How $200 Per Month, Patience, and Royal Bank of Canada Could Make You a Millionaire

Want to become a millionaire? It’s simple. Read how easy it is, using shares of Royal Bank of Canada (TSX:RY)(NYSE:RY).

| More on:
The Motley Fool

It’s tough being an individual investor.

We’re constantly hearing about stuff that just isn’t fair. Like billionaires who have enough clout that they can buy into a company and essentially make management their pawns. A company will resist making a shareholder-friendly move for years, and then do it almost immediately after a vocal billionaire shows up.

Plus, folks who are in on the action get other advantages, too, like great research, the best tips, and access to management that small investors can only dream of. It’s easy to get frustrated when stacked up against those odds.

But what if it didn’t have to be that hard? What if investors could find success just by sticking some money away every month and buying shares of high-quality titans of Canadian business? Wouldn’t that be attractive?

Of course, it would be. Fortunately for investors, it really is that easy.

Let’s assume that an investor started putting away just $200 per month, starting 30 years ago. This investor took the money and invested it in Royal Bank of Canada (TSX: RY)(NYSE: RY), because the company was Canada’s largest and most respected bank. Each month, like clockwork, they plunked down an additional $200 to buy a few more shares. Whenever dividends were received, they were reinvested, buying even more shares.

As of the closing price yesterday, this strategy would have netted an investor a cool $1.68 million.

Yes, that’s all it would have taken to become a millionaire. Heck, all the company would have to do is maintain that return for another couple years and you’d be a millionaire twice over. Most middle-class Canadians could retire pretty comfortably on a portfolio that size.

That’s not bad for the amount of cash most of us spend getting coffee.

Over the past 30 years, Royal Bank of Canada has been a terrific investment. Including reinvested dividends, it’s grown nearly 17% — 16.63% annually, to be precise. Can we expect it to perform just as well over the next 30 years?

Perhaps, or perhaps not. On the one hand, the company is still Canada’s largest financial institution. It’s a behemoth in both retail banking and the capital markets. It also has large insurance and wealth management divisions, along with a sizable presence in both the southeast U.S. and the Caribbean. Put all those divisions in one company, and it’s pretty easy to see why it would succeed.

On the other hand, Royal Bank is one of the 10 largest financial companies in the world, with assets eclipsing $1 trillion. Naysayers could point to the law of large numbers, saying that the company is simply too big to continue growing at more than 10% a year. Perhaps that’s true, but it’s not like there are geographical restrictions to banking. When you break it down, banking is essentially the same business no matter where you go. And globalization will continue to open up new markets for the company.

Going forward, I can’t guarantee that a couple of Sir Robert Bordens each month and the patience to wait 30 years will make you a millionaire. But there’s no reason to think that a similar strategy wouldn’t succeed with any number of Canada’s dominant business leaders. Royal Bank has consistently been the best financial in the country. It’s gone through a tough time in Toronto’s real estate market in the early 1990s, the dot-com bubble, the collapse of that bubble, and the worst of all, the Great Recession. Even through all that, it still gave investors generous returns. I’m not sure I’d bet against that.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nelson Smith has no position in any stocks mentioned.

More on Bank Stocks

money cash dividends
Stocks for Beginners

Is TD Stock the Best Dividend Stock for You?

Shares of TD stock (TSX:TD) plunged on the news of a money laundering probe. But could this mean it's a…

Read more »

Increasing yield
Bank Stocks

Is a Dividend Yield of 6.5% Enough Reason to Buy Bank of Nova Scotia Stock?

Bank of Nova Scotia is up about 14% in the past six months. Are more gains on the way?

Read more »

Dice engraved with the words buy and sell
Stocks for Beginners

TD Stock: Buy, Sell, or Hold?

TD stock (TSX:TD) is under immense scrutiny during its money laundering probe, but this could also mean it is a…

Read more »

path road success business
Bank Stocks

Should You Load Up on TD Bank Stock?

TD Bank stock is down 10% this year, as it faces ongoing money laundering investigations that will mean up to…

Read more »

edit Colleagues chat over ketchup chips
Bank Stocks

Money-Laundering Investigation: Is TD Bank Stock in Trouble?

Some legal challenges faced by publicly traded companies should be perceived as opportunities by investors since they can discount the…

Read more »

edit Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Bank Stocks

Is TD Bank Stock a Good Buy Now?

Here’s why TD Bank stock looks even more attractive to buy for the long term after its upbeat second-quarter earnings.

Read more »

consider the options
Bank Stocks

Is TD Bank Stock the Best Bank Stock for You?

TD Bank stock is reflecting a lot of the negative news. It remains a top bank stock trading at attractive…

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Prediction: These 2 Canadian Bank Stocks Are Next in Line to Pop

National Bank of Canada (TSX:NA) and another bank stock look ready to roar higher in the second half of 2024.

Read more »