If you pick stocks smartly, even a moderate sum (like $5,000) can grow to become something substantial. Consider that $5,000 invested and compounded at an annual average rate of 10% could become nearly $13,000 after 10 years. If you increased your average annual rate of return to 15%, that $5,000 could become $20,000 in 10 years.
Stocks that compound can multiply your wealth
Of course, we are never fully in control of the rate of return that we earn. However, we can stack the odds in our favour in two ways. First, pick stocks in high quality companies that have a record of consistent, strong performance. Winners tend to keep winning. Winners tend to have a valuable secret sauce supporting their growth and profits.
Second, have an extended investment horizon. You might mis-time a purchase or overpay for a quality stock. Yet, these compounding stocks eventually justify their valuations. Great businesses produce great profits over time. You don’t want to trade in and out of these types of stocks.
If you are wondering what stocks could be a good buy for the decade ahead, here are a couple to buy with $5,000 today.
VitalHub: A small-cap stock with big growth potential
If you want a long-term growth opportunity, you probably want to hold some small-cap stocks (stocks with a market cap below $1 billion). With a market cap of $562 million, VitalHub (TSX:VHI) is a small-cap stock that could have a long runway.
The company provides niche software to the healthcare industry. It has operations in Canada, the U.K., the Middle East, and Australia. The healthtech has delivered a smart strategy to consolidate smaller software players at attractive valuations. VitalHub then utilizes operating and sales expertise to optimize profitability and cash generation.
In the past three years, revenues have risen by a 38% compounded annual growth rate (CAGR). Earnings per share (EPS) have risen by an 82% CAGR in that time. This is not the cheapest tech stock to buy. However, the stock has recently dipped. If its strong growth trajectory continues, it could still deliver excellent returns ahead.
Colliers: A strong brand with multiple avenues for long-term growth
Another stock worth holding for a decade ahead is Colliers International Group (TSX:CIGI). It has a market cap of $8.6 billion. However, CIGI stock could deliver mid-teens total returns that align with its long-term historical average.
Colliers is well-known for its commercial real estate brokerage brand. However, the company is less known for its growing segments in engineering/advisory and investment management. In fact, it has made six substantial acquisitions in those areas this year.
Today, over 70% of Colliers income comes from recurring sources. It has a high level of insider ownership and a founder-led CEO. This real estate investment has a lot of characteristics you want in a long-term compounding stock.
CIGI stock is down 11% this year. Its valuation is aligned with its 10-year average. However, that doesn’t really recognize the significant changes (and improvements) this company has made in the past five years. 2025 is expected to be a build year and 2026 shareholders could reap the benefit of those investments.
There could be attractive value in the stock today. At some point, the market will recognize the value of Colliers’ growing engineering and investment management platforms. You want to hold this stock when the market does.
