Nobody wants to get to retirement age only to realise they don’t have enough funds to live as comfortably as they had dreamed.

The good news is that this living nightmare doesn’t have to happen to you. By planning ahead and investing wisely in ASX shares, you could put yourself in a position to have a rich retirement.

Let’s take a look at three steps you could take to try and make this dream a reality.

Step one: Start as early as you can

Time is an investor’s best friend. The longer you have to allow compounding to do its thing, the less capital you need to deploy into ASX shares.

For example, if you have an investment time horizon of 30 years, then by investing $500 a month, you would grow your investment portfolio to a sizeable $1 million if you can generate an average total return of 10% per annum.

And while future returns are not guaranteed, this return is in line with historical averages. As a result, I feel it is reasonable to aim for this in the future.

Now imagine you only have 10 years to invest until retirement. Instead of making $500 monthly investments into ASX shares, you would need to put in $5,000 a month to get to $1 million if you achieve an average 10% per annum return.

Step two: Buy quality ASX shares for your retirement portfolio

If you’re wanting a rich retirement, then you ought to consider buying only the highest quality ASX shares for a balanced portfolio.

Traits to look for are strong business models, experienced and talented management teams, sustainable competitive advantage, and positive long-term growth outlooks.

These are the qualities that Warren Buffett looks for when he makes his investments. And given that he has doubled the market return since the 1960s, it’s fair to say that his investment strategy is tried and tested.

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

Step three: Reinvest dividends

While getting a pay check every six months from your ASX shares is undoubtedly very nice, unless you absolutely need these dividends, you should consider reinvesting them into the market.

That’s because if you take them out, you’re stopping them from compounding each year along with the rest of your funds. This will slow down your wealth creation and could leave you with less in your retirement portfolio than you were hoping to have come retirement time.

Let’s imagine that you have a 2% dividend yield across your investment portfolio. If you take those dividends out, your investment portfolio would only grow by 8% per annum (if you achieve a 10% total return).

Going back to our $500 a month investment example, this new growth rate would mean you end up with a portfolio valued at $710,000 after 30 years. That’s almost $300,000 that you have sacrificed by pulling out the dividends.

Overall, by following these three steps, investors have a good chance of retiring rich.

The post 3 steps to take for a rich retirement with ASX shares appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Goodman Group. 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.

Artificial Intelligence (AI) is revolutionising industries globally, and ASX AI stocks are reaping the benefits.

Savvy investors are increasingly looking beyond the tech giants directly involved in AI to companies providing essential infrastructure and services.

According to TAMIM Asset Management, these companies are often referred to as the ‘picks and shovels’ play, a nod to the entrepreneurial types who sold shovels to miners during the gold rushes.

Let’s explore two ASX stocks well-positioned to benefit from the AI boom: Southern Cross Electrical Engineering Ltd (ASX: SXE) and IPD Group Ltd (ASX: IPG).

ASX AI stocks in favour

Southern Cross Electrical Engineering is a prominent player in the Australian electrical contracting sector. It operates across the resources, commercial, and infrastructure markets.

While not directly involved in AI, it is well-placed to capitalise on the growing demand for data centres, as noted by TAMIM. Data centres are crucial for AI operations and require substantial electrical infrastructure.

The global data centre market is estimated to grow at a compound annual growth rate of 9.6% during the period 2023-2030, driven by the increasing adoption of cloud computing and AI technologies.

The market has recognised this potential. Southern Cross’s share price surged nearly 140% in the past year, reflecting strong market demand for its services. It is “riding a wave of AI momentum,” TAMIM notes.

Moreover, the company is expanding its business. Following its acquisition of MDE Group in June, management upgraded the ASX AI stock’s FY24 EBITDA guidance to $53 million.

Data centres are electrically dense, with electrical work comprising the largest component of construction costs,” according to TAMIM. The group has announced thirteen data centre awards totalling over $120 million in the last four years.

The company expects this growth to be sustainable, with further earnings growth anticipated in FY26 and beyond.

Beyond TAMIM, other experts are bullish on Southern Cross Electrical Engineering. It is rated as a strong buy according to the consensus of broker estimates on CommSec.

IPD is capitalising on AI infrastructure demand

IPD Group is an Australian distributor of electrical products and solutions. It plays a crucial role in energy management and automation.

As AI and data centres expand, IPG’s services are becoming increasingly critical, putting it at the forefront of TAMIM’s picks and shovels strategy. This, it says, could make it a potentially attractive ASX AI stock.

The company supplies essential electrical infrastructure products to the market. As noted by TAMIM, “IPD Group has demonstrated its capabilities in the data centre space by successfully completing projects such as supplying low-voltage switchgear for the Stack data centre.”

