The stock market rewards investors who buy and hold stocks for the long run — allowing compound interest to work in their favor. If you had invested $1,000 in the S&P 500 (SNPINDEX:^GSPC) 50 years ago, you would have $39,000 today, or in other words, 39 times whatever amount you initially invested. Of course, one of the challenges in achieving such incredible returns is resisting the temptation to sell.
For those of you who are interested in achieving the massive gains associated with long-term investing (and I know you are earnestly interested — otherwise you wouldn’t have clicked on this article), here are three growth stocks you can buy and hold for the next 50 years.
Amazon is the quintessential growth stock
Amazon (NASDAQ:AMZN) has a compound annual growth rate (CAGR) of 27.6% in the last decade. What’s more, when its fiscal 2020 is over, the e-commerce giant will likely report a rate of growth above its 10-year average. The pandemic has accelerated the shift from brick-and-mortar shopping to online, and that trend is unlikely to reverse even after the pandemic has faded away.
Its army of over 150 million loyal shoppers (known as Prime members) will help fuel the continued growth in its retail segment. Third-party businesses, companies that sell products on Amazon’s site and pay Amazon a percentage fee for the privilege, covet having access to these shoppers. The more Prime members Amazon acquires, the more businesses it will attract to list products on its site, which will provide more value to Prime members. In other words, the classic network effect is at play.
Amazon’s highly profitable Web Services segment, which provides cloud computing services to enterprises and institutions, continues to grow at nearly 30%. According to Grand View Research, the cloud computing industry is expected to grow at a compound annual growth rate of 14.9% between 2020 and 2027. Amazon is the market leader in that space and will benefit from a leading position.
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