ASX growth shares could be the way to go to deliver strong returns over the longer-term.
Compounding is a very powerful financial force, which can help grow our wealth. Many investors can underestimate how strong compounding can help by the time we get to, for example, year five in a growth journey.
If I were looking for ASX growth shares that could deliver impressive returns in the short-term and long-term, these would be two that I’d go for:
Xero Limited (ASX: XRO)
Xero is one of the world’s leading online accounting software providers.
It started in New Zealand but it’s now in numerous countries including Australia, the UK, the US, Canada, Singapore, South Africa and more.
The great thing about Xero’s business model is that it has already developed its accounting and business platform, so new subscribers are largely just additional profit makers for the company, considering it has a gross profit margin of close to 90%.
Over the past decade, the ASX growth share has been heavily focused on growth, but it’s not going to be more measured with its spending – management have guided that the expense to revenue ratio is going to lower and improve.
With profit now much higher on the agenda, I believe the market will come to appreciate how much cash flow the business will be able to generate.
Vaneck Morningstar Wide Moat ETF (ASX: MOAT)
This is one of my favourite exchange-traded funds (ETFs) when it comes to the potential for capital growth.
It’s designed to target businesses that appear to be undervalued, according to Morningstar analysts. But, those analysts only consider an investment for the portfolio if the business’ competitive advantages are almost certain to endure for the next decade, and probably for the next two decades.
The investment portfolio is focused on quality US shares at a good price, and it has performed very well over the long-term, though past performance is not a reliable indicator of future performance. The MOAT ETF has returned an average of 15.2% per year over the prior three years.
I think this ASX growth share can keep performing very well.