Want to Get Richer? Buy These Top Stocks and Wait 10 Years

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

Building on that idea, Riskified (RSKD -0.99%) and SoFi Technologies (SOFI -0.13%) look like good candidates for your hard-earned dollars. These companies should benefit as trends like 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 has certainly been positive, it has made combating fraud more difficult. Today, many businesses rely on in-house systems to determine the legitimacy of online transactions, and these solutions are frequently slow and inaccurate, resulting in lost revenue due to false declines and increased costs due to fraud-related expenses (e.g. chargebacks).

That's where Riskified comes in. Its platform leans 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 10 largest merchants on its platform have seen an 8% uptick in revenue and a 39% decline in fraud-related expenses, but those figures are as high as 20% and 60%, respectively, for some merchants.

Moreover, Riskified actually assumes liability for all fraudulent transactions, while guaranteeing minimum approval rates. That value proposition has translated into strong growth.

Source: Riskified SEC Filings. TTM = trailing 12 months.

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

Looking ahead, Riskified should benefit from industrywide tailwinds. 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 flip side, e-commerce losses due to false declines will total $443 billion in the U.S. this year.

As merchants look to curtail those expenses, Riskified should see an uptick in demand. That's why this fintech stock looks like a smart investment over the next decade.

2. SoFi Technologies

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

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

In short, SoFi's mobile-first platform helps consumers borrow, save, spend, invest, and protect their money. That convenience has helped this fintech add members at an impressive pace.

Source: SoFi SEC filings. TTM = trailing 12 months.

SoFi puts its market opportunity at over $2 trillion, and shareholders have good reason to be optimistic. In October 2020, the company received preliminary conditional approval for its banking charter. And once the process is complete (something management expects before the end of 2021), it will supercharge 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 use the money in those deposit accounts to fund its lending business, driving lower interest rates for borrowers and higher interest rates for SoFi Money account holders. In other words, the business will be more efficient from a financial perspective and more valuable to each member.

More broadly, this will further differentiate the company from its rivals, expanding SoFi's ability to build lifelong consumer relationships. That's why this stock could make you richer over the next decade.