You don’t need a massive amount of capital to start investing. If you invest wisely and with a long time horizon, the power of compounding can turn a small amount of cash into a large amount.
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$5,000 could become significantly more if invested wisely
$5,000 invested at a 10% average annual rate of return over 10 years could become $12,968. That same $5,000 compounded at a 15% average annual rate over 10 years could be $20,222!
However, if you increased your length of time to 20 years, your returns (at 10% and 15% annual compounded returns) would become $33,637 and $81,832!
The whole point of this is to demonstrate the wonderful power of long-term compounding. Even a modest amount like $5,000 can become a life-changing amount of cash.
The combination of strong returns and many years is the perfect compounding recipe. If you are looking for stocks that could turn $5,000 into many multiples more, here are three that could have a good chance.
VitalHub: A small cap stock with large potential
VitalHub (TSX: VHI) is a small-cap stock Canadian investors should have on their radar. It has a market cap of $605 million. Over the past five years, its stock has soared 253% in the past three years and 578% in the past five years. That equates to compounded annual returns of 52% and 46%, respectively.
Given that its stock is fairly priced today, it will be challenging to replicate those same returns in the future. However, a 15-20% compounded annual growth rate (CAGR) is possible.
The company is building an empire focused on niche healthcare software. It has grown by making numerous prudent acquisitions. It has a development arm in Sri Lanka that enables it to take the software it acquires and cost-effectively improve and modulate it for its customers.
This is also supporting strong organic growth. Revenues and earnings per share have risen respectively by a 37% and 82% CAGR. With $91 million of cash on the balance sheet, it has the firepower to keep fueling its acquisition growth.
If you want to multiply $5,000 for several years ahead, this is an investment to consider right now.
Trisura: A cheap way to invest for long-term growth
Another stock that could multiply a $5,000 investment over a long time is Trisura Group (TSX: TSU). With a market cap of $1.92 billion, it is still one of the smallest insurance stocks on the TSX.
Yet, since it was listed in 2017, it has delivered an incredible 688% return. That equates to a 29% CAGR in that period.
Trisura has steadily been building a very strong specialty and fronting insurance business in Canada and the United States. The company has had some growing pains over the past few years. Its stock has not gone anywhere since 2021. Yet, it could be primed for a breakout.
Trisura stock only trades for two times book value. It has a forward price-to-earnings ratio of 13 times. Other specialty insurers trade at significantly higher valuations.
This company has worked out a lot of its growth “kinks.” It just finished a significant infrastructure buildout in the United States. Now, it is ready to start reaping growth from its investments. Management is targeting a 15% growth rate for the next several years ahead. For value and growth, this is a great place to invest $5,000 today.
