I think that buy and hold investing is one of the best ways to grow your wealth.
And it's important to note that you don't have to make big investments in ASX shares to make the strategy work for you.
If you can afford to invest $500 into the share market each month, you could grow your wealth materially over the long term.
For example, based on an expected (but not guaranteed) return of 10% per annum, which is in line with historical averages, $500 monthly investments would compound into the following:
- 10 years – approximately $100,000
- 20 years – approximately $360,000
- 25 years – approximately $620,000
- 30 years – approximately $1 million
This means that someone in their early 20s could be a share market millionaire by their early 50s if they have the patience and discipline to follow the investment strategy over the long term.
But which ASX shares would be good options for that first $500 investment? Let's have a look at two that could be worth considering:
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CSL Ltd (ASX: CSL)
CSL is arguably one of Australia's highest quality companies. It is a biotherapeutics giant with operations spanning plasma therapies (CSL Behring), vaccines (CSL Seqirus), and iron deficiency and nephrology treatments (CSL Vifor).
Analysts at Macquarie think now could be a great time to invest. After a tricky post-COVID period, the broker believes that the stars are now aligning and CSL is destined to deliver mid-teen earnings growth for the next five years.
In light of this, the broker has put an outperform rating and $330.00 price target on its shares. However, it may not stop there. That's because Macquarie believes that this strong growth outlook could lead to the ASX share rising beyond $500 within three years.
Xero Ltd (ASX: XRO)
Another ASX share that could be a great buy and hold option for that $500 investment is Xero. It is a leading cloud accounting platform provider with a huge growth opportunity.
For example, Goldman Sachs believes that Xero is "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."
As a comparison, the company currently has 4.16 million subscribers and annualised monthly recurring revenue of just under NZ$2 billion.
Goldman currently has a conviction buy rating and $180.00 price target on its shares.
