There are a many ways for Americans to earn wealth. They can put their money under their bed, buy bank CDs or bonds, or buy a home and hope it appreciates at a quicker pace than inflation. But over the long term, no investment possibility has given a better return than stocks.
If you put your money into great companies and allow your investment to continue over the years, or even better decades, stocks have the magical power to make you rich.
Understandably, there is no one definition of being rich. For some folks, that probably means buying a car without caring about the price or buying a boat. For others, “rich” might mean the increased value of giving more time with your family or not worrying about paying your bills.
By the time you hit retirement, these two winning stocks could make you rich.
Long-term investments are sometimes boring. And that is the case with Berkshire Hathaway, the large conglomerate that has been controlled and managed by billionaire Warren Buffett since around 1965. In Buffett’s over five decades, he has created more than $500 billion for the company’s shareholders and produced an annual average growth of 20%. In aggregate, we are talking about a return of around 3,400,000% for the Class A shares, taking into account ytd gains.
One of the primary reasons Berkshire is such a great company is its connections to cyclical industries. A lot of the company’s almost $323 billion portfolio is invested in technology, consumer staples and financials. These are industries that do very well when the economy is going on all cylinders.
The other factor to the company’s superior performance is its dividend. While Berkshire does not pay a dividend, many of the companies it is invested in do. All told, my calculation has the company netting about $5.1 billion in income from dividends this year along.
Another winning stock that can aid working Americans to retire wealthy on their own is cloud-based CRM software company Salesforce.com.
In easy terms, consumer-facing businesses make use of CRM software to support their customer relationships and bring in more sales.
Salesforce is the top dog alpha in this sector. In the first part of 2020, IDC reported that practically $0.20 of every $1 spent worldwide on CRMs was Salesforce. The company’s four top competitors don’t even add up to the company’s market share. Translation: The company’s own the industry.
Salesforce’s CEO, Marc Benioff, has also done a great job of growing the company through acquisitions. The purchases of Tableau, MuleSoft and, more recently, Slack, have aided the company in expanding its customer-centric ecosystem and appealing to a bigger portion of small and medium-sized companies.
Author: Blake Ambrose