Sometimes, the old financial adages are spot on. For example, it does take money to make money. And the expression that "time is money" is correct in many ways.
But it's also true that some investment alternatives require much less time to make you money than others.Want $1 million in retirement? Invest $250,000 in these three stocks and wait a decade.
1. Vertex Pharmaceuticals
An $83,333 investment (roughly one-third of $250,000) in Vertex Pharmaceuticals (VRTX -0.26%) made in October 2013 would now be worth nearly $393,000. Can Vertex deliver a similar return over the next 10 years? I think it just might come close.
Vertex still has plenty of room for growth in the cystic fibrosis market. There are at least another 20,000 patients that can be treated with the company's current therapies. Vertex's messenger RNA therapy in development could add another 5,000 or so cystic fibrosis patients. Altogether, there's another 30% or so of the addressable market for its treatments that it has yet to tap -- and it doesn't have any competition in that indication.
However, I expect that Vertex will enjoy a much bigger boost from its efforts to expand beyond treating cystic fibrosis. Regulatory approvals for exa-cel -- a gene-editing treatment that looks to provide a functional cure for the rare blood disorders sickle cell disease and transfusion-dependent beta-thalassemia -- should be just months away. Vertex's non-opioid pain drug candidate VX-548 could be hot on its heels, with late-stage clinical studies on track to wrap up by the end of 2023.
Vertex is also evaluating inaxaplin in a pivotal trial in targeting the underlying cause of APOL1-mediated kidney disease (AMKD). There are no approved drugs for AMKD -- and that condition affects more patients worldwide than cystic fibrosis.
If that's not enough, Vertex's pipeline also features three programs that hold the potential to cure type 1 diabetes. Successful results from clinical studies with these therapies over the next few years could light a fire beneath the biotech stock.
2. TransMedics Group
The global organ transplant market totaled close to $8.7 billion last year, and is forecast to grow to $21.6 billion by 2030, according to Fortune Business Insights.TransMedics Group's (TMDX -3.65%) market share in that is around 2% right now. I think TransMedics will easily be able to deliver the 4x gain we need over the next decade. My confidence is based on the way the company is disrupting the organ transplant market.
It's shocking how few donor organs actually make it to their intended recipients using the cold storage method of transportation that has been the standard for years. Roughly 60% of donor livers are ultimately transplanted to recipients. The numbers are worse for hearts and lungs -- 28% and 18%, respectively.
TransMedics Group's Organ Care System (OCS) keeps organs alive during transit. In clinical studies, more than 80% of donor lungs and hearts made it to recipients. Donor liver utilization increased by 2x. Severe post-transplant complications were reduced across the board.
One of the biggest impediments to TransMedics' growth has been that it doesn't control the entire end-to-end logistics process involved with organ transplants. That will change, though, with the company's recent acquisition of charter flight operator Summit Aviation. This transaction will enable TransMedics to build out its own nationwide air logistics network dedicated to supporting organ transplants.
3. Brookfield Renewable
Brookfield Renewable (BEP -0.13%) (BEPC) expects to deliver total annual returns of 12% to 15% over the long term. If the renewable energy provider can hit the upper end of that range, it would translate into a 4x gain over the next 10 years. I like its chances.
The company's distributions alone get us nearly halfway to the needed level of return. The limited partnership's distribution yield currently stands at close to 6.9%. Brookfield Renewable has increased its distribution at a compound annual rate of 6% since 2012.
Even better, the demand for renewable energy will almost certainly continue to grow rapidly for many years. That isn't just because of the push to reduce carbon emissions, by the way. Solar and onshore wind are more cost-effective energy sources than fossil fuels.
Brookfield Renewable is preparing to meet this surging demand. The company has around 32 gigawatts of operational capacity today. Its development pipeline capacity stands at 134 gigawatts.
Two important caveats
I genuinely believe that $250,000 invested evenly across these three stocks could grow to $1 million over the next decade. However, there are two important caveats to keep in mind.
First, potential issues could arise that derail Vertex, TransMedics, and/or Brookfield Renewable. There's no guarantee that any of these stocks will be able to generate 4x returns over a 10-year period.
Second, putting all of your eggs in only three baskets isn't advisable. It's prudent to construct a highly diversified portfolio to lower your overall investment risks. As much as I like Vertex, TransMedics, and Brookfield Renewable, I wouldn't bet the entire farm on just three stocks -- no matter how great they might be.
