Even just 1 ASX share with a return of 1,000% or more is enough to supercharge the returns of your share portfolio. To see this, consider the following example of 2 simple $10,000 portfolios containing shares in 10 companies.
For simplicity, assume both portfolios contain equal $1,000 amounts in each of the 10 shares.
For portfolio 1, assume an annual return of 10% per year. This gives us the following portfolio value after 5 years:
Portfolio Value = $10,000 x [(1.1)^5] = $16,105
For portfolio 2, also assume an annual return of 10%. However, this will only be for 9 shares in the portfolio, with the 10th share returning 1,000% over the 5 years – or a compounding annual return of 61.54%. After 5 years, the value of the portfolio would be:
Portfolio Value = $9,000 x [(1.1)^5] + $1,000 x [(1.6154)^5] = $25,495
As you can easily see in the chart below, just finding one of these ’11 baggers’, or shares returning 1,000%, is enough to significantly boost your portfolio returns. By a difference of an amazing 58% in just 5 years in the above example.
2 ASX shares returning 1,000% over the last 5 years
While there would have been a number of companies reaching this coveted return over the last 5 years, most would be unknown to the majority of investors. However, I’m sure many people have heard of A2 Milk Company Ltd (ASX: A2M) and/or Altium Limited (ASX: ALU). Both of these companies have given investors the chance at a 1,000% return in the past 5 years.
a2 Milk shares listed on the ASX just over 5 years ago, selling for just 56 cents per share. However, a couple of months later in May 2015, the shares closed for just 47 cents. At the time of writing, a2 Milk shares are trading today, 5 years later, at a staggering $18.37 each. This is an astonishing 39 bagger in just 5 years. Or a return of 3,800%.
If you were lucky enough to pick up shares in the PCB software company in August 2015 at $3.71, you would’ve been sitting on a return of 1,049% in February this year prior to the market crash. However, even despite this crash, the return today would be a massive 857% or a ‘9 and a half bagger’. But only if you had managed not to sell the shares in the meantime.
As shown above, managing to find and invest in just a single company with these returns can have dramatic results for your portfolio’s performance.
Of course, shares like these are not easy to come across, and often even harder to hold onto during the often volatile ride to a 1,000% turn. Both a2 Milk and Altium experienced significant drops along the way.
However, finding growth companies early, within a large expanding industry, and spreading your funds over multiple candidates for the long term is one way to increase your chances of owning one in your portfolio.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor Michael Tonon has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and Altium. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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