For nearly all of us, getting to play for a professional sports team or writing a best-selling book or winning an Academy Award is just a pipe dream -- it's not likely to happen. But there are still some wonderful life achievements that are within our grasp -- such as retiring a millionaire.
Given sufficient time and effective saving, most of us can become millionaires, and we can get there simply by investing in the overall stock market -- perhaps via a low-fee S&P 500 index fund. Your portfolio might grow extra-fast, though, if you include some companies that are growing briskly (and continue to do so).
Image source: Getty Images.
Growing a million dollars
Before naming any promising companies, here's a look at just what it takes to amass a million dollars. It all depends on three factors:
Your investing time frame
Clearly, the longer your investments can grow, the bigger your nest egg will become. That's why it's best to start early -- even in your 20s -- as that might even permit you to retire early.
The growth rate of your investments
If you save and invest aggressively for decades, but your money only grows by 1% or 2%, you might still not achieve millionaire status. The stock market, over many decades, has averaged an annual gain of close to 10%. That's a good goal to shoot for, though the market may average less (or more) over your investment period.
How much you invest
Finally, how much you invest also matters a lot. The table below shows how much you might amass saving different sums regularly over various periods:
|
Growing at 8% for |
$10,000 invested annually |
$15,000 invested annually |
$20,000 invested annually |
|---|---|---|---|
|
5 years |
$63,359 |
$95,039 |
$126,718 |
|
10 years |
$156,455 |
$234,683 |
$312,910 |
|
15 years |
$293,243 |
$439,865 |
$586,486 |
|
20 years |
$494,229 |
$741,344 |
$988,458 |
|
25 years |
$789,544 |
$1,184,316 |
$1,579,088 |
|
30 years |
$1,223,459 |
$1,835,189 |
$2,446,918 |
Data source: Calculations by author.
That table assumes an 8% average annual growth rate, which you can hope to achieve with a long-term index fund investment. Below are three companies to consider investing in, to help you become a millionaire by retirement. Each has grown at a faster clip than the overall market, and seems poised to continue doing so.
1. Amazon.com
Online commerce juggernaut Amazon.com (AMZN -1.65%) has clearly been growing at a rapid clip for a long time. The 20-year average annual growth rate in its stock price was recently 26.3% -- enough to turn a single $10,000 investment into $1 million. It can be hard for companies to grow as briskly as they did in the past, once they grow large -- but over the past decade, Amazon's average annual growth rate has been even steeper -- 33.8%. (To compare, the S&P 500 averaged 6.9% and 13.9%, respectively (with dividends reinvested) over the past 20 and 10 years.) No one should expect average annual gains of 25% or more over the next decade, but Amazon offers many reasons to expect market-beating growth for the foreseeable future.
For example, it's firing on all cylinders during the pandemic, with net sales in the third quarter surging 37% over year-ago levels to $96 billion, while net income tripled. The company has added a lot more workers and is planning to add 100,000 more permanent workers, who will receive at least the company's minimum wage of $15 per hour. While many, if not most, people associate it just with its online marketplace offerings, one of its biggest cash cows these days is its cloud-computing platform, Amazon Web Services (AWS), which grew 29% to $11.6 billion in the third quarter, and boasts a 33% market share in its industry.
Image source: Getty Images.
2. PayPal
PayPal (PYPL -1.14%) is another standout performer, averaging an annual growth rate of 37.1% since it was spun off from eBay in the summer of 2015. You probably assume that it's a reasonably major financial services company, as so many purchases you make online offer a PayPal option. But you probably don't know how big a business it is. For starters, its market value was recently $241 billion -- which tops the recent market value of Coca-Cola, Netflix, and AT&T and is more than twice that of Wells Fargo or Citigroup.
PayPal serves some 361 million active users globally (that's roughly the population of the United States) and in its third quarter processed about four billion transactions worth about $247 billion. On an annual basis, that would be about 12 billion transactions worth close to a trillion dollars. That's impressive enough, but note, too, that PayPal also owns Venmo, the fast-growing mobile payment system.
No. 3: Activision Blizzard
Activision Blizzard (ATVI) is a powerhouse in the video game industry, averaging an annual growth rate of 25.2% over the past 20 years and 21.8% over the past 10 years -- with dividends reinvested. Part of its long-term success is likely due to the fact that its products are kind of addicting -- not a bad business model to have! (Actually, a recent study found that only 10% of gamers can become actually addicted to playing, with negative consequences in their lives.)
If you're familiar with video games, you'll see some familiar names among Activision Blizzard's titles, many of which have become blockbuster hits. The company's titles include the Call of Duty, World of Warcraft, Hearthstone, Overwatch, Warcraft, StarCraft, Diablo, and Candy Crush franchises. In its last quarter, the company reported some 390 million monthly active users, with net revenue up 52% year over year. Activision Blizzard's future looks quite promising, with the video game market expected to grow by almost 13% annually between 2020 and 2027, per Grandview Research.
These three companies are all doing well, and are positioned to keep doing well for a long time. They're worth adding to your investment watch list, and perhaps even worth buying into now, if you see them as undervalued and you expect to hang on for the long term.
