The Motley Fool

How I’d double my money investing in stocks and shares

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Hand arranging wood block stacking as step stair on paper pink background
Image source: Getty Images

I aim to double my money every five years by investing in stocks and shares. Putting it another way, I aim to achieve an annual total gain of 15%. There’s a neat maths shortcut to approximate how long it will take to double my money called the rule of 72. Essentially, divide 72 by your annual gain to calculate the doubling time.

The long-term average return from investing in stocks and shares is said to be around 8% to10%. Of course, past performance doesn’t guarantee future returns. But the period of average returns encompasses a range of scenarios including several wars, international catastrophes, and stock market bubbles.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

How I’d start investing in stocks and shares

Investing in stocks and shares should be a long-term activity, in my opinion. There can be a greater element of risk involved during shorter timeframes. I try to invest for several years at the very least.

This can mitigate fluctuations caused by some of the shorter-term economic, political, and psychological factors that affect stocks and shares.

If I was starting again, I would begin my investing journey with carefully selected funds and investment trusts. I would look for funds that are global, diversified, and with competent managers.

Top fund

There are a few options that would currently be at the top of my list. Firstly, I’d invest in Fundsmith, run by veteran portfolio manager Terry Smith. The past 10-year gains have been exemplary, in my opinion. At an average annual return of 18%, the fund performed very well.  

Fundsmith focuses on quality and profitability. The fund only invests in high-quality businesses that can sustain a high return on capital employed. The companies must also have business advantages that are difficult to replicate. Once found, Fundsmith aims to hold these investments for a long period.

Bear in mind, to meet stringent selection criteria, the portfolio is relatively concentrated. It holds between 20 and 30 stocks. This is fewer than many other funds and it could affect fund performance if one of the holdings were to significantly underperform. That said, given the high quality of the holdings, it’s not a major concern for me.

Top investment trust

In the long term, I’m a great believer that technology will drive human progress forward. Computing power should rapidly increase over time and this could have large implications for multiple industries. Which industries will the next generation of winners come from?

Tom Slater, joint manager of Scottish Mortgage Investment Trust (LSE:SMT) thinks healthcare, transport, transactions, and food delivery are the sectors to watch.

Investing in stocks and shares from these industries could be rewarding over the long term. This actively managed investment trust has performed incredibly well, by any standard. Its average annual return over the past five years is 38%, and over the past 10 years is 24%.

Holdings, including Tesla and Amazon, helped propel the trust to grow by 90% over the past year.

A word of warning, however. The holdings are typically high-growth companies. As such, these stocks can be more volatile. As disruptors, they can experience setbacks in addition to breakthroughs. A change in market sentiment towards high-growth stocks can also have an amplified effect on a technology fund like Scottish Mortgage.

That said, as a long-term investor willing to hold investments for over five years, I’m happy for it to form a core part of my portfolio.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Harshil Patel owns shares in Scottish Mortgage Investment Trust, Fundsmith Equity, Amazon and Tesla. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon and Tesla and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.