Should I buy Xero and Zip shares with $10,000?

It has been a tough year for the two ASX growth shares in this article.

Both are down more than 50% from their 52-week highs, despite delivering strong results and having promising growth outlooks.

Here's why I think this is a buying opportunity for investors with $10,000 to put to work in the share market.

Xero Ltd (ASX: XRO)

I've always liked businesses that make themselves an important part of their customers' everyday lives.

And I think Xero has done a particularly good job of this.

For millions of small businesses, its accounting software helps manage everything from invoices and expenses to payroll and financial reporting.

Once a business has spent years building its financial records inside Xero, changing providers can become a considerable undertaking. That gives the company an opportunity to build lasting customer relationships.

But what I like most is how much more Xero could do for these businesses.

Small business owners spend an enormous amount of time managing administrative tasks. I think there is considerable potential for Xero to use artificial intelligence to make this work faster and easier.

Its acquisition of Melio also provides a way to expand further into payments, particularly in the enormous US market.

I like the idea of Xero becoming a place where business owners can manage more of their financial activities, rather than having to move between several different services.

There is also plenty of room to attract new customers, particularly outside its established Australian and New Zealand markets.

Of course, competition is fierce, and AI could eventually change how businesses approach accounting software. But I think Xero's established relationships with businesses and accountants give it a strong starting position.

With the shares having fallen so heavily, I would be happy investing for the next decade.

Zip Co Ltd (ASX: ZIP)

Zip is another ASX share I think could look substantially different in five or ten years.

The buy now, pay later provider has made impressive progress in the United States, and I think that market holds the key to its future.

What I find interesting is the opportunity to become a more familiar payment option for American shoppers.

When customers reach the checkout, they often have several ways to pay. Zip wants to become one of those everyday choices.

And as more retailers offer its services, the company has an opportunity to reach new customers and encourage existing users to make more purchases.

I think there is an opportunity on the merchant side, too. Retailers want payment options that help customers complete purchases. If Zip can demonstrate that its services support sales, it could strengthen existing partnerships and attract more businesses to its network.

The challenge will be managing that expansion responsibly. Higher interest rates can increase funding costs and squeeze margins, while pressure on household finances could lead to more missed repayments and bad debts.

I would want Zip to remain disciplined about the credit it provides, even if that means occasionally sacrificing some growth.

Nevertheless, I think the company's opportunity in the US is enormous.

If it can continue expanding while keeping credit losses under control, I believe today's share price could eventually look like an excellent entry point.

Foolish takeaway

I would be happy investing $10,000 across Xero and Zip shares today.

Both companies still have plenty to prove, and I wouldn't expect their share prices to recover overnight.

But I think the size of their opportunities gives them room to grow for many years. At their current prices, I would be comfortable buying both and giving them time to deliver.

The post Should I buy Xero and Zip shares with $10,000? appeared first on The Motley Fool Australia.

Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. 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. 2026