The Motley Fool

The 10 Times Earnings Stock Portfolio: How to Grow $10,000 Into $100,000 in 20 Years or Less

Increasing the value of an investment by 10 times or more is a common goal. Often referred to as a “tenbagger,” such a score can set you well on your way to a secure retirement. A $10,000 investment that becomes a tenbagger is worth $100,000 at the end. Repeat the feat once more and you’re up to $1 million.

The only problem is that hitting a tenbagger can take a long time. At an average return of 10% a year (what the TSX has averaged since 1970), it would take you 24 years. While not exactly an eternity, but certainly a longer wait than most investors would like.

Fortunately, there are ways to accelerate your path to a tenbagger–and the financial security that comes with it. As you’re about to see, you only need to beat the market by a very slight margin for one of your investments to become a tenbagger in 20 years or less.

At that rate, you could have an investment become a tenbagger two times over in 40 years! In just a second I’ll mention some stocks that have the potential to do that. First, let’s look at what kind of annualized return you’d need to hit a tenbagger in 20 years.

What annualized average return you’d need

A tenbagger works out to a 1000% total return regardless of how long it takes to get there. To reach that return in 20 years, you’d need an annualized return of 12.2%. If that doesn’t sound like much, you’re right: thanks to the miracle of compounding, you can reach a fairly large total return even if your annual return isn’t that high.

That’s not even beating the market by that much

To put 12.2% a year into perspective, it helps to remember that the TSX’s average annual return since 1970 has been 10% (including dividends). So you only need to beat the market by 2.2% a year to get to a 20-year tenbagger.

Consider a stock like Toronto-Dominion Bank (TSX:TD)(NYSE:TD). Over the past five years, it has outperformed the TSX by about 30%, and that’s not even including dividends. With an annualized return of 6.33% from capital gains and an average yield of 4%, you’ve got a return in excess of 10.3% a year right there (and that grows slightly higher if you reinvest the dividends). So even a milquetoast bank stock can take you within striking distance of a 20-year tenbagger.

Enbridge (TSX:ENB)(NYSE:ENB) is another slow and steady tenbagger stock. Over the past 20 years, this stock is up roughly 450%, which takes you nearly halfway there, at an annualized growth rate of 8.6%. The real genius behind this stock, though, is its ultra-high dividend yield, currently around 6%, which brings the total return up to 14% (assuming future performance matches past performance). At that rate, it would take only 17 years to 10x your investment!

Amazon CEO Shocks Bay Street Investors By Predicting Company "Will Go Bankrupt"

Amazon CEO Jeff Bezos recently warned investors that “Amazon will be disrupted one day” and eventually "will go bankrupt."

What might be even more alarming is that Bezos has been dumping roughly $1 billion worth of Amazon stock every year…

But Bezos isn’t just cashing out, he’s reinvesting his money into a company utilizing a fast-emerging technology that he believes will “improve every business.”

In fact, this tech opportunity could be bigger than bigger than Amazon, Tesla, and Berkshire Hathaway combined.

Get the full scoop on this opportunity that has billionaire investors like Bezos convinced – before it’s too late…

Click here to learn more!

Fool contributor Andrew Button owns shares of TORONTO-DOMINION BANK. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.