My seven-year-old son wants to be the next Michael Jordan. He already has a great jump shot, and he plays for several hours every day. Hey, you never know.
But even Michael went to college, so it's not too early for my wife and me to start figuring out how we'll ever pay for it. My son would like to walk down the street and attend Georgetown University, which unfortunately is somewhat beyond his parents' means at the present time. But we think we'll be able to talk him into attending Michael's alma mater, the University of North Carolina. As a resident of Washington, D.C., he'll qualify for in-state tuition in North Carolina, so in 10 years we'll need to come up with approximately $105,000 to fund the entire four years (roughly $26,000 per year). Ouch.
Funding Michael and his sister
Assuming the market delivers a 9% annual return for the next 10 years, we'd need $44,484 invested in the market today in order to fund his college education in 2016. For those who are fortunate enough to have $44,484 available to invest in the market, it would be essential to maximize the potential of each investment dollar. Devoting a mere 10% of this total to a high-growth strategy could make coming up with that $100 grand a lot easier.
So let's say we allocate $4,500 to a high-growth strategy. What can we expect? In a recent article, my colleague Tim Hanson showed that the top 10 stocks of the last 10 years, a list that included Chico's
Is the number 23 still available?
Oh, come on! No one can choose the top 10 stocks of the next 10 years. Yes, that's probably true. But our analysts at Motley Fool Rule Breakers are giving it a shot anyway, and the results so far are encouraging. When Motley Fool co-founder David Gardner launched this service back in the fall of 2004, his aim was to find the next ultimate growth stock on behalf of the Rule Breakers community. With three recommendations already delivering triple-digit returns, I'd say the search has been fruitful. In slightly more than a year, David and his crack team of analysts have delivered an overall return of 27.06%, compared with 8.10% for the S&P 500. At a rate of 27.06% a year, our high-growth position of $4,500 would be worth $49,351 in 10 years, almost half of the ultimate goal of $105,000. That potential is why it's reasonable to devote a small portion of our portfolio to excellent growth stocks.
I already have. Last year I invested in two Rule Breakers, Vertex Pharmaceuticals
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When my son turned in a sloppily written assignment recently, he told his teacher not to worry, because he was going to be in the NBA someday. Obviously, he got a lecture from both his teacher and his parents about the importance of planning for the future. Likewise, if you have long-term financial goals, you should consider doing something equally prudent: Invest in outstanding high-growth companies today.
John Reeves holds positions in Procter & Gamble, Johnson & Johnson, Vertex, and Exelixis. The Motley Fool has an ironclad disclosure policy.