Who doesn’t want to double their money over and over again? I’m not just talking about saving money on your paychecks. If you save $ 300 per month, it will take you two months to double your savings of $ 300 from the first month. With savings of $ 600, it will take you another two months to double your savings to $ 1,200. The more your savings reserve increases, the longer it will take you to double your money.
Let your money work hard for you too. Invest your money.
The rule of 72 approximates the time it takes to double your money based on your estimated return per year. So if you earn 2% per year from GICs, it will take you around 36 years to double your money. It’s a long time!
But if you plan to generate 20% per year from your investments in stocks, it will take you around 3.6 years to double your money. This means that if you invest $ 10,000 now and earn 20% per year on the investments, the $ 10,000 will double to around $ 20,000 in 3.6 years. Continuing on the 20% rate of return, the $ 20,000 will double to $ 40,000 in another 3.6 years, or four times your initial investment in about 7.2 years.
The problem is, it is difficult to maintain such a high rate of return for many years. Only the best investors, like Warren Buffett and Peter Lynch, have had this kind of outperforming annualized returns for more than a decade.
Certainly, stocks are likely to deliver double-digit growth. Think about growth stocks such as Alphabet, Amazon, Facebook, Netflix, and Shopify. However, your portfolio could end up being too focused on these large cap stocks if returns are what you are looking for.
Feedback is not everything. Investors should consider risk management when allocating money in their equity portfolios. For example, how will the portfolio behave in the face of bear markets?
Small-cap stocks can double your money much faster than high-growth, large-cap stocks. For example, a $ 10,000 investment in Speed of light the share since its IPO in early 2019 would have reached more than $ 60,000! Another awesome tech stock that you should check out is Docebo. It’s also a six-bag since 2019!
A tech stock that could double your money
Open text (TSX: OTEX) (NASDAQ: OTEX) is a tech stock that has doubled investor money over and over again over the long term. Since 2000, the dividend stock has almost been a sack of 18 for investor money, equivalent to annualized returns of almost 15%.
The question is whether double-digit growth can continue. Let’s quickly review the recent results of the tech stock. In fiscal 2021, it increased revenue 9% to US $ 3.4 billion, while increasing Adjusted EBITDA, a cash flow indicator, by more than 14% to US $ 1.3 billion. US dollars on a strong Adjusted EBITDA margin of 38.8%.
Free cash flow fell 8% to $ 812 million over one year, but that’s more than enough to cover its growing dividend on a 26% payout ratio. With strong dividend coverage, management proudly increased the dividend by 10% this month.
Open Text is a solid name to buy for long term price appreciation and dividend growth. It could potentially grow by 10 to 15% per year over the next few years. The stock is slightly discounted today. So if you like it, buy some stocks and consider buying more on the dips.
Madness to take away
There are many opportunities for high growth in tech stocks and small cap stocks. While quickly doubling your money in these stocks would be exhilarating, they could introduce more volatility to your portfolio. Volatility itself is not risky if you can handle it. The real risk is the weakening of the fundamentals of the company in times of bad economic times or investors sell at a loss or below the intrinsic value of a company in bear markets.
It would be great if ordinary investors could achieve on average annualized returns of at least 13% over the long term in a diversified portfolio. This rate of return will allow you to double your money every 5.5 years or less. Remember that regularly investing new money in stocks with high growth potential will also help you to double your money faster.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the board of directors of The Motley Fool. Suzanne Frey, executive at Alphabet, is a member of the board of directors of The Motley Fool. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of its CEO, Mark Zuckerberg, is a member of the board of directors of The Motley Fool. The Motley Fool owns shares and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Facebook, Lightspeed POS Inc, Netflix and Shopify. The Motley Fool recommends Lightspeed POS Inc., OPEN TEXT CORP and Open Text and recommends the following options: January 2022 long calls at $ 1,920 on Amazon, $ 1,140 long calls in January 2023 on Shopify, short calls in January 2022 to $ 1,940 on Amazon and short in January 2023 $ 1,160 of calls to Shopify. Foolish contributor Kay ng owns shares of Amazon, Facebook, Netflix and Shopify.