The strongest financial tool for anyone to grow their wealth over the long-term is compounding. Giving your investment the time it needs to grow is the best thing you can do for your finances.
Many people don't start thinking about investing until they're in their 30s or even 40s. That's a lot of compounding that they've missed out on. What if you could start compounding as a ten year old, five year old or even one year old. That would give a child many years of compounding by the time they reach 20 or 30.
Deciding what to invest in for a child is just as difficult, if not more difficult, than deciding what to invest in for yourself. The investment needs to be something that will be relevant in at least a decade's time, perhaps two decades or even longer.
Here are three shares that I'd be very happy to buy for my child:
BETANASDAQ ETF UNITS (ASX: NDQ)
This is an exchange-traded fund which invests in the 100 biggest companies on the NASDAQ. Technology companies are a huge part of our everyday lives, whether it's our smartphones, office computers or laptops at home.
One way to get children excited about shares is knowing that they own a tiny piece of companies that produce things they use every day. Apple, Alphabet (Google), Facebook, Microsoft and Amazon should all continue to be excellent investments over the long-term.
Costa Group Holdings Ltd (ASX: CGC)
Costa is one of Australia's largest food producers. It grows a variety of food types like mushrooms, tomatoes, berries, citrus fruit and avocadoes. I could have gone for a growth stock like Domino's Pizza Enterprises Ltd (ASX: DMP), but I think it's a better idea to teach the idea that you can profit from healthy eating.
Costa could be a good long-term growth option as demand for food grows with the population, particularly healthy food.
Vanguard MSCI Index International Shares ETF (ASX: VGS)
Perhaps the best way to ensure the share remains relevant for decades is to choose an investment that invests in the whole global share market and changes its holdings as more businesses are created.
Vanguard provides extremely low-cost investment products and the fund I've mentioned invests in all of the top North American shares, European shares and Asian shares. I expect this ETF will be around for many years after I check my portfolio for the last time.
Foolish takeaway
I'd be happy to invest in any of the above three shares for my child. The NASDAQ index may generate the most returns over the next few years but I'd rather invest in the Vanguard fund because the 'next big thing' may be on a stock exchange other than the NASDAQ.
