I think it’s safe to assume that everyone wants to retire comfortably. However, that can be difficult to achieve. Canadian numbers are more difficult to attain, so for descriptive purposes, I’ll be grabbing financial statistics from our neighbours to the south.
In 2019, it was found that the average size of retirement savings accounts for American households was only $65,000. For individuals under the age of 35, the average savings amount was $13,000. These numbers are shockingly low. If we take the suggested withdrawal rate of 4% throughout your retirement, you will need a savings total of $1,000,000 to obtain an annual income of $40,000.
Now, the question becomes, is it possible for the average investor to build a savings account of $1,000,000? It definitely is, given that investors are able to put money away consistently for a long period. With that, the question then becomes how? Choosing the right companies to invest in is the hard part.
In this article, I discuss two stocks that could help you retire comfortably. Choosing these companies, or companies with similar characteristics could help your savings account over the long term.
This stock has surely produced many stock market millionaires
Although stories like this don’t happen very often, early investors in Shopify have undoubtedly become millionaires by today. Since its initial public offering (IPO), Shopify has gained more than 5,900%! That represents an average annual gain of 92.3%. To put that into perspective, a single investment of $10,000 made at its closing price on Shopify’s first day of trading would be worth more than $600,000 today. For comparison, the TSX has gained 34.7% over the same period. This represents an average annual gain of 4.9%.
With that said, it’s normal for investors to believe that Shopify’s best days are behind it. However, I would disagree. In fact, Shopify’s growth is proof that its business is an important one today. As Shopify continues to penetrate new markets, expect its stock to continue growing. In its 2021 Q1 and Q2 earnings presentations, Shopify reported year-over-year increases of 110% and 57%, respectively. The company is also gaining ground in the online retail industry, taking market share from its competitors.
This company has produced outstanding returns over the past couple of decades
Investors wanting to look at a company that boasts a longer track record of success should consider Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM). Since August 1995, Brookfield stock has gained 4,580%. This represents an average annual gain of 15.9%. While it certainly doesn’t come close to Shopify’s explosive growth over the past few years, investors would have still made tons of money. Over that period, a $10,000 investment in Brookfield would have grown to nearly $470,000.
Brookfield’s business is much less flashy than Shopify’s. It invests in and operates real assets, such as those in the real estate, infrastructure, and renewable energy industries. Because of the nature of these assets, investors should keep an eye on increasing cash flows in Brookfield’s financial reports more than they should look at revenue totals.
Brookfield’s world-class management team should allow investors to rest easy knowing that each new asset the company adds to its portfolio will help boost Brookfield’s cash flows in the future.
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 Jed Lloren owns shares of Shopify. The Motley Fool owns shares of and recommends Brookfield Asset Management and Shopify. The Motley Fool recommends Brookfield Asset Management Inc. CL.A LV and recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify.