Wouldn't it be nice if you could turn $10,000 into $50,000 by the end of the decade? Well, the good news is that this sort of return is not unheard of with ASX shares.
While it certainly is rare, it does happen. So, why not aim for it?
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How to turn $10,000 into $50,000 in seven years
To turn a $10,000 investment into $50,000 in the space of seven years, you're going to need to generate an average annual return of 26% per annum.
This is significantly higher than the share market's historical average of 10% per annum.
It also means that your investment will have to increase fourfold during that time. In light of this, I believe the best chance of generating this type of return is to look at the smaller side of the market.
After all, it is much easier for a $500 million to $1 billion company to grow four times its current size than it is for a $50 billion company.
However, the smaller we go looking for big returns, the higher we climb up the risk scale. This makes this endeavour suitable only for investors with a higher tolerance for risk.
With that in mind, here are a couple of ASX shares that I believe have the potential to generate very strong returns over the remainder of the 2020s.
Life360 Inc (ASX: 360)
Life360 is a $1.1 billion location technology company. It is best known for its eponymous Life360 app, which currently has 50 million global active users. The company also bolstered its offering with recent acquisitions of wearables company Jiobit and items tracking company Tile. These are opening the door to cross and upselling opportunities.
Goldman Sachs estimates that Life360 has a US$12 billion global total addressable market (TAM). This compares to the company's 2022 revenue guidance of US$225 million to US$240 million. It also means that even if Life360 grew its revenue four times over, it would still have captured less than 10% of its TAM.
And with the company expecting to be profitable this year, the days of dilutive capital raisings appear to be over. All in all, I believe this means it could be onwards and upwards from here for this ASX tech share.
Temple & Webster Group Ltd (ASX: TPW)
Another ASX share that I believe has the potential to turn a $10,000 investment into $50,000 by 2023 is Temple & Webster. It is Australia's leading online furniture and homewares retailer with a market capitalisation of $650 million.
Once again, I am going to call on Goldman Sachs to support my argument with this one. The broker is expecting the company to grow its earnings before interest, tax, depreciation and amortisation (EBITDA) by a compound annual growth rate (CAGR) of 22% over the next 10 years.
And with the shift to online shopping still in its early stages for furniture sales, Temple & Webster commanding a leadership position, and the category having high barriers to entry, I feel that Goldman's forecast is achievable.
As a result, if it does deliver on Goldman's forecast, I believe it is highly possible for the Temple & Webster share price to generate a 26% per annum return over the next seven years.
