It's important that investors remain grounded and realistic in their expectations for the returns their portfolio will produce. Generally the longer someone has been investing, the more they come to realise what is and isn't realistically achievable. In contrast, investors new to the share market are more likely to have an over-hyped sense of achievable returns – they'll 'swing for the fences' and thereby risk 'striking out'.
In reality, even if an investor achieves only a relatively modest mid-single digit return, compounded over a long time frame, they can still set themselves up for a comfortable retirement…
In fact, to double your money within 10 years only requires you to achieve a compound return of 7.2% per annum.
Given the S&P/ASX 300 Accumulation Index has achieved an annualised return of approximately 9% over the past decade, an investor could actually have done worse than the market average and still have doubled their money!
With the above return parameters in mind, here are three stocks which have the potential to help investors achieve a portfolio return of at least 7.2% per annum (pa) over the coming ten years.
Vertically integrated gas producer, electricity generator and retailer Origin Energy Limited (ASX: ORG) has provided shareholders with a Total Shareholder Return (TSR) of 12.4% pa for the past decade. With a forecast yield of 3.4% and plenty of earnings growth set to occur as its APLNG Project enters production, there appears a decent chance that a TSR of 7.2% or more can be achieved over the next decade.
Ansell Limited (ASX: ANN) is a global manufacturer of health and safety protection products. For the past decade the firm has achieved a TSR of 10.4% pa. With a forecast unfranked yield of 2.5%, investors will be looking for most of their returns through share price appreciation. With a positive outlook for earnings growth and with the company trading on an undemanding multiple, it's not unrealistic to expect that a double digit rate of TSR could continue to be achieved.
Leading international medical diagnostics company Sonic Healthcare Limited (ASX: SHL) has achieved a TSR of 9.7% pa for the last ten years. With the stock currently trading on a forecast yield of 4.2%, it only needs to achieve share price appreciation of approximately 3% pa (plus a little to adjust for partial franking) to reach an annual TSR of 9%. This growth rate would appear quite possible given the multitude of opportunities Sonic has to grow and expand its business.
