Investing in 2020 has certainly been an adventure. Wall Street professionals and retail investors have navigated their way through a 34% loss in the broad-based S&P 500 in a matter of a month. They've also dealt with the benchmark index's 10 largest single-day point losses and eight biggest single-session point gains of all time since late February.
Although volatility can be unnerving at times, it's almost always an opportunity for investors to put their money to work in great companies at a discount. Best of all, you don't have to be a millionaire to make money on Wall Street. As long as you give your investment theses time to play out, you can compound your wealth just like the professionals on Wall Street.
If you have $1,000 that you don't need to pay bills or cover emergencies, you have more than enough capital to buy and hold the following three stocks for the next 10 years.
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Wells Fargo
One of the easiest ways for patient investors to make money is to buy into bank stocks like Wells Fargo (WFC -1.92%) during a recession.
At the moment, Wells Fargo probably doesn't look like much. It's trying to get past a scandal involving 3.5 million unauthorized accounts opened between 2009 and 2016. Further, it's been hit by lower interest income and the prospect of higher loan delinquencies. With the Federal Reserve pledging to keep interest rates at or near historic lows for years to come, things aren't going to get better for Wells Fargo overnight.
But Wells Fargo also has a penchant for attracting affluent customers. Well-to-do clients tend to be less fazed by minor hiccups in the U.S. or global economy, which means they're less likely to default on their loan obligations. They're also more likely to take advantage of multiple financial products, such as mortgage servicing and asset management.
Wells Fargo has also done a solid job of promoting digital engagement. Increased digital banking and rising mobile app usage mean the company can modestly lower its noninterest expenses by consolidating some of its branches.
Wells Fargo is priced well below book value and is begging to be bought.
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If growth stocks are more your thing, social media company Pinterest (PINS -0.55%) is the name you'll want to own.
Most social platforms have growing pains, but not Pinterest. Its compound annual monthly active user (MAU) growth was 30% prior to the coronavirus disease 2019 (COVID-19) pandemic, and it's accelerated even more with folks stuck in their homes. Pinterest ended September with 442 million MAUs.
A majority of Pinterest's new MAUs are from international markets. The downside of this boosted international presence is that average revenue per user (ARPU) outside the U.S. is just a fraction of what it is inside the United States. However, the ability to double ARPU many times over this decade is precisely why the company's growth rate remains so consistently high.
Pinterest also sets investors up to take advantage of long-term e-commerce growth. Since Pinterest's users are willingly sharing what products, services, and places interest them the most, Pinterest can connect these MAUs with small businesses that cater to their desires. According to the company, 90% of its weekly Pinners use the platform to make purchasing decisions.
As long as Pinterest can utilize video to keep users engaged, there's no reason its stock can't head significantly higher.
Image source: Getty Images.
Mastercard
Another smart way to put $1,000 to work over the next decade would be to buy payment processing giant Mastercard (MA 0.66%).
Let's get the 800-pound gorilla out in the open: Mastercard isn't a fundamentally cheap stock, and it's never going to be. Paying 41 times forward earnings might sound difficult to stomach, but Mastercard continues to deliver for its shareholders year in and year out.
The company's avoidance of lending makes it special. Although some of its processing peers have chosen to double-dip by also lending money (i.e., offering credit cards), Mastercard has strictly stuck with the processing side of the equation. By doing so, it ensures no direct negative impacts from rising credit and loan delinquencies during periods of economic contraction and recession. This is a big reason why Mastercard emerges from recessions so quickly.
Mastercard also holds the second-largest share of credit card network purchase volume in the United States. Though it's playing second fiddle to Visa, Mastercard still possesses a lucrative 22% share of credit card network purchase volume in the No. 1 market for consumption in the world. Thus, buying and holding Mastercard is a logical bet on consumers and businesses spending more money over time in the U.S.
Mastercard has ample opportunity outside the U.S., as well. Most global transactions are still conducted in cash, which gives the company plenty of opportunity to penetrate underbanked regions of the world like the Middle East, Africa, and Southeast Asia.
Investors with $1,000 would be wise to charge forward with Mastercard over the next 10 years.
