For an investment to double in a decade, an investor need only achieve a 7.2% average annual return and reinvest the profits.
For example, $5,000 invested today for the next decade, at a rate of 7.2% per annum, with profits reinvested, would turn into $10,021.
"But with interest rates so low, where can I get 7.2% per year?" I hear you say.
Well, one alternative investment vehicle is the Australian stock market. Which, over the past 30 years, has gained 11.7% per annum.
As Motley Fool investment advisor Scott Phillips says: "That's higher than previous decades, where the average gain was between 9% and 11% (depending on which data you use), but even those lower numbers are impressive."
Returning to our example above, the initial $5,000 investment would've turned into $15,118 at 11.7% per annum with profits reinvested.
As any experienced long-term investor will tell you however, past returns are no guarantee of future success. But, a strong track record is reassuring and can be a sign of a reliable business model.
Three stocks which have gone above, and well beyond, the market's decade-long average return are Cash Converters International Ltd (ASX: CCV), InvoCare Limited (ASX: IVC) and Amcom Telecommunications Limited (ASX: AMM).
Second-hand goods dealer and payday loans provider, Cash Converters, has achieved a 10-year average annual total shareholder return (capital gains plus dividends) ("TSR") of 20.8%.
$5,000 invested in Cashies a decade ago, would now be worth over $30,000. However with its share price currently below $1.10, its best days could lie ahead.
The same could be said for both Amcom and InvoCare. Amcom is a network provider and cloud computing specialist, while InvoCare is a funeral, cemetery and crematoria owner and operator. The two companies have achieved TSRs of 20.6% and 19.2%, respectively.
Buy, Hold, or Sell?
Amcom, Cash Converters and InvoCare each pay grossed-up dividends greater than 4%. Making the challenge of achieving a 7.2% yearly return much more manageable. I already own Cash Converters shares but would happily hold InvoCare and Amcom shares in my long-term portfolio.