IPG expects robust earnings growth, with FY24 EBITDA projected between $39 million and $39.5 million. According to my colleague Kate,  the company could benefit from power shortages caused by AI-related demand.

The company has already completed several large data centre projects. TAMIM says this could be a tailwind as demand for cloud computing increases.

[IDP’s FY 2024] guidance reflects the company’s strong performance and the positive impact of its recent acquisitions, including EX Engineering and CMI Operations, which have strengthened its electric vehicle infrastructure team and expanded its customer reach.

In addition to TAMIM, Bell Potter analysts have a buy rating on IPD Group, with a $5.60 price target. According to CommSec, the consensus broker rating is a strong buy.

ASX AI stocks come in many shapes and sizes

Investing in ‘picks and shovels’ ASX AI stocks could be a sound strategy. Stocks like Southern Cross Electrical Engineering and IPD Group provide essential electrical infrastructure and services, positioning them as indirect beneficiaries of the AI revolution.

As always, consider your own personal financial circumstances before investing.

The post 2 ‘pick and shovel’ ASX stocks to cash in on the AI megatrend appeared first on The Motley Fool Australia.

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• Is this ASX small-cap stock an overlooked beneficiary of the AI boom?
• Why Alligator Energy, Data#3, Fisher & Paykel, and IPD shares are storming higher
• 2 of the best ASX growth shares to buy right now

Motley Fool contributor Zach Bristow 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 Ipd Group. The Motley Fool Australia has positions in and has recommended Ipd Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Goldman Sachs is one of the most highly respected investment banks out there.

Its analysts scour the globe for investment opportunities and then recommend them to investors.

While the broker has buy ratings on a number of ASX shares, it has a coveted list that is only for the crème de la crème.

That list is Goldman’s conviction list. In the Asia-Pacific region it currently contains 29 companies, with only four coming from the Australian share market.

One of those is cloud accounting platform provider Xero Ltd (ASX: XRO).

Why are Xero shares among the best in the Asia-Pacific region?

Goldman is feeling positive on the company due partly to its strong performance in FY 2024. The broker said:

Xero reported FY24 Sales/EBITDA +0.3%/+10% vs. GSe, while FY25 operating expense to revenue is expected to be 73% in FY25, in-line with GSe prior 72.6%. Rule of 40 exceeded (41%) and record EBIT margins delivered (2H24 of 21% vs. 10% in 1H24, 8% 2H23) as XRO benefits from strong revenue growth, cost controls and much lower than expected capex.

But the real reason to be positive is the company’s long-term outlook and huge market opportunity. Goldman highlights that with 4.16 million subscribers, Xero is only really scratching at the surface of its addressable market. This gives it a multi-decade runway for growth at a time when small businesses are digitising. It explains:

Xero is a Global Cloud Accounting SaaS player, with existing focuses in ANZ, UK, North American and SE Asian markets. We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM. Given the company’s pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – the stock is Buy rated.

Big return potential

According to the note, the broker currently has a conviction buy rating and $164.00 price target on Xero’s shares.

Based on its current share price of $130.94, this implies potential upside of 25.5% for investors over the next 12 months.

To put that in context, a $10,000 investment would turn into approximately $12,500 if Goldman is on the money with its recommendation.

All in all, it believes this makes Xero one of the best investment options in the whole Asia-Pacific region.

The post Why Xero could be one the best shares to buy in the Asia-Pacific appeared first on The Motley Fool Australia.

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

Given the cost of living crisis, it’s probable that many readers don’t have as much in their savings accounts as they would like.

But don’t worry if that’s the case because history shows that it’s possible to build a meaningful nest egg by following in the footsteps of Warren Buffett. Even when starting from zero.

Especially if you follow the Oracle of Omaha’s “golden rule” of investing.

What is Warren Buffett’s golden rule?

The legendary investor’s golden rule is very simple. The Berkshire Hathaway (NYSE: BRK.B) leader famously remarked:

Rule No. 1: Never lose money.

And to highlight just how important this rule is for investing, Buffett then adds:

Rule No. 2: Never forget Rule No. 1.

You might now be thinking that this golden rule isn’t very helpful because it’s so obvious and simple. But there’s actually more to it that first meets the eye.

That’s because when investing in ASX shares, it can be very tempting to chase big gains by investing in companies that people on message boards or Reddit (NYSE: RDDT) groups are touting as the next big thing and a way to get rich quickly.

Time and time again investors get sucked into these types of investments. And time and time again they will destroy significant wealth buying these highly speculative ASX shares.

