We are already into the second month of the new decade, and Canadian investors need to start gearing up for the challenges to come. The broader markets performed well throughout 2019 to climb to new all-time highs. Despite a fantastic year for the TSX Index, there were concerns raised last year regarding troubling financial times.
2020 might be the year that Canadian investors face off with two tough challenges. I am going to discuss both possible issues and how investing in a stock like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) can help you fight the challenges.
Rising debt crisis
Canadian households are under increasing pressure. Expenditures keep rising every year, and the average increase in income cannot meet with the demands. With an income lower than your expenses, debt becomes a significant issue. Almost half of Canadians are saying that they will need to borrow money to cover their most basic costs in 2020.
The debt crisis in Canada is already bad enough as it is. The global slump in manufacturing activity across industries is leading to a decline in jobs. There are increasing fears of commodities losing their value this year due to the ongoing trade war between the U.S. and China.
A decline in the number of jobs and an increase in expenses that cannot be met without incurring debt will make the situation worse than it already is. Canadians are already struggling with their mortgages despite lower interest rates.
With rising debt, another challenge Canadians are facing is a severe lack of savings. Where you should be looking toward outlets to grow your cash, you need to have some money saved up in the first place. According to a poll by accounting firm BDO Canada Ltd, more than a third of Canadians do not have retirement savings.
There is a dire need to analyze your spending habits and cash outflow. Prioritize paying off high-interest loans and make an effort to consolidate your debt so you can deal with them more effectively. For a lot of Canadians, the mortgage is the most significant debt to deal with.
The rising debt crisis can lead to a decline in the Canadian economy moving forward. Reprioritizing your spending and increasing your focus on saving more money can help you on your way to deal with the challenges in 2020. That being said, the work does not end there.
Let’s say you manage to save a significant amount. Instead of letting that cash sit idle, you can use your savings to earn more money through smart investments in a reliable stock like TD. As of this writing, the bank’s stock is trading for $73.98 per share and has a juicy dividend yield of 4.00%.
Investing in the TD stock can allow you to take advantage of the bank’s capital gains to grow your wealth. Additionally, TD’s dividend payouts will accumulate in your account as free-flowing cash. You can reinvest the money or use it to help with expenses and save more money from your paycheque.
At the time of writing, the bank’s stock is up by more than 46% from its value five years ago. It has one of the best growth rates among the Big Five Canadian banks. Between potential capital gains and high dividend income, I think investing in TD can help you mitigate the effects of 2020’s challenges.
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 Adam Othman has no position in any of the stocks mentioned.