You'll often hear investors brag about a 10-bagger -- an investment that helped them wind up with at least 10 times as much money as they started with. Truth is, while many investors may wind up with a 10-bagger or two in their careers, there's an element of luck involved in any investment that quickly skyrockets that high.
Don't confuse luck with skill. Because with the right skills at your disposal, you can leave those 10-bagger braggarts in the dust and turn every single dollar you invest into $100. All you need are two ingredients:
- Time
- A decent rate of return
With those at your disposal, you can reach that seemingly impossible goal. This chart shows exactly what it takes:
|
Rate of Return |
Years it Takes |
|---|---|
|
5% |
94.4 |
|
8% |
59.8 |
|
10% |
48.3 |
|
12% |
40.6 |
|
15% |
33.0 |
|
20% |
25.3 |
|
25% |
20.6 |
Get real
Unfortunately, unless you're the next Warren Buffett, you're not likely to sustain 20% or 25% annual returns for the time it would take to earn 100 times your money. But 10% to 12% is about in line with the historical moves in the stock market, and while 15% would certainly be a stretch, it wouldn't quite require Buffett's level of mastery. Any way you slice it, though, reaching the 100-fold marker is achievable in a lifelong investing career.
Think about what that means. In 2007, many employees can contribute up to $15,500 to their 401(k) plans. At a 12% compounding rate, that would reach $1.5 million after just over 40 years. That's not a bad potential nest egg from one year's contribution by a young whippersnapper just starting out.
Even if you no longer have 40 or so working years ahead of you, there's no need to despair. You may not really be able to turn every dollar you invest into $100, but you can certainly still take advantage of compounding. Combine that with decent regular investments, and you can still reach retirement with a substantial enough nest egg to let your golden years truly be golden.
Reach for the sky
There's also the very real fact that the higher your return rate, the faster you'll get to the point where your dollar in contributions can reach $100 in total worth. You may not be the next Warren Buffett, but you can certainly invest like him. After all, the companies in the portfolio he manages include many household names:
|
Company |
Shares Held by Buffett's Company |
Market Cap |
|---|---|---|
|
H&R Block (NYSE:HRB) |
10,971,000 |
$7.5 billion |
|
American Standard (NYSE:ASD) |
11,062,700 |
$9.1 billion |
|
Nike (NYSE:NKE) |
4,000,000 |
$24.7 billion |
|
Target (NYSE:TGT) |
745,700 |
$49.0 billion |
|
American Express (NYSE:AXP) |
151,610,700 |
$73.1 billion |
|
United Parcel Service (NYSE:UPS) |
1,429,200 |
$80.5 billion |
|
General Electric (NYSE:GE) |
7,777,900 |
$383.6 billion |
The fact is, you don't need to venture into the territory of unknown micro-cap companies or unproven "next big things" to earn decent returns as an investor. All you need to do is buy decent companies trading at discounts to their true worth, then wait for the market to realize that it had offered you a sale and correct its mistake. It's a remarkably straightforward strategy known as value investing. It's what made Buffett rich, it's what we follow at Motley Fool Inside Value, and it's what you can use to help shave years off your quest to turn $1 into $100.
Get started now
Of course, no matter how well your investments perform, you're still going to need to be invested for a significant period of time to see serious returns. The longer you wait to begin, the less time you'll have to enjoy the fruits of your labor. You can take the next 30 days to try Inside Value for free and learn how to become a market-beating value investor. Your journey begins here.
At the time of publication, Fool contributor and Inside Value team member Chuck Saletta owned shares of General Electric. Warren Buffett's company, Berkshire Hathaway, is an Inside Value recommendation. UPS is an Income Investor recommendation. The Fool has a disclosure policy.