You only need to look at companies like Brainchip Holdings Ltd (ASX: BRN) and Weebit Nano Ltd (ASX: WBT) to see this. Both of these semiconductor companies are attempting to compete with giants such as US$3 trillion Nvidia (NASDAQ: NVDA) in the chip market with comparatively minuscule budgets.

And so far, based on their insignificant revenue generation, they look unlikely to deliver on the grandiose goals that stock spruikers are saying is possible.

This has led to their shares losing approximately 50% and 65% of their value, respectively, over the last 12 months (and significantly more from their highs).

Why it’s important not to lose money

If you lose money, you have an uphill battle to get even again and then to compound your way to significant wealth.

For example, let’s imagine you make a single $20,000 investment into a balance portfolio of high quality ASX shares. If you can generate an average annual return of 10% for the next 30 years, you would end up with a portfolio valued at approximately $350,000.

Now imagine that you start with a $20,000 investment but lose 65% during your first year. At the beginning of year two you will have $7,000. If you now compound this amount for 29 years at 10% per annum, you would end up with an investment portfolio valued at approximately $111,000.

This means that the one gamble you took on a speculative ASX share in the first year has cost you $239,000.

How to grow your wealth

Instead of putting all your money on a speculative ASX share, investors might want to consider putting what they can into a balanced portfolio of high quality shares that have strong business models and sustainable competitive advantages.

This approach has served Buffett well over the years and there’s nothing to say that it won’t serve you equally well.

If you can do this with $500 a month, even starting from zero you would have a nest egg of $1 million in 30 years if you achieve a 10% per annum return. That return is of course not guaranteed but is in line with historical averages. So, it certainly is something to aim for.

Final thoughts

Overall, I think this shows the importance of not losing money recklessly with ASX shares.

Instead, investors ought to consider investing in quality, profitable companies that have sustainable competitive advantages and positive outlooks.

Resist temptation and grow your wealth slowly like Warren Buffett.

The post With nothing in my savings account, I’d use Warren Buffett’s golden rule to build wealth appeared first on The Motley Fool Australia.

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

New research shows 54% of Australians have little or no understanding of the tax concessions available within superannuation. This means they may be missing out on thousands of dollars in tax savings.

Women and Gen Zs are particularly affected, according to financial advisory firm Findex.

Its data reveals that 65% of women and 65% of Gen Zs have little to no understanding of tax concessions.

The research also shows that 28% of Australians have never added extra money to their superannuation.

The first thing to learn is that personal superannuation contributions (up to a cap) are taxed at just 15%.

This is far lower than the marginal tax rate that most Australian workers pay. This means that you can save significant money by clicking a few buttons online. Let’s find out more.

You’ll save on tax by adding money to superannuation

Daniel Slabicki, a senior manager at Findex, explains that individuals can make personal concessional (pre-tax) superannuation contributions up to a cap of $27,500 for the 2024 financial year (FY24).

These contributions include the compulsory Superannuation Guarantee payments made by your employer, any salary sacrifice amounts you have arranged, and any extra money you choose to add.

Say you contribute $8,000 of extra funds into superannuation. That money is then taxed at 15% within the fund. This leaves $6,800 to be invested by the fund according to your selected strategy.

When you fill in your tax return, you then claim a tax deduction for the $8,000.

Alex Duonis, a tax advisory partner at Findex, explains the impact:

A high earning taxpayer may obtain a tax deduction at a rate of up to 47.5% in respect of such super contributions but may only pay contributions tax at the fund level of 15%, thus generating a potential immediate tax arbitrage benefit of 32.5%.

It’s important to remember that after depositing your funds, you must fill in a Notice of Intent to Claim or Vary a Deduction for Personal Super Contributions form and send it to your superannuation fund.

The deadline to do this is the earlier of the date you lodge your income tax return and the last day of the income year after the income year in which you made the contributions (typically the following 30 June).

A few things to be aware of…

Slabicki says workers on high incomes should be mindful of the Division 293 tax.

He explains:

An additional 15% tax on concessional superannuation contributions applies to individuals who earn more than $250,000 per annum. High income earners should consider this when contemplating whether to make additional personal superannuation contributions this year.

Slabicki also points out that unused concessional caps from the past five years may be carried forward. This means you may be able to make additional concessional contributions above the $27,500 cap for FY24.

However, the total value of your superannuation must have been less than $500,000 on 30 June of the previous year to use the carry-forward benefit.

Matthew Swieconek, Findex Head of Investment Relations, says superannuation tax concessions allow workers to save more for their retirement in less time.

If you want to give your superannuation a boost, here are more ways to get money into your fund.

