Rich is a subjective term. For households of modest means, rich might constitute enough money to maintain a financially healthy, debt-free lifestyle. But for more ambitious individuals or households, the term “rich” may only apply if they accumulate a significant amount of wealth. Regardless of the interpretation, investments are a crucial part of becoming rich.
If your goal is to become rich by the time you retire, you are on a schedule. Though you have to make investment decisions that have the potential to get you to the desired “wealth” level in the time you have till retirement. Powerful and consistent growth stocks can be a great help in this regard and deserve to be a crucial part of your retirement planning.
There are three such stocks in the tech sector that you should keep an eye on.
A discounted tech stock
Enghouse Systems (TSX: ENGH) is an old software and service company that has been operating since 1984. It operates in four different market segments, including call center services, video conferencing, networking, and transportation. Vertical markets like call centres are becoming obsolete, and there is stiff competition in the video conferencing market, but the company is evolving to meet the market’s needs.
This is reflected in the company’s adoption of chatbots and other relevant AI technologies in its communication-related business segments and restructuring of its video conferencing services to meet the needs of specific industries.
The stock experienced powerful growth in the decade between 2010 and 2020 – over 1,300%. However, its post-pandemic correction has been brutal, to say the least, and the company has lost over 60% of its market value from its 2020 peak.
A logistics tech stock
The Descartes Systems Group (TSX: DSG) is currently one of the most consistently growing tech stocks in Canada, especially if you are measuring the consistency in terms of years, not months, because there have been several small dips along the way. If we take the growth in the last decade, the stock rose by a mouth-watering 725%.
The pattern has slowed down in the latter half of the decade because the returns in the last five years were just under 130%, but some of it can be blamed on COVID and how it impacted the market as a whole.
But even if the stock offers comparatively more modest growth going forward, that is, 5 times in the coming decades, you can grow your capital by 10 times in the company in just 20 years, which can go a long way towards building wealth.
A software holding company
Constellation Software (TSX: CSU) has offered the most powerful combination of consistency and growth in the entire TSX (not just the tech sector) in the past two decades. The stock grew by about 1,580% in the last 10 years alone. As a result of this consistent growth, it has become one of the most expensive securities in Canada, currently trading at over $2,700 per share.
The company has been defying expectations of a slowdown or a fall for almost 20 years, and considering its healthy financials and strong business model, it may continue to do so in the future as well. It also pays dividends, which is rare for a tech stock, significantly enhancing the overall return potential.
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Foolish takeaway
These three tech stocks can not only help you get rich by retirement, but they can also help you build generational wealth. Even if they underperform by a modest margin, they can still grow your capital somewhere between 15 and 30 times in the next three decades, so if you have invested enough capital, your chances of getting rich will be quite decent.
