Unlock the Greatest Potential for Your Money

Build wealth by unlocking higher returns with high-growth stocks or quality dividend-growth stocks such as Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY).

| More on:
The Motley Fool

Interests rates are low, and five- to 10-year government bonds yield roughly 1.3%. With that kind of long-term time horizon, you can unlock greater potential for your hard-earned dollars by investing in stocks.

Higher returns can make a big difference

If you invest $5,500 in a Tax-Free Savings Account for 1.3% per year for five years, you would end up with almost $28,400, of which about $900 will be growth from your investments and $27,500 will be from your savings. The total returns of your investments would be about 3.3%.

If you instead invest $27,500 for 10% per year, you would end up with nearly $35,500, of which about $8,000 would be returns from your investments. The total returns of your investments would be about 29%. In other words, this growth would be 8.8 times the amount one would get from investing in long-term government bonds.

The longer the compounding, the bigger the difference

What happens when you invest $5,500 every year for 10 years with 1.3% annualized returns? You would end up with $58,700, of which about $3,700 would be growth from your investments. Your total returns would be about 6.7%.

If you instead invest an annualized return of 10%, you would end up with nearly $93,900, of which about $38,900 would be returns from your investments. Your total returns would be about 70%. In other words, this growth would be 10.5 times the amount one would get from investing in long-term government bonds.money, wealth

What can get you 10% returns?

You could potentially get +10% returns from high-growth stocks such as Shopify Inc. (TSX:SHOP)(NYSE:SHOP). Last year alone, the stock climbed about 165%.

If you’re not comfortable with growth stocks, you can consider businesses that are backed by real assets. For example, Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY) owns a portfolio of quality real estate around the globe.

Its core portfolio is comprised of 269 best-in-class office and retail properties. Additionally, it also has opportunistic investments in multifamily, industrial, hospitality, triple net lease, self-storage, and student-housing assets for higher returns.

The units offer a 5.3% yield thanks to a strong greenback (the shares pay U.S.-denominated distributions). On top of that, management aims to grow its distribution by at 5-8% per year. So, that leads to an approximate annualized return of at least 10%, excluding any potential multiple expansions.

Investor takeaway

Government bonds offer low but guaranteed returns and promise the security of your principal.

Although stocks are riskier than bonds, stocks can unlock a greater potential for your invested dollars by delivering much higher returns in the long run. If you have a long-term horizon, you should consider sprinkling some high-growth stocks or quality dividend-growth stocks in your portfolio to build greater wealth over time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of Brookfield Property Partners. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Shopify and SHOPIFY INC. Shopify is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »