Growing your wealth over time can be easy work. Set up an investment portfolio that can deliver a compound annual growth rate (CAGR) of roughly 15%. Let it run for five years if you're looking to double your money. So, if you put $1,000 into that investment, you'd have $2,000 by the end of 2029.
Now, where can you find stocks promising to provide an average return of 15% per year for the next five years? First, you may not need a stock at all if an index-tracking exchange-traded fund (ETF) can get the job done.
An index fund tracking the venerable S&P 500 (^GSPC 0.33%) probably wouldn't quite do it, for example. The CAGR for this market tracker worked out to 12.6% over the last five years and -- for investors who prefer basing their decisions on more reliable long-term statistics -- 8.1% in the last three decades. Sure beats the average interest rate on savings accounts, but it won't double your money in five years.
There are other index funds that seem likely to meet these goals, though. Switching to the more volatile bet on mostly tech stocks, the Nasdaq 100 Index, the average return in five years lands at 20.6%. That's more than enough for my stated purposes. It's not a surefire guarantee, of course -- the truly long-term Nasdaq 100 return stops at 8.9% from a 30-year perspective. That's volatility from the dot-com bubble rearing its unexpected head three decades later.
Still, a Nasdaq 100 tracker, such as the Invesco QQQ Trust (QQQ 0.26%), may deliver the desired return if the artificial intelligence (AI) boost of 2023 sticks around for a few more years. But this is one of those instances where hand-picked stocks might provide the returns that a more stable index fund probably can't. On that note, let me show you a couple of top-notch stocks that should see average five-year returns of 15% or more.
Alphabet (GOOG +0.23%) (GOOGL +0.36%) and Amazon (AMZN 1.08%) offer that rare combination of thrilling growth prospects and the proven flexibility to stay on that growth track for years and maybe even decades ahead. And they're not even expensive right now despite having gained more than 60% each in the last 52 weeks.
NASDAQ: GOOGL
Key Data Points
A proven winner with a flexible future
Alphabet stands as a bastion of innovation in an ever-evolving digital landscape -- often leading from the front. The Google parent continues to push boundaries, especially in the realm of AI.
Even its namesake search service can be seen as a form of AI, and the company keeps adding more digital smarts to its main business, with tools like natural language processing and sophisticated results-ranking algorithms based on deep learning analytics. Products such as Google Translate and the Google Maps navigation feature take the AI connection one step further, explicitly building the consumer experience around neural networks and machine learning systems.
The company's sustained revenue growth and strategic investments signal a future as dynamic as its past. The Alphabet umbrella structure lets the company try new and entirely different business ideas without confusing consumers expecting the Google brand to focus on online services. That's a stroke of flexible genius from 2015, among the first acts of CFO and financial heavyweight Ruth Porat, formerly the CFO of financial services giant Morgan Stanley.
The stock's price-to-sales (P/S) ratio is well within reason at 6.2 times trailing revenues, far below fellow AI experts such as Nvidia or Microsoft. All in all, Alphabet offers a compelling case for investors looking for a blend of stability and forward-thinking growth. Shareholders have enjoyed a CAGR of 21.4% for five years and 23.3% since the initial public offering (IPO) in 2004. That's a paragon of high-growth stability rarely seen in the tech sector or anywhere else.
Past returns are no guarantee of future results, but Alphabet's history inspires plenty of confidence in the stock's future prospects. If you want to double your money in five years, this stock seems likely to deliver the goods.
NASDAQ: AMZN
Key Data Points
The innovative powerhouse Jeff Bezos built
Amazon's journey from an online bookstore to a diversified e-commerce and cloud computing behemoth shows its capacity to defy market boundaries.
The Amazon Web Services (AWS) platform didn't exactly invent cloud computing, but it was one of the first widely available cloud systems on a global scale. Started as an experimental way to squeeze some business value out of unused capacity in Amazon's e-commerce data centers, AWS has grown into the company's most profitable and fastest-growing arm. Its robust selection of AI tools should accelerate that trend in the years ahead.
The company's strategic investments in new technologies and markets, from healthcare to entertainment, reveal a bottomless appetite for growth. Founder Jeff Bezos famously expects Amazon to operate as if every day is "day one" for a brand-new upstart with limitless growth potential. Current CEO Andy Jassy has embraced the same philosophy, and it shows in Amazon's appetite for seemingly risky growth-boosting bets.
From overnight and same-day shipping to cloud-based AI tools and the innovative Amazon Market platform for independent retailers, Amazon has a long history of investing billions of dollars in promising growth boosters. Not every swing is a home run, as proven by disappointments such as the forgettable Fire Phone and Amazon Auctions projects. However, the big wins more than make up for a few misses along the way.
If Amazon keeps up this growth-oriented attitude and impressive hit ratio for another five years, I don't see why the annual stock returns would fall below 15%. There may not be any guarantees in the stock market, but an Amazon investment at 2.9 times sales comes close. Like Alphabet, Amazon looks poised to double your money in five short years.
There you have it -- two stocks and one ETF that should double your money by 2029. Any combination of Amazon, Alphabet, and the Invesco QQQ Trust should help you achieve that goal and build your wealth well beyond that modest target.
