When you start investing, or once you have been investing for a little while, you will quickly start to learn that the two biggest assets that will aid in your long-term performance are having the cash and funds to invest as well as having a long time frame.
As with money, the more time you have, the greater the possibilities. You can still achieve the same targets as someone who has more time to reach the goal than you; however, when you try and hit targets in a shorter amount of time, all else being equal, it’s significantly harder.
You will learn really quick that compound interest is an exceptional power.
Albert Einstein, one of the smartest humans in history, has a famous quote saying, “Compound interest is the eighth wonder of the world, he who understands it, earns it; he who doesn’t, pays it.”
With compound interest, giving your investments more time to grow only adds to its exceptionally powerful nature, so starting to invest as early as possible will give you that much greater of an advantage.
If you were to start today with $0 and contributed $5,000 a year, you would have a total investment value of more than $680,000 after 30 years at a 9% compounded annual growth rate on just $150,000 of savings.
Now, if you were 25 when your first started to invest, you would have this value at age 55 and could continue to invest it another 10 years for retirement at 65, where it would grow to a whopping $1.69 million on just $200,000 in savings at the same 9% compounded rate.
Clearly, there is a massive difference between the two, and the earnings difference you can make over the additional 10 years, which should highlight the potential everyone has by starting earlier and giving yourself extra time to continue to compound your growth.
Of course, this assumes a constant long-term growth rate that averages out to 9% a year, which is doable, you just have to find the right high-quality stocks to buy and hold for the long term, such as Enbridge (TSX:ENB)(NYSE:ENB).
Enbridge is an ideal stock for investors looking to build a long-term portfolio of stocks you never have to sell.
First and foremost, it’s a mainstay of the North American economy, transporting roughly a quarter of North America’s crude oil and natural gas.
The company also has a gas utilities business, which gives it some diversification in its operations but still keeps the majority of its earnings predictable.
Its business, on top of being extremely important to the economy, is also insulated by having 98% of its earnings before interest, taxes, depreciation, and amortization regulated or with a fixed fee.
The high-stability nature of its businesses allows Enbridge to pay a significant and attractive dividend that sees strong growth every year. It’s one of the main reasons why Enbridge is listed on the Canadian Dividend Aristocrats list.
Today, its dividend yields roughly 6.4%, and it just recently announced an increase to its dividend, effective early in 2020, and its expectation for 5-7% growth annually beyond that.
It’s a great company that has the flexibility to be strategic with its investments and allocate its capital to the make the most prudent investment decisions it can today, to help increase its long-term growth rate.
If you are looking to start investing and need to build up the core portion of your portfolio, Enbridge is the stock to start with, and it will help set your portfolio on the path to great long-term growth, allowing you to build a small fortune for when you retire.