The post Saving tax through superannuation: What you need to know appeared first on The Motley Fool Australia.

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• Brokers name 3 ASX dividend shares to buy
• What will happen to CSR shares next week?

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 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.

If you are on the hunt for larger than average returns for your investment portfolio, then look no further.

That’s because the ASX shares listed below have been named as buys by analysts and tipped to rise materially from current levels.

Here’s what brokers are saying about them and just how high they think their shares could climb over the next 12 months:

Capricorn Metals Ltd (ASX: CMM)

Analysts at Bell Potter have put a buy rating and $6.53 price target on this gold miner’s shares. Based on its current share price of $4.46, this implies potential upside of almost 47% for investors over the next 12 months. The broker commented:

CMM is a sector leading gold producer with a strong balance sheet, a management team with an excellent track record of delivery and clear organic growth options to lift group production to 270kozpa. We retain our Buy recommendation.

Cedar Woods Properties Limited (ASX: CWP)

Over at Morgans, its analysts see a lot of value in this ASX property company’s shares. The broker currently has an add rating and $5.60 price target on them. This suggests that upside of 25% is possible between now and this time next year. An attractive 4%+ dividend yield is also expected by its analysts. Morgans commented:

CWP is a volume business and the demand for lots looks to be improving, with margins to invariably follow. CWP’s exposure to lower priced stock in higher growth markets sees further potential to drive earnings. On this basis, we see every reason for CWP to trade at NTA and potentially at a premium, were the housing cycle to gain steam through FY25/26.

Qantas Airways Limited (ASX: QAN) $6.11

Finally, Goldman Sachs thinks that this airline operator is an undervalued ASX share to buy right now. The broker has a conviction buy rating and $8.05 price target on its shares. Based on the current Qantas share price of $6.11, this implies potential upside of 32% over the next 12 months. The broker said:

We forecast a ~24% FY19-24e cumulative uplift in unit revenues (c. 4.4%pa), and ~50% drop-through of QAN’s A$1bn+ structural cost-out program. QAN’s current market capitalisation in line and enterprise value still 5% below pre-COVID levels. As such, we believe QAN is not priced for a generic recovery, let alone prospects for improved earnings capacity. We continue to see upside associated with substantially improved MT earnings capacity.

The post These ASX shares could rise 25% to ~50% appeared first on The Motley Fool Australia.

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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 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.

Not all S&P/ASX 200 Index (ASX: XJO) shares will stand the test of time.

For various company-specific and macroeconomic reasons, some companies that look promising today will not live up to that promise over the next decade.

Others, on the other hand, will find their products and services enjoying ever-increasing demand. And the best among those will already have a strong growth history behind them, with experienced management and sustainable business models.

It’s these ASX 200 shares that you can buy and then all but forget about it.

With that in mind, we look at two such companies I think investors would do well to buy and hold for the next 10 or more years.

Two quality ASX 200 shares to buy and hold onto

BHP Group Ltd (ASX: BHP) is the first outstanding ASX 200 share to buy and hold for the next decade.

Shares in the global mining giant have gained around 28% over the past 10 years.

While that may not be shooting the lights out in terms of share price gains, BHP has a lengthy track record as a reliable dividend payer. Those dividends and the BHP share price will fluctuate over the coming decade alongside the commodities price cycle.

Despite a sharp retrace in iron ore and coal prices, BHP shares currently still trade on a healthy 5.4% fully franked dividend yield.

And BHP has far more in its portfolio than iron ore and coal. While both commodities will remain in strong demand over the next decade, I think BHP’s growing copper ambitions and its world-class uranium assets will help drive ongoing success for the big Aussie miner for many years to come.

Which brings us to the second ASX 200 share to buy and hold for a decade, data centre developer and operator NextDc Ltd (ASX: NXT).

NextDc doesn’t pay dividends. At least, not yet.

But the NextDc share price has soared around 1,010% over the past 10 years.

Now, I’m not sure it can deliver that same kind of growth over the next decade. But it’s certainly possible.

That bullish assessment for this ASX 200 share is largely based on the ongoing AI revolution.

That’s because AI needs a home, too. The generative artificial intelligence chips that make it all work reside in data centres, and demand for next-generation data centres is booming to meet the requirements of AI technology.

This was reflected in NextDc’s half-year results. Among the highlights, revenue for the six months increased 31% year on year to $209 million, representing a new record high.

And the company is well-capitalised for further growth.

In April, the ASX 200 share successfully conducted a $1.3 billion capital raising to accelerate the development and fit-out of its key data centre assets in Sydney and Melbourne.

The post 2 outstanding ASX 200 shares to buy and hold for a decade 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 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.