With $5,000 to invest, I'd aim to make a 1,000% return from ASX shares

It's been done before and will likely be done again.

| More on:
A man leans forward over his phone in his hands with a satisfied smirk on his face although he has just learned something pleasing or received some satisfying news.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • If I was aiming to turn a $5,000 initial investment into $55,000, I would look to invest in ASX shares
  • There are three investing tactics I might consider employing in my quest to realise a 1,000% return
  • They each involve various levels of risk, as well as demand for time and patience

If I had $5,000 burning a hole in my pocket and an aspiration to make a 1,000% return, I'd turn to the ASX and the shares that call it home.

There's no guaranteed path to turn $5,000 into $55,000, but there are a few strategies I would consider using if I were aiming for such an astronomical return.

Investing in future 10-bagger ASX shares

The first is that which might come to mind quickest – investing in a share, or many, capable of gaining 1,000% or more.

That's certainly possible. ASX shares posting such gains over the last few years include lithium favourite Core Lithium Ltd (ASX: CXO), homewares retailer Temple & Webster Group Ltd (ASX: TPW), and software provider IODM Ltd (ASX: IOD).

In fact, the latter tech share has posted a gain of more than 4,000% over the last five years.

However, identifying future 10-baggers is far more difficult than scrounging up past winners.

If I were hunting for stocks potentially capable of rising 1,000%, I would start my search among the smaller end of town. There, I would look for shares in businesses I truly believe could make it. Personally, I would focus on those boasting a healthy balance sheet and a major competitive edge.

However, investing in stocks that look like they could be future multi-baggers generally demands a lot of patience and time. It also comes with a huge side of risk.

Thus, it's likely that I would miss my 1,000% target or even lose money if some of my picks underperform against my expectations.

Using Peter Lynch's strategy

Another approach I might consider when seeking a 1,000% return by investing in ASX shares would start at the other end of town. That is a strategy touted by investing great Peter Lynch – investing in 'stalwarts'.

Stalwarts are generally larger companies, like S&P/ASX 200 Index (ASX: XJO) shares, that haven't quite met their growth potential. Thus, they may be capable of moderately outperforming the market over a few years.

After a company's expected growth was realised, Lynch would sell out and reinvest in a new stalwart, thereby compounding returns. It's widely reported that Fidelity's Magellan fund returned an annual average of around 29% under Lynch's control.

If I could realise such a return, which is far from guaranteed, I could turn $5,000 into more than $55,000 in around 10 years. That's the power of compounding!

Take advantage of index funds

The final tactic I would consider is buying shares in an index fund tracking the ASX 200. This approach offers the least risk of the three.

Combining capital returns and dividends, the ASX 200 returned 9.3% on average over the 10 years to 2021.

While past performance doesn't indicate future performance, such a return could turn a $5,000 initial investment into $55,000 in 27 years.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group. The Motley Fool Australia has recommended Temple & Webster Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Investing Strategies

A female broker in a red jacket whispers in the ear of a man who has a surprised look on his face as she explains which two ASX 200 shares should do well in today's volatile climate
Dividend Investing

Top brokers name 3 ASX dividend stocks to buy

These dividend shares were give the thumbs up by analysts last week. But why?

Read more »

Man smiling at a laptop because of a rising share price.
Dividend Investing

One ASX dividend machine I'd buy over Fortescue shares right now

When it comes to dividends, growth can be better than a high yield.

Read more »

A group of friends cheer around a smart phone.
Growth Shares

5 ASX growth shares rated as buys this month

Analysts have put buy ratings on these stocks. Let's see why they could be good options for growth investors.

Read more »

Excited woman holding out $100 notes, symbolising dividends.
Dividend Investing

3 ASX dividend stocks with great yields to buy today

These dividend options have been given the thumbs up by analysts.

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Dividend Investing

How big will the BHP dividend be in 2025?

Let's see if the mining giant will be rewarding shareholders with more generous dividends.

Read more »

Middle age caucasian man smiling confident drinking coffee at home.
Dividend Investing

Buy Woolworths and these ASX 200 dividend shares

Analysts think that income investors should be buying these stocks.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Small Cap Shares

Down 40% in 2024, why is this ASX small-cap stock rocketing 32% today?

This small cap is smelling like roses on Thursday.

Read more »

footwear asx share price on watch represented by look holding shoe and looking intently
Cheap Shares

2 cheap ASX shares I'm considering buying now

These stocks look too cheap to ignore for me.

Read more »