In the investment world, billions and even trillions of dollars are thrown around frequently, but for individual retail investors, even $1 million is a big deal.
If you could build a stock portfolio of up to $1 million by retirement, in addition to your Social Security benefits and 401(k) or other employer-sponsored plan, you’d probably find that a comfortable nest egg.
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The keys to achieving this are patience and persistence, but you’ll also need to pick some good, high-performing stocks. To show you the value of time, if you had a 20-year time horizon until retirement and an initial investment of $10,000, with $100 contributed monthly, it would grow to $1 million with an annual return of about 21%.
That doesn’t sound so far-fetched, like Nasdaq Composite the index has had an average annual return of 17% over the past decade.
But if you started your retirement planning efforts later and only have a 10-year window to build your nest egg, then you obviously have some work to do. Here’s how you could do it in a decade and three actions that could probably help you get there.
Achieving your goal with a 20-year window would only require an initial investment of $10,000 and a 21% annual return. If you take 10 years worth of contributions and time for compound growth to work, you’ll need to start with an initial investment of $50,000, contribute $100 per month, and generate an average return of 30%. This is obviously a much harder rate of return to achieve.
Finding stocks that have the potential to average 30% annual returns over a decade is not easy, but over the past 10 years, Nvidia (NASDAQ: NVDA ) did, too adze and Broadcomand Apple approached.
What actions could this do in the next 10 years? In my opinion, Nvidia is still one of them.
Nvidia’s stock price has come back down to earth a bit. It’s down about 15% from its peak in November, so its valuation has taken a bit of a reset. But its advantages and wide opportunity in designing GPUs for data centers will remain, and various studies estimate that by 2030 up to $7 trillion will be spent on artificial intelligence (AI) infrastructure.
For many of the same reasons, I would Taiwan Semiconductor Manufacturing (NYSE: TSM) on the list. As the world’s leading chip foundry, producing semiconductors for Nvidia and other chipmakers, it has a virtually unassailable moat. Today, its share of the third-party chip manufacturing market is about 67%, and it produces about 90% of all advanced AI chips.