Many young savers wonder how they will be able to accumulate $1 million in their saving accounts — it’s a sum many believe is enough for a comfortable life in retirement. I would like to dispel this impression that you will find a shortcut in these articles to build a million-dollar portfolio. The road to achieve financial independence starts with discipline and persistence. You have to control your spending from the day your start earning. You have to develop a habit of saving aggressively, and you have to do it for a long time….
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Many young savers wonder how they will be able to accumulate $1 million in their saving accounts — it’s a sum many believe is enough for a comfortable life in retirement.
I would like to dispel this impression that you will find a shortcut in these articles to build a million-dollar portfolio. The road to achieve financial independence starts with discipline and persistence.
You have to control your spending from the day your start earning. You have to develop a habit of saving aggressively, and you have to do it for a long time.
In Canada, you have a fantastic saving tool which has been designed to help you maximize your savings and get you the best tax benefits.
As evident from its name, Tax-Free Saving Accounts (TFSAs) have many advantages for young savers. They allow investments to compound tax free, and you can cash out your TFSA without anytime without incurring a tax liability.
Through your TFSA, you can start investing in safe, growth-oriented stocks which you plan to buy and hold for a long time.
Let’s say you maximize your yearly TFSA limit of $5,500 and start investing at the age of 20. If you continue to do so for the next 40 years, you could retire with $1 million in your TFSA. More precisely, you’ll have $1.187 million in your account, including $788,000 as an investment return on your contributions.
The assumptions here are that the rate of inflation will be 2%, and you’ll be able to maintain 5.5% rate of return on your portfolio.
Now, let’s talk about the stocks that can get you there. Here are my five favourite millionaire-making growth stocks.
Enbridge Inc. (TSX:ENB)(NYSE:ENB) is my top pick among the Canadian energy infrastructure companies. Through its constant growth and a smart acquisition strategy, the company has reached a scale that will enable it to produce a steady income stream for a long time.
Offering a 4.9% annual dividend yield based on its today’s price, Enbridge has paid dividends for over 64 years to its shareholders, producing 12.3% total annualized return during the past 15 years.
Canadian National Railway Company (TSX:CNR) (NYSE:CNI) runs a 100-year-old railway business and has a strong leadership position in the transportation sector. The Canadian rail industry is a quintessential duopoly, dominated by CNR and Canadian Pacific Railway Limited. CNR has delivered a ~17% annualized return for its investors for the past 15 years, if all dividends were re-invested.
Brookfield Infrastructure Partners L.P. (TSX:BIP.UN) (NYSE:BIP) is a solid stock for Canadian investors to have some global diversification. Its portfolio of critical infrastructure assets, such as electricity and gas distribution businesses in Australia and the U.S., and a portfolio of 36 ports in North America, helps the company generate stable cash flows for long-term investors who are keen to earn stable dividends.
Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is one of the best stocks among large Canadian lenders. Its huge presence in the U.S. and dominant market share in the local market makes this lender a cash machine for long-term TFSA investors. In the past 15 years, the lender has provided a 12% annualized total return, and there is no reason why it shouldn’t continue with this trend.
BCE Inc. (TSX:BCE) (NYSE:BCE) is also a great long-term stock for a TFSA. The company is Canada’s largest telecom operator with a lot of media assets. BCE currently pays a $2.88 per share annual dividend, which translates into a juicy 4.8% yield — a solid payout in today’s low-return environment.
The bottom line
Amassing $1 million before you retire is not that hard. Keep saving and investing in great dividend-paying companies, such as Enbridge and TD Bank, and you will notice how quickly your saving nest grows as years tick by.
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Fool contributor Haris Anwar has no position in the companies mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway and Enbridge. Brookfield Infrastructure Partners, Canadian National Railway, and Enbridge are recommendations of Stock Advisor Canada.