BLDP:CC - Want $1 Million in Retirement? Invest $50000 in These 2 Stocks and Wait a Decade

2023-12-06 16:10:00 ET

The way stock markets work, time in the market is more important than timing the market. If you want to convert $50,000 into $1 million in 10 years, your portfolio has to give you a compounded annual growth rate (CAGR) of 35%. However, the 10-year CAGR of the TSX Composite Index is 4.4% and 20% for iShares S&P/TSX Capped Information Tech Index ETF . The stock market is risky. But you have to invest in risky high- growth stock to get a 35% CAGR in a decade.

How to prepare a returns target for a $1 million retirement portfolio

It is difficult to identify a stock that can give a 35% CAGR from a stock. If your portfolio generates a lower return, the time required to convert a $50,000 investment to $1 million will increase. It is always better to consider all scenarios and prepare for everything. Because as value investor Warren Buffett says, “Risk comes from not knowing what you’re doing.”

I have prepared a table of various scenarios of different returns CAGR and the years it will take to reach $1 million:

I calculated annual returns at 35% to determine the number of years.

The first year calculation was $50,000 x 1.35 = $67,500.

Since it is a CAGR, next year’s calculation started from the previous year’s close: $67,500 x 1.35.

Just keep multiplying the previous year’s returns with 1.35, and when the amount crosses $1 million, you know the number of years it will take.

You can use this formula and tweak your CAGR or investment amount depending on how your portfolio is performing. A stock won’t give a consistent 35% return every year. Some years could see a decline, and some could see a significant surge.

Two growth stocks to buy and wait for a decade for a $1 million portfolio

It is difficult to determine a high-growth stock, as a 35% CAGR return needs a business in the growth stage with the potential to scale successfully. I have identified two such stocks that have the potential to be high-growth stocks.

Advanced Micro Devices

AMD ( NASDAQ:AMD ) is a stock with significant growth potential, as it has proven in the last nine years with its turnaround since Lisa Su took over as chief executive officer. Between October 2014 and October 2023, a $10,000 investment would be $317,000 by now, growing at 46.8% CAGR. Since the stock has already achieved its turnaround rally, such a CAGR is difficult to replicate. But a 30-35% CAGR is possible as secular trends of artificial intelligence and 5G drive demand for data centres and embedded chips.

The one area that could drag its returns in the short term is its high exposure to the declining PC and laptop chip market. While PCs and laptops will continue to grow, their growth rate will slow as most of the demand comes from replacement. You can buy the stock now and even when it dips due to short-term headwinds.

Ballard Power Systems stock

Apart from a turnaround stock that still has its moat, a company making revolutionary technology can see significant growth. But most of its growth will likely come in the later years. Canada’s Ballard Power Systems ( TSX:BLDP ) has been working on hydrogen fuel cells for decades and has successfully tested it on commercial vehicles and marine.

The hydrogen fuel industry is currently facing infrastructure and supply chain bottlenecks. However, several major infrastructure investments are progressing. Germany and Norway plan to replace Russia’s natural gas and coal with hydrogen pipelines. Australia and many other countries are actively investing in hydrogen fuel, as it has the potential to give a nation energy security while reducing carbon emissions.

While Plug Power is leading in the hydrogen space, Ballard Power Systems is also an attractive investment. Once the hydrogen fuel cells become mainstream, BLDP stock could surge severalfold and surpass the 35% CAGR target.

While I would not suggest investing $25,000 in BLDP, given its high risk, you can invest $10,000 and wait for a decade.

The post Want $1 Million in Retirement? Invest $50,000 in These 2 Stocks and Wait a Decade appeared first on The Motley Fool Canada .

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Advanced Micro Devices. The Motley Fool has a disclosure policy .

2023