In the long-term the best way to grow your portfolio is with 'growth' shares. Businesses that are re-investing for growth and have growing returns on equity are excellent ideas for market-beating holdings.
I can understand if investors want to avoid small caps, they may appear too risky. But, I wouldn't want to invest in large caps that are essentially done growing, as they aren't going to compound their earnings strongly.
Large cap growth shares should be able to offer both growth and security:
Challenger Ltd (ASX: CGF)
I think Challenger is the best way to get exposure to Australia's growing wealth and retiring population. Each year the company reports growing annuity sales and growing assets under management (AUM), which leads to growing management fees for Challenger.
With the number of people over 65 (retirement age) set to grow by 75% over the next 20 years it's likely Challenger could anticipate a similar sort of growth in demand for its products.
Challenger is currently trading at 14x FY19's estimated earnings with a grossed-up dividend yield of 4.64%.
REA Group Limited (ASX: REA)
REA Group is the best way to get exposure to the property market without having to own a property in my opinion. It owns the market-leading site realestate.com.au but it also runs realcommercial.com.au and flatmates.com.au.
It is on a path for more growth with higher fees for ads on its sites, investments in overseas sites and diversification into areas like mortgage broking.
REA Group is currently trading at 30x FY19's estimated earnings with a grossed-up dividend yield of 1.78%.
Ramsay Health Care Limited (ASX: RHC)
Ramsay is Australia's largest private hospital operator and one of the largest in the world with its hospital networks in the UK and France.
This is another business that should benefit from Australia's ageing population as long as the cost of private health insurance can be brought under control. More elderly patients should mean more revenue and profit over the long-term.
Ramsay is currently trading at 20x FY19's estimated earnings with a grossed-up dividend yield of 3.12%.
Foolish takeaway
All three shares are high quality businesses with long-term growth plans, I think they all have market-beating potential. REA Group is trading a bit too expensively for me to consider buying it at the moment, but Challenger is looking much more attractive in the $10s whilst Ramsay is also better value than it has been for several years.
