Want $1 million in retirement? Invest $300,000 in these 3 stocks and wait a decade

an elderly couple examines paper detailing stock transactions

Many people aim to become millionaires before they retire. Not only is it a fun achievement, but it’s also close to what many people need to maintain their lifestyle in their golden years. But if you’re only a decade away from retirement, reaching millionaire status will take a lot of money (there are no shortcuts).

However, by investing in these three stocks, you can increase your returns from the market average annual return of 10% to around 12% to 13%. It would take just under $300,000 ($294,588 to be exact) to reach millionaire status. So what are these three stocks?

Alphabet

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is the parent company of Google, YouTube and the Android operating system. Its core business is advertising, but it also has a hand in two important industries: artificial intelligence (AI) and cloud computing.

These could be huge catalysts for Alphabet’s growth over the next decade. With Alphabet’s latest generation of its generative AI model Gemini beating the competition on almost every baseline test, it’s sure to be a top pick for developers. Alphabet has yet to recognize any revenue from this segment, but it will be one to watch in the coming years.

Cloud computing has been a huge business trend in recent years as companies find it easier to outsource computing resources rather than trying to figure out what they need on-premises. It is also a beneficiary in the AI ​​trend, as companies need massive computing power to develop AI models and capture and store the data needed for them. Google Cloud grew 22% last quarter, making it Alphabet’s fastest-growing division. With the cloud computing market expected to expand from $626 billion in 2023 to $1.27 trillion by 2028, Alphabet is operating in a huge opportunity.

Add in Alphabet’s cheap stock valuation of 20 times 2024 earnings, and you have a recipe for a company that can outperform the market by a few percentage points every year.

Free market

Free market (NASDAQ: MELI) is one of my top rated stocks. It is a leader in Latin America in the e-commerce and fintech spaces and has become a combination of Amazon and PayPal in a region with twice the population of the United States

It has consistently delivered incredible results from both the retail and fintech segments, both delivering 76% and 61% currency-neutral growth, respectively, in the third quarter. While MercadoLibre has been a huge growth machine for some time, it’s also starting to improve its margin profile. In the third quarter, all three core measures of earnings increased.

Metric

Third quarter 2022

Third quarter 2023

Improvement

Gross profit

50.1%

53.1%

2.95%

Operating margin

11%

18.2%

7.24%

Profit margin

4.85%

9.5%

4.89%

Data source: MercadoLibre.

This shows MercadoLibre’s strong pricing power and its commitment to becoming a more efficient business. With the Latin American opportunity just getting started, MercadoLibre should easily deliver market-crushing returns over the next decade.

Amazon

Amazon had an incredible 2023. While its growth was unimpressive for most of the year, its efficiency gains were.

AMZN Gross Profit Margin Chart (Quarterly).

AMZN Gross Profit Margin Chart (Quarterly).

This is a good sign for shareholders, as we have yet to see Amazon fully profitable for a full year. Also, Amazon’s biggest growth driver will have a great year in 2024.

Amazon Web Services (AWS), its cloud computing wing, is a direct competitor to Google Cloud. However, with a massive market opportunity of $1.27 trillion, there is plenty of room for multiple winners. In 2023, many customers chose to optimize their spending with AWS. Management sees this trend slowing and new workloads (many AI-related) starting to come online. This will be a welcome change of pace and should give Amazon a boost in 2024.

Still, Amazon’s commerce segments fared better, with its advertising and third-party seller services growing 26% and 20%, respectively, in the third quarter. Amazon is a cash-flow powerhouse whose full potential is yet to be seen. However, we will see it through for the next decade and stock returns should easily exceed 10% per year.

While all three stocks are great buys, a well-diversified portfolio consists of at least 25 stocks. Investing all of your nearly $300,000 in just these stocks is dangerous because one of them could get hit by an unforeseen headwind and destroy its investment case. But as part of a broader portfolio, I’m confident that this trio will post market-beating returns.

Should you invest $1,000 in Alphabet right now?

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Suzanne Frey, CEO of Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet, Amazon and MercadoLibre. The Motley Fool has positions and recommends Alphabet, Amazon and MercadoLibre. The Motley Fool has a disclosure policy.

Want $1 million in retirement? Invest $300,000 in These 3 Stocks and Wait a Decade Originally Posted by The Motley Fool

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