When we deposit a large sum of money into a high-interest bank account, we can expect to get returns of a few percentage points through interest payments. You can expect your returns to be slightly higher if you invest the same amount in the stock market, but you should also remember that the risk is higher.
More recently, cryptocurrencies have managed to completely offset expectations by delivering tens of thousands of percentage returns to investors in recent months. The meme-based cryptocurrency Dogecoin is one of the top examples of such assets, delivering over 12,000% returns just this year.
While Dogecoin and meme stocks may seem attractive investments due to their unbelievably high returns, there may be a better way for you to invest if you seek high wealth growth.
Meme stocks and cryptocurrencies this year
Cryptocurrencies are not the only assets with inexplicable and arguably unjustified gains in the market today. GameStop and AMC Entertainment are two popular meme stocks that have seen several rallies this year, powered by a community of retail investors banding together on Reddit. The two stocks have gained 1,200% and 2,900% this year, fueled by nothing but investor sentiment.
Despite delivering massive returns, meme stocks and Dogecoin have also posted significant declines in just a few weeks. Dogecoin suddenly declined by over 73%, GameStop by almost 90%, and AMC by around 60% within weeks during February. As an investor, would you be alright with such a high degree of volatility if you seek long-term wealth growth?
If you are an investor seeking long-term wealth growth that is reliable and free of speculations, investing in high-quality stocks for a long time is a time-tested method that you should consider. While it might not seem like the most exciting method to grow your wealth, it has a proven track record.
Top TSX stock for long-term wealth and reliable growth
Constellation Software (TSX:CSU) is an excellent stock to consider for this purpose. The tech company has provided its investors with returns of over 3,600% since 2011. The $39.13 billion market capitalization tech company has managed to put up a stellar performance on the stock market in recent years, fueled by its acquisition strategy in the last few years.
Constellations Software has posted outsized growth in its earnings and revenue growth in the last decade. While Constellations Software does not offer the same high-speed growth that Shopify stock does, the company does offer significant long-term growth prospects.
The Toronto-based tech enterprise is up by 12% on a year-to-date basis. In the quarter that ended in March, Constellation Software’s earnings increased by 113% from the same period last year, reflecting a staggering US$15.50 in earnings per share. As the trend in its sales and growth rate continues to improve, the stock could be well worth buying right now.
Dogecoin and meme stocks undoubtedly have provided investors with outsized returns in recent months. However, the inherent volatility and lack of fundamentals to support the growth figures present an unnecessary risk to investor capital.
If you seek a high-growth asset to help you grow your wealth in the long run, Constellation Software could be a far better alternative to consider.
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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Software and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify.