future is bright for Coles. At present I estimate that its shares offer a fully franked 4% FY 2021 dividend.

Transurban Group (ASX: TCL)

Income investors that can afford to be patient might want to consider buying this toll road operator’s shares. It may have experienced a very sharp reduction in traffic volumes on its roads during the pandemic, but I expect traffic to rebound as restrictions ease. And while I suspect that a final distribution may not be forthcoming, I believe the payments will start flowing again in FY 2021. I expect a 45 cents per unit distribution next year, before an increase to previous levels in FY 2022. The former implies a forward 3.1% distribution yield.

VanEck Vectors Australian Banks ETF (ASX: MVB)

If you’re wanting to invest in the banking sector but aren’t sure which bank to buy ahead of others, then the VanEck Vectors Australian Banks ETF could be a great option. This is because this exchange traded fund lets you buy a slice of the big four banks through just a single investment. It also provides investors with exposure to the regional banks and investment bank Macquarie Group Ltd (ASX: MQG). I estimate that its units currently provide a yield of at least 5%.

More reading

• The Aussie dollar just hit an 8-week high. Here’s how it affects your ASX shares
• Where will the Coles share price be in 1 year?
• 3 exciting ASX growth shares to buy in June
• 3 quality ASX 200 blue chip shares to buy right now
• The one sector that could experience a V-shape COVID-19 recovery

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Transurban Group. 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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Do you have $4,000 to invest? I think that there are a few ASX shares that could be perfect buys right now in the current economic conditions.

Some shares are back to their pre-coronavirus highs even though they’re facing some potential troubles this year. I think these shares could be good opportunistic buys today:

iShares S&P Global 100 (ASX: IOO)

This is an exchange-traded fund (ETF) which invests in 100 of the biggest businesses in the world, no matter which country they come from. It’s invested in shares like Microsoft, Facebook, Alphabet, Amazon, Nestle, LVMH, Novartis and so on.

Many of the best businesses are located outside of Australia, we can’t directly invest in them on the ASX like we can with ASX shares. But it’s still possible to indirectly buy them on the ASX.

As a group I think the biggest 100 businesses, whichever names make up that list, will get bigger and more economically powerful over time.

I think it could be a good time to buy this ETF because the Aussie dollar has gotten a lot stronger. It’s good to buy international shares when Aussies have stronger buying power.

Brickworks Limited (ASX: BKW)

Investors are very pessimistic about the construction industry right now. And rightly so – a downturn is expected in the coming months. But I don’t think construction will be permanently be in the doldrums. So I believe it’s a good time to be a contrarian investor for this side of the ASX share’s business.

However, I think Brickworks is a very dependable business because of its other assets. The value of its Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares and its 50% stake of the industrial property trust more than makes up the Brickworks market capitalisation. Those two assets provide solid cashflow, will allow Brickworks to pay a reliable dividend to shareholders until construction returns.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is one of the most promising growth ASX shares right now. The electronic donation business predominately services large and medium US churches. At the moment there is an accelerated shift to digital giving away from cash giving. This is really benefiting Pushpay.

The company is now expecting that earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to double in FY21. That’s impressive growth in just one year. And there could be plenty of growth in the years ahead for this ASX share.

Over the longer-term it’s targeting a $1 billion revenue opportunity. That’s a large market for an ASX share.

Bubs Australia Ltd (ASX: BUB)

Bubs is another infant formula business which is starting to grow strongly overseas. It has a growing portfolio of products to sell to customers. Quarter on quarter revenue is growing at very impressive double digit numbers.

What I’m particularly attracted to at the moment is how much growth there is in ‘other markets’. In other words, markets away from China. Vietnam alone is proving to be an exciting market for Bubs. The huge Chinese market can be a blessing or a curse depending on how companies play it, and how they’re treated by China. 

Bubs generated a positive operating cashflow in the March 2020 quarter. If it can keep generating a positive cashflow each quarter from here then it’s an even more attractive ASX share than it was a few months ago.

Foolish takeaway

I’m a fan of all four of these ASX shares. I believe Bubs and Pushpay have great prospects for the next few years. Meanwhile, Brickworks looks very cheap for a recovery buy. I’d buy all of them for my portfolio. 

More reading

• If the ASX 200 crashes again, which shares should you sell?
• Should you ever buy into an ASX IPO?
• 3 ASX dividend shares to diversify your income
• 3 exciting ASX growth shares to buy in June
• 2 ASX shares that are absurdly cheap right now

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