A lot of people new to stock market investing think that you can only make a lot of money when you have more than enough to begin with. Yes, people with significant capital to start investing in the stock market have a good chance at success, but that doesn’t mean you don’t. If you can invest wisely and with a long investment horizon, the power of compounding can turn even a tiny amount into a small fortune.
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How $5,000 can turn into a massive fund when used wisely
Suppose you invested $5,000 10 years ago in the stock market and got an average annual rate of return of around 10% throughout that time. That same $5,000 compounded at a 15% average annual return rate over a decade could be worth over $20,000!
Instead of exiting the investment at 10 years, staying invested for 10 more would see the power of compounding turn that $5,000 into over $33,000 at a 10% rate and over $81,000 at a 15% rate.
The entire point of explaining this model is to show how putting your money to work in the stock market after thinking things through can be successful for you. It can turn even a small amount into the kind of money that can change your life. The combination of discipline, patience, and strong returns can make you much wealthier, and here are two stocks that can give you a solid chance at that.
Trisura Group
Trisura Group (TSX: TSU) is a $1.96 billion market capitalization company that offers property and casualty insurance. The company has business segments in Canada, the U.S., and other markets. Trisura Canada includes risk solutions, corporate insurance, and surety business insurance products. Its U.S. segment provides specialty fronting insurance solutions.
Being one of the smallest insurance stocks on the TSX by market cap, TSU stock has been growing in the last few years. Where other insurance companies on the stock market trade at higher valuations, it trades for only around twice its book value, making it arguably cheap.
As of this writing, TSU stock trades for $41 per share, up by 33.24% from its 52-week low. The company’s management is tracking a 15% growth rate for the next few years, and it looks too attractive to ignore.
VitalHub
VitalHub Corp. (TSX: VHI) is an even smaller TSX stock than Trisura Group. VitalHub is a $619.77 million market-cap firm based in Canada that develops tech solutions for health and human service providers in long-term care, community health services, mental health, home health, social services, and acute care sectors.
As of this writing, VHI stock trades for $11.11 per share, up by a massive 64.83% from its 52-week low. The company is effectively carving out a niche for itself in the tech sector by building healthcare software solutions catering to smaller but important markets.
The company’s revenues have increased by 37% compounded annual growth rate, and its earnings by 82%. The stock looks well-positioned to grow further and further. It might be a good investment at current levels for multi-bagger long-term growth.
Foolish takeaway
While I’ve mentioned just two stocks to illustrate my example better, it’s important to remember never to put all your eggs in one basket (or two, for that matter). The key to success is investing in assets that deliver high-yielding returns over the long run.
The stocks must be well-positioned and have the kind of underlying businesses to support the long-term strategy. To this end, TSU stock and VHI stock are the kind of small-cap stocks that can be perfect additions to your self-directed portfolio for that strategy.
