Want to get richer? Buy these best stocks and wait 10 years

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Here’s one of my favorite investing tips: It’s the time in the market, not the timing of the market, that matters. So if you are looking to build wealth, don’t waste your time negotiating. Only 3% of day traders actually make any money, and less than 1% earn more than minimum wage, according to a recent study. Instead, aim to buy and hold high quality stocks for long periods of time.

Building on this idea, risk (NYSE: RSKD) and SoFi Technologies (NASDAQ: SOFI) look like good candidates for your hard earned dollars. These companies are expected to benefit as trends such as e-commerce and digital finance become more popular, and both stocks have significant upside potential.

Here’s why.

Image source: Getty Images.

1. Riskified

The e-commerce industry has grown rapidly in recent years and while this trend is certainly positive, it has made the fight against fraud more difficult. Today, many businesses rely on in-house systems to determine the legitimacy of online transactions, and these solutions are often slow and inaccurate, resulting in lost revenue due to false declines and increased costs due. fraud-related expenses (for example, chargebacks).

This is where Riskified comes in. Its platform relies on artificial intelligence to verify online transactions, automating the approval or denial process with 99.8% accuracy. Specifically, Riskified captures hundreds of data points per transaction, then correlates them with past transactions to quantify risk. And the results speak for themselves. The top 10 merchants on its platform saw an 8% increase in revenue and a 39% decrease in fraud-related spending, but those numbers reach 20% and 60% respectively for some merchants.

In addition, Riskified effectively takes responsibility for all fraudulent transactions, while ensuring minimum approval rates. This value proposition has translated into strong growth.

Metric

Q2 2020 (TTM)

Q2 2021 (TTM)

Switch

Returned

$ 140.1 million

$ 205.5 million

47%

Source: Risky SEC Deposits. TTM = 12 rolling months.

Investors should also look at Riskified’s retention rates. In 2020, the company reported 98% gross retention (meaning it lost 2% of its customers) and 117% net retention (meaning the average customer spent 17% more. ). These are solid numbers, but if you exclude businesses heavily affected by the pandemic (for example, ticket sales and travel), the gross and net retention rates were 99% and 158%, respectively.

Going forward, Riskified is expected to benefit from favorable industry-wide winds. According to Juniper Research, e-commerce fraud will exceed $ 25 billion by 2024, meaning a significant number of illegitimate transactions will be approved. And on the other hand, e-commerce losses due to false declines will total $ 443 billion in the United States this year.

As traders seek to reduce these expenses, Riskified should see an increase in demand. That’s why this fintech stock looks like a smart investment over the next decade.

2. SoFi Technologies

Consumers today have access to financial services through countless providers, including banks and credit unions, insurers, and fintech companies, but none of them offer a comprehensive portfolio that unifies all of these use cases. SoFi Technologies is the exception to this rule.

Through a single mobile platform, it provides an end-to-end suite of financial products designed to meet the needs of its members at every stage of life. SoFi divides its business into two categories: loans and financial services. The first includes student loans, home loans and personal loans; while the latter offers money management, investment and credit card services, in addition to third-party insurance products.

In short, SoFi’s mobile platform helps consumers borrow, save, spend, invest and protect their money. This convenience has helped this fintech add members at an impressive rate.

Metric

Q2 2020 (TTM)

Q2 2021 (TTM)

Switch

Members

1.2 million

2.6 million

113%

Returned

$ 357.7 million

$ 625.4 million

75%

Source: SoFi SEC files. TTM = 12 rolling months.

SoFi assesses its market opportunity at over $ 2 trillion, and shareholders have good reason to be optimistic. In October 2020, the company received preliminary conditional approval of its banking charter. And once the process is complete (which management expects before the end of 2021), it will energize SoFi’s product portfolio.

For example, a banking charter will allow the company to offer deposit accounts through its money management platform, called SoFi Money. The fintech company will then be able to use the money in those deposit accounts to fund its lending activities, resulting in lower interest rates for borrowers and higher interest rates for SoFi Money account holders. In other words, the business will be more financially efficient and more valuable to each member.

More broadly, it will further differentiate the company from its competitors, expanding SoFi’s ability to build lasting relationships with consumers. This is why this stock could make you richer over the next decade.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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