As I’ve mentioned previously, a $5,000 investment once a year over a long period has the potential to grow into something significant due to the power of compounding interest.
According to research by Fidelity, as of December 31, the Australian share market had generated an average total return of 9.1% per annum over the last three decades.
Based on this return, an investment of $5,000 each year for a period of 30 years would have grown to be worth a total of $760,000 today.
I believe this shows just how rewarding long-term buy and hold investing can be.
With that in mind, here are three shares to buy with that first $5,000:
Appen Ltd (ASX: APX)
I think investing $5,000 into the shares of this global leader in the development of high-quality, human-annotated training data for machine learning and artificial intelligence could prove very rewarding over the long term. I expect its shares to provide strong returns for investors over the next decade thanks to its position in an artificial intelligence market which is expected to grow to be worth up to US$191 billion by 2025. Management estimates that 10% of the market relates directly to Appen’s services, which will give it an addressable market of US$19.1 billion in six years. Overall, I believe this means it is well-placed to continue its impressive earnings growth for many years to come.
Cochlear Limited (ASX: COH)
Another top option for that $5,000 could be this leading global hearing solutions company. Although its shares trade at a lofty 41x estimated full year earnings, I remain confident that its exposure to the ageing population tailwind and its market leading products have positioned it perfectly to deliver long-term earnings growth that more than justifies this premium. All in all, I think Cochlear is one of the best buy and hold options on the market right now.
Webjet Limited (ASX: WEB)
Webjet could be another great option for investors this week. The online travel agent has been growing at an impressive rate over the last few years thanks to the increasing popularity of its travel booking brands and the shift to online booking by consumers. Pleasingly, this positive form has continued in FY 2019, with management recently reaffirming its full year EBITDA guidance of $120 million. This will be a 37% year on year increase. I think this makes its shares great value at 30x estimated full year earnings.
And here are five more shares that could be great options for that $5,000. They were all recently tipped as buys by a leading analyst.
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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 Cochlear Ltd. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and Webjet Ltd. 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 Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019