Appropriate targets for savings. Instead of searching for random stocks and investing in stocks that you feel are attractive, you should have a long-term goal for your investments. Do you have a basis for considering the analysis and the choice may be limited to the stocks for a reasonable risk in the best position to reach your return.
An ambitious but appropriate goal is to achieve an average return
Price growth and dividend of investments of 15 per cent per year. Then, your main task is to double every five years (regardless of tax and transaction costs). Furthermore, the portfolio is likely to outperform the index.
With risk-free interest rates below 5 per cent, the stock market is unlikely to average more than about 10 per cent per annum over a long period, including dividends, although it has historically yielded 12-15 per cent per annum or more for longer periods.
To reach the goal of doubling capital every five years
Our advice to invest in growth companies, ie companies with a turnover and profit growth that is above the growth of the overall economy of society (GDP growth).
There is no uniform definition of the term growth, but you should first look for companies that have the potential to grow by 15 percent per year. The goal is to double the capital every five years to reach “enough” until the company’s profits grow in line with turnover and the stock market is ready to bring the same profit / loss score in the form of P / E as today.
Often they are especially interesting among the companies that have grown rapidly thanks to the leadership of a skilled management. A good example of such a task is Hennes & Mauritz, where experience shows that high growth can continue for many years at well-run companies. Worse-led companies, however, have been very difficult to achieve high growth, even when in an industry with good growth prospects.