Make $1 Million in 10 Years With This 1 Stock!

Don’t wait for a stock market crash. Don’t try the next big thing. To get to a million dollars, you just need a strong stock, a TFSA, and a solid goal.

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The last year was a crazy one, and that includes within the stock market. There was a lot of fear and a lot of opportunity. But it also made investors start to question their strategies, when, really, what they should have questioned was their goals.

That’s what it should all come down to: your goal. If you’re a citizen investor, then trying to time a market bottom or hop onto the next big thing really isn’t for you. Instead, you need to find strong companies that can practically guarantee you’ll reach your goal.

That doesn’t mean you have to wait a long time or make boring goals. If you want a million dollars in a decade, it’s possible! You just need to do a few things.

Open a TFSA and contribute!

If you don’t have a Tax-Free Savings Account (TFSA), that’s your first big mistake. Most Canadians know of the TFSA, yet only 15 million actually have one. That’s only 40%! And of those, only 8.5 million contributed to their TFSAs in 2018, and of those that contributed, only 1.4 million reached the contribution limit, according to the most recent data this year.

This all means one thing: missed opportunity. Forget a stock market crash. Forget missing out on the right stock. Start with the basics and open a TFSA! Then meet that contribution room each and every year you can. I get it; we can’t all afford it, but there is a place to start. If you can put $500 away each month, you’ll meet this year’s $6,000 contribution limit.

Drip feed

Another problem investors have is that they believe they need to buy a bulk of stock all at once. That’s not true. If you’re like most Canadians, putting just a bit aside at a time is absolutely fine. You can start with that $500 per month, putting it into your TFSA and waiting for the right opportunity to invest. