How to double your stock portfolio in 5 years

Investors, are you beating the index averages? Doing much better than average should be the goal of all Foolish investors.

The past 10-year average return of Australian shares is 9.2%, according to the ASX/Russell Investments Long-term Investing Report. Over the past 20 years, the average dipped slightly to 8.7%. As an average, there are a number of stocks that are well above (and well below) that mark.

If you don’t want slow growth, then you need to latch onto some high growth stocks right now.

Let’s say your goal was to double your portfolio’s value in five years. Is that too aggressive or ambitious? Not necessarily.

Using the “rule of 72”, a quick accounting trick to see what rate you need to double a value, you’ll need an annual 14.4% return for the five years to double your portfolio.

That’s more than the averages above, yet there are some stocks that are growing earnings per share at that pace and higher. That doesn’t even add in dividend income return.

Here are two stocks that could potentially give this level of return over the next five years.

1)    REA Group Limited (ASX: REA)

The company has been a consistent fast grower with earnings usually in the high-double digits. It operates the massively successful property search website. It is number one in Australia and now will be attempting to transplant its success in the US as the owner of the third-largest US property search site, with its partner, the media giant News Corp (NASDAQ: NWS). Even if the company slowed down its growth a little to build up the business there, it would probably still be over our 14.4% hurdle. It does pay a 1.5% fully franked yield, but the big thing here is the earnings growth.

2)    TPG Telecom Ltd (ASX: TPM)

One of the bigger, yet still growing telecom players, the company is developing its own high-speed broadband similar to the national broadband network. Since it actually owns a lot of internet and mobile infrastructure, it gives the company the opportunity to extend that network infrastructure to more urban homes and residences. That can grow its potential customers greatly. Its consensus forecast for earnings growth is an average 23% annually over the next two years. That gives us a wide buffer beyond our desired 14.4%. It also offers a 1.4% yield fully franked. I think TPG Telecom is a solid telecommunications company and can be a good portfolio addition.

Some good growth stocks are smaller companies that give you the opportunity to get in near the ground floor for long-term growth. For example, one tech company with attractive growth prospects has just been named by our top analysts as their top pick for 2015.

The Motley Fool has completed a brand-new free report on this stock. Be among the first to get the name and code right now of this sexy ASX tech company!

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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