Where I’d Invest a $10,000 Windfall Right Now

Don’t spend all your windfall! If you invest it wisely, you could double your money in a timely manner in the current market environment.

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If you have an unexpected windfall of $10,000, it would be tempting to spend it on a vacation or something else you enjoy. However, did you know that if you invested it wisely, you could make another $10,000 down the road?

To double your money in five years, you would need to invest and achieve a total return of exactly 14.87% per year. That is a high target but not unachievable. Here are a couple of stocks that may be able to help you make another $10,000.

Brookfield

Brookfield (TSX: BN) is a global wealth manager of alternative assets in more than 30 countries for institutional and retail investors. The complex company consists of three core businesses:

  • A leading Asset Management business with approximately US$850 billion of assets under management, including about half that is fee-bearing capital .
  • An Insurance Solutions business that predominantly provides annuity-based reinsurance products.
  • An Operating Businesses in renewable power, infrastructure, private equity, and real estate that largely generate substantial cash flows.
BN Chart

BN data by YCharts

The stock is down about 3% over the last 12 months. Actually, as the above graph shows, the stock has been disappointing over the last three years for buy-and-hold investors. Primarily, the stock solid off because the market is worried about the impact of higher interest rates on the company — particularly on its commercial real estate portfolio.

At $46.48 per share at writing, the stock offers tremendous value for its double-digit growth prospects. In fact, it could potentially double investors’ money over the next three to five years.

The top TSX stock was one of Brian Madden’s top picks on BNN Bloomberg this week. (Madden is the chief investment officer at First Avenue Investment Counsel.) He noted there’s great demand in its offerings, as represented by fund flows into alternative assets outstripping funds into stocks and bonds, even with these interest rates. As well, he highlighted that Brookfield’s shareholder returns have been 15% compounded over the last 25 years, including dividends, which means $1 in 1998 is worth about $33 today.

Although Brookfield’s dividend yield is less than 1%, it has increased its dividend for longer than a decade. Its 10-year dividend-growth rate is solid at about 8.6%.

Brookfield Infrastructure Partners

Stocks are volatile. In today’s higher interest rate and relatively high inflationary environment, investors may feel more comfortable holding stocks that pay more income. In that case, you could consider putting your surprise fortune into one of Brookfield’s subsidiaries, Brookfield Infrastructure Partners (TSX: BIP.UN).

The limited partnership owns and operates a diverse portfolio of global infrastructure assets in utilities, midstream, transport, and data operations. Just like its parent, Brookfield Infrastructure has the potential to double investors’ money over the next five years as it trades at a substantial discount — it trades at about two-thirds of its intrinsic value! To make things better for investors, the top utility stock pays out a nice cash distribution, yielding almost 5.8% while having that potential.

Investors should only invest their long-term capital in stocks. If you’re just starting out, don’t put all your eggs in one basket, no matter how enticing an opportunity appears to be. Aim to build a diversified portfolio for the long term.

If you expect to use your windfall within a year or two, it would be much safer to put it in a high-interest savings account or Guaranteed Investment Certificate to ensure the safe return of your capital while earning decent interest income.

Fool contributor Kay Ng has positions in Brookfield and Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield, Brookfield Corporation, and Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

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