Keith Speights has positions in Brookfield Renewable, Brookfield Renewable Partners, and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Brookfield Renewable, TransMedics Group, and Vertex Pharmaceuticals. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
FAQs
Here are seven different options for you to consider when investing $250,000.
- Work with a Financial Advisor.
- Build an Emergency Fund.
- Open an IRA.
- Stock Market Investments.
- Real Estate Investment Property.
- Peer-to-Peer (P2P) Lending.
- Alternative Investments.
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
How much income will 250k generate? ›
£250k is all you need to double your State Pension. A 4.5% yield on your invested capital of £250k will produce an annual income of £11,250.
How to invest $100 000 to make $1 million? ›
There are two approaches you could take. The first is increasing the amount you invest monthly. Bumping up your monthly contributions to $200 would put you over the $1 million mark. The other option would be to try to exceed a 7% annual return with your investments.
Where is the safest place to put 250k money? ›
High-Yield Savings Accounts
Deposits of up to $250,000 are insured by the Federal Deposit Insurance Corp., which ensures they are ultra-safe investments. A high-yield savings account is a type of savings account that typically offers higher interest rates than a traditional savings account.
Can I live off the interest of 250k? ›
Ideally, you can live off the interest without touching your investment principal. While many investors may not be able to live off the interest from $250,000, it could supplement other sources of retirement income to meet their needs.
What percentage of retirees have a million dollars? ›
In fact, statistically, around 10% of retirees have $1 million or more in savings. The majority of retirees, however, have far less saved.
How long can you live off the interest of 1 million dollars? ›
Around the U.S., a $1 million nest egg can cover an average of 18.9 years worth of living expenses, GoBankingRates found. But where you retire can have a profound impact on how far your money goes, ranging from as a little as 10 years in Hawaii to more than than 20 years in more than a dozen states.
How long will $1 million last in retirement by state? ›
For instance, in California, an average retiree requires approximately $100,965 to lead a comfortable life, whereas in Kansas, that figure is just above $63,000. Retirees in certain states can enjoy between 15 and 16 years of life if they save one million dollars.
How much do I need to invest to make $1000 a month? ›
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
In this situation, your nest egg would last around five years and four months. Remember, the above figures don't account for interest or investment income, which help your nest egg last longer. That said, your rate of return on $250,000 would provide an additional $10,000 per year if you estimate conservatively.
How much interest does $250,000 earn a year? ›
Savings and money market accounts.
Depending on your balances and where you open your account, your interest rate will vary. Many high-yield savings accounts from online banks offer rates from 2.05% to 2.53%. On a $250,000 portfolio, you'd receive an annual income of $5,125 to $6,325 from one of those accounts.
How long does it take 100k to turn into 1 million? ›
Over the long haul, the stock market has provided average annual total returns somewhere in the neighborhood of 10%. If the future ends up like the past, $100,000 would grow into $1 million in just over 24 years from compounding alone.
How long to become a millionaire investing $1,000 a month? ›
Let's consider some examples: Investor A can only invest $1,000 every month and has nothing in savings. If he earns a 10% annual rate of return (compounded quarterly) in a portfolio created by a robo advisor, Investor A will need 22 years and seven months to become a millionaire.
How to flip 10k into 100k? ›
To potentially turn $10k into $100k, consider investments in established businesses, real estate, index funds, mutual funds, dividend stocks, or cryptocurrencies. High-risk, high-reward options like cryptocurrencies and peer-to-peer lending could accelerate returns but also carry greater risks.
Is 250k cash a lot of money? ›
You may want to spread your money around
And even among people who have a lot of assets, the reality is that $250,000 in savings is a lot. Generally, someone with that much cash would be advised to put some of it into a brokerage account to invest.
Is 250000 considered rich? ›
Someone who makes $250,000 a year, for example, could be considered rich if they're saving and investing in order to accumulate wealth and live in an area with a low cost of living. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. Rich vs.
How many Americans have over 250k? ›
Of all the financial institutions reporting, including commercial banks and federal savings banks, there are approximately 860 million deposit accounts (not including retirement accounts). But fewer than one percent–just 0.83 percent–of these accounts have more than $250,000.
Is 250k a lot of money? ›
Only 2.9% of earners make more than $250,000 a year (CNBC). On a nationwide and worldwide scale, many consider this to be wealthy. But some people within this income level hesitate to call themselves rich – identifying more in the upper middle class.
