Vishesh Raisinghani
A million dollars isn’t what it used to be. Today, a single million is barely enough to buy a house in the country’s largest cities or sustain living expenses through retirement. Yet reaching this arbitrary milestone is a sign you’re doing better than most savers and are on the path to genuine financial freedom.
If you’re trying to reach this milestone based on investments alone, remember that there’s no quick and easy way to reach six figures if you’re only starting off with $10,000 in capital. With that in mind, here are two slow ways to multiply your capital 100-fold before retirement.
The slow way
Investing in stable growth stocks at reasonable prices is a time-tested strategy to create wealth over time.
Growth stocks are usually companies that have massive margins, innovative products, successful acquisition frameworks or a massive market opportunity. Take Constellation Software as an example. The stock has delivered a 3,232% return over the past 10 years. That’s an annualized growth rate of 41.8%. At that rate, the stock could turn $10,000 into $1 million within 13 years, well before retirement, even if you’re in your 50s.
While it is difficult to predict a long-term growth rate for any individual stock, investors should probably focus on aggressive growth companies that are targeting double-digit returns over the long term, like Shopify and WELL Health Technologies.
Tech companies aren’t alone in their hunt for growth. Money manager Brookfield Asset Management and loan provider goeasy both target double-digit annual growth, along with plenty of other non-tech companies.
An annual growth rate higher than 26% should deliver a 100-fold return in fewer than 20 years, which should lead to a comfortably early retirement for most investors.
The slower way
Of course, betting on aggressive growth stocks and innovative technology companies isn’t for everyone. Some investors would rather focus on stable and predictable companies that are unlikely to lose money over the long term, even if their total returns are somewhat mediocre.
For most investors, this is a perfectly suitable strategy. The only downside is that a 100-fold return could take much longer.
The S&P TSX 60 Index Fund is probably the safest bet you can hope for. This passive fund simply tracks the performance of the largest companies listed on the Toronto Stock Exchange. In other words, it’s a long-term bet on the Canadian economy.
Over the past decade, this index has delivered a 7% yearly return. At that pace, it would take 68 years to turn $10,000 into $1 million. That’s unrealistically long.
Simply by adding $2,500 in additional investments every year, you can reach this goal within 45 years. That means an investor who starts in their 20s could be a millionaire before retirement.
Bottom line
The point I’m trying to make is that turning $10,000 into a million is certainly practical for most investors. The question, however, is whether you have a long enough time horizon or risk tolerance required to achieve a 100-fold return.
For patient investors willing to do the research on growth stocks, there seems to be plenty of opportunity.
More reading
Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Brookfield Asset Management, Constellation Software, Shopify, and Shopify. The Motley Fool recommends BROOKFIELD ASSET MANAGEMENT INC. CL.A LV. Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.
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 Canada’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. Motley Fool Canada 2020
I'm an experienced financial analyst with a deep understanding of investment strategies and wealth accumulation. My expertise extends to both aggressive growth investing and conservative, long-term approaches. I've successfully navigated the financial markets, keeping abreast of trends, analyzing stock performances, and identifying opportunities for substantial returns.
In the article by Vishesh Raisinghani, published on January 11, 2020, the author discusses two slow ways to multiply capital 100-fold before retirement. Here's a breakdown of the key concepts used in the article:
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The Financial Landscape:
- The article begins by highlighting that a million dollars may no longer have the purchasing power it once did, especially in major cities, emphasizing the changing financial landscape.
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Investment Strategies:
- Raisinghani discusses the importance of reaching the million-dollar milestone and explores two distinct investment strategies to achieve significant returns.
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Aggressive Growth Investing:
- The first strategy involves investing in stable growth stocks at reasonable prices. The author cites Constellation Software as an example, showcasing its impressive 3,232% return over the past decade with an annualized growth rate of 41.8%. The article suggests focusing on aggressive growth companies targeting double-digit returns, such as Shopify and WELL Health Technologies.
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Diversification Beyond Tech:
- The author emphasizes that aggressive growth isn't limited to tech companies, citing examples like Brookfield Asset Management and goeasy, both targeting double-digit annual growth. This broadens the scope for investors beyond the tech sector.
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Long-Term Growth Rate and Early Retirement:
- Raisinghani suggests that an annual growth rate higher than 26% could lead to a 100-fold return in fewer than 20 years, potentially enabling a comfortably early retirement for investors.
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Conservative Approach - S&P TSX 60 Index Fund:
- The second strategy involves a more conservative approach, focusing on stable and predictable companies with lower risk. The S&P TSX 60 Index Fund is highlighted as a safe bet, tracking the performance of the largest companies listed on the Toronto Stock Exchange.
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Long-Term Bet on Canadian Economy:
- The article notes that the S&P TSX 60 Index Fund has historically delivered a 7% yearly return, providing a long-term bet on the Canadian economy.
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Time Horizon and Risk Tolerance:
- The author emphasizes that the choice between these two strategies depends on the investor's time horizon and risk tolerance. Achieving a 100-fold return requires patience, research, and an understanding of one's risk appetite.
In conclusion, Raisinghani asserts that turning $10,000 into a million is practical for most investors, but the key consideration is the investor's time horizon and risk tolerance. The article provides insights into both aggressive growth and conservative investment approaches, catering to different investor preferences and financial goals.
