In the world of investing, figures in the billions and even trillions of dollars are often thrown around, but for retail investors, even $1 million is a lot of money.
If you can build a stock portfolio of up to $1 million in retirement, you may find that it’s a comfortable nest egg in addition to your Social Security benefits and 401(k) or other employer-sponsored plan.
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The key to achieving this is patience and persistence, but you also need to pick some great, high-performing stocks. To show you the value of time, if you had a 20-year time horizon before retirement, with an initial investment of $10,000 and monthly contributions of $100, you would have $1 million and an annual return of approximately 21%.
This doesn’t sound so far-fetched because Nasdaq Composite Index Over the past decade, the index has averaged annualized returns of 17%.
But if you start planning for retirement late and only have 10 years left to build up your savings, you obviously have some shortcomings to make. Here’s how you can do it in a decade, and three stocks that might help you get there.
Achieving your goals over a 20-year window requires only an initial investment of $10,000 and an annualized return of 21%. If you remove the 10 years of contributions and the time for compound growth to come into play, you would have to start with an initial investment of $50,000, contribute $100 per month, and generate an average return of 30%. This is obviously a more difficult rate of return to achieve.
It’s not easy to find stocks with the potential for a ten-year average annual return of 30%, but over the past 10 years, NVIDIA (Nasdaq: NVDA) did it, too Tesla and Broadcomand apple Very close.
Which stocks can do this over the next 10 years? In my opinion, Nvidia is still one of them.
Nvidia’s stock price has recovered somewhat. It’s down about 15% from its November peak, so its valuation has adjusted somewhat. But its advantage and wide moat in designing GPUs for data centers will remain, with various studies estimating that spending on artificial intelligence (AI) infrastructure will reach as high as $7 trillion by 2030.
For many of the same reasons, I will also TSMC (NYSE: TSM ) is on the list. As the world’s leading chip foundry, making semiconductors for Nvidia and other chipmakers, it has a nearly impenetrable moat. Today, it has about 67% of the third-party chip manufacturing market and produces about 90% of advanced artificial intelligence chips.
It also produces about 90% of the packaging needed for the chips. All of this will make it the center of the artificial intelligence boom in the coming years. Additionally, the stock is relatively cheap, trading at 32 times earnings and 24 times forward earnings.
The last stock in my trio that I can put aside and forget about for ten years is Microsoft (NASDAQ:MSFT). Like other stocks, it’s relatively cheap, trading at just 25 times earnings. Additionally, it is investing heavily in AI infrastructure and has been growing market share Amazon in cloud computing.
Additionally, it’s eyeing the next big thing, investing heavily, and positioning itself to compete in quantum computing when the technological revolution breaks out. With its size, resources and first-mover advantage, it could also become a major player in the space.
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Dave Kovaleski Has no position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon, Apple, Microsoft, Nvidia, TSMC, and Tesla. “Motley Fool” recommends Broadcom. Motley fool has a Disclosure policy.
Want a $1 million pension? Invest $50,000 in these 3 stocks and wait ten years. Originally posted by The Motley Fool