It’s possible to become a multi-millionaire, especially if your investments are in a tax-sheltered vehicle like a TFSA. Most investors assume that the road to millions requires picking the right stocks, and they’re right. But there’s an even greater tool that many of the world’s greatest investors don’t even have: time. That’s because time lets you experience the magic of compound interest.
Einstein famously called compound interest one of the most powerful forces in existence. “Compound interest is the eighth wonder of the world,” he reportedly said. “He who understands it, earns it. He who doesn’t, pays it.”
Here’s a powerful example. If you’re 30 years old and stash away $5,000 per year at a 10% interest rate, you’ll have roughly $900,000 by the time you’re 60. If you waited until you were 40 years old to start saving, you’d need to invest nearly $15,000 per year to reach $900,000 by age 60. By eliminating one-third of the investable years, you’d need to triple your annual investment. If you waited until you were 50 years old to start saving, you’d need to invest more than $50,000 per year to reach $900,000 by age 60!
Time is not only your friend but your secret weapon. If want to become a TFSA millionaire, use this weapon to your advantage. That means buying stocks that can compound your dollars for decades to come. These stocks are rare, but the following two picks look the part. Both have incredible management teams and are targeting opportunities that could last until 2050 and beyond.
Canada Goose Holdings (TSX:GOOS)(NYSE:GOOS) has a plan. Over the next 20 years, it aims to replicate the great success it’s had in Canada. It already owns an iconic brand with a 60-year history that’s capable of producing industry-leading margins. More than 5% of all Canadians now own a Canada Goose jacket — more than 80% of whom plan to buy another. As I wrote earlier this year, “For every new customer, the company can expect a lifetime of purchases that total well into the thousands of dollars.”
Looking abroad, there are some tantalizing opportunities. In high-income countries like South Korea and Japan, less than 1% of the population owns a Canada Goose product, although sales are beginning to ramp. In China, the largest luxury market in the world, less than 0.1% of the population owns a Canada Goose product.
If Canada Goose can replicate its domestic success in other countries, the company would have a clear path for quadrupling in size. Over the long term, management aims to compound sales and earnings by more than 20% per year. In a few decades, this company could be significantly larger, delivering millionaire-making compound returns.
Best game in town
Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) is playing the best game in town. That’s because its long-term growth hinges on an incredibly reliable source: population growth. Brookfield owns critical infrastructure like data centres, railroads, gas pipelines, and cell towers. As populations rise, demand for these services mount, benefiting whoever owns the assets.
Over the last decade, Brookfield has compounded shareholder value by more than 20% annually. If you’d invested $5,000 per year starting in 2009, you would have invested a total of $50,000, yet the end-value of your portfolio would be worth $220,000. Over a 20-year period, you’d end up with an astounding $2.5 million.
According to the United Nations, global populations should continue to grow for another 80 years, directly enriching Brookfield shareholders. This is a proven long-term compounder with several decades of growth ahead of it. Don’t miss out on big opportunities like this.
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.
The Motley Fool owns shares of Canada Goose Holdings. Fool contributor Ryan Vanzo has no position in any stocks mentioned. Brookfield Infrastructure Partners is a recommendation of Stock Advisor Canada.