If you want to build life-changing wealth in the stock market, you can’t go wrong with a buy-and-hold approach to investing.
Buying and owning shares of high quality companies is critical to investment success as it allows your returns to accumulate over time. In fact, Warren Buffett, CEO of Berkshire Hathaway and one of the best investors of the modern age, has likened wealth creation to rolling a snowball downhill: it gets bigger the lower it goes.
A top-tier company that has been successful over the last few decades is the asset manager black rock (BLACK 1.90%). BlackRock is a massive player in the exchange-traded fund (ETF) space and has done a spectacular job of growing its business over the years.
Investing in BlackRock would have produced huge profits
BlackRock manages investments for clients around the world and is the world’s largest asset manager, with more than $8.5 trillion in assets under management (AUM), ahead of Vanguard Group, UBS Groupand Fidelity.
In 2000, BlackRock was not the giant it is today. The company has done an excellent job of growing its business, which has delivered an eye-opening performance. If you had invested $10,000 at the turn of the century, that investment would have grown to more than $587,000. To put this in perspective, a $10,000 investment in the S&P 500 the index would have become $40,000 during that same period.
BlackRock has capitalized on passive investing trends
BlackRock offers a variety of investments to investors, but is perhaps best known for its ETFs under its iShares brand. iShares ETFs were initially created in 2000 by barclays with the help of ETF inventor Nate Most. A pivotal move in BlackRock’s history occurred in 2009 when it bought iShares from Barclays, putting it in a prime position to capitalize on the growing trend toward passive investing.
Passive investing has gained popularity because it allows investors to take control of their investments. This has resulted in the creation of ETFs that match the performance of a specific index, allowing for automated investments with much lower expenses than actively managed funds. From 2008 to the present, BlackRock has increased its AUM from $1.3 trillion to $8.5 trillion, a 15% compound annual growth rate thanks in large part to its ETF products.
2022 market volatility has posed a challenge
This year has challenged BlackRock’s business, with CEO Larry Fink noting on the company’s most recent conference call that the first half of 2022 has been a tougher environment than investors have seen in decades. Investors have weighed high inflation and rapidly rising interest rates, leading to the worst start for stocks and bonds in more than 50 years.
As a result, investments have lost value. BlackRock’s AUM fell 11% from its peak of $10 trillion last year, and the stock fell 27% since the start of the year.
Here’s why BlackRock can keep winning
Despite recent stock volatility, BlackRock is in a strong position to continue to grow its business. The company is building its fintech product, Aladdin, which could provide a source of recurring revenue growth through long-term contracts.
The company has also invested heavily in the creation of its ETFs that offer numerous options for investors, including sustainable investment options through its environmental, social and governance (ESG) products. During the company’s investor day last year, it projected that the global AUM ETF would grow from $8 trillion in 2020 to more than $15 trillion in 2025, which could be a huge boost for its future growth. BlackRock has been a stellar performer for decades, and appears to be in a great position to sustain that growth.
Courtney Carlsen has no position in any of the mentioned stocks. The Motley Fool holds positions and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Barclays and recommends the following options: Long $200 January 2023 Call Options on Berkshire Hathaway (B-Shares), Short $200 January 2023 Put Options on Berkshire Hathaway (B-Shares) and Call Options short $265 in January 2023 on Berkshire Hathaway (B shares) . The Motley Fool has a disclosure policy.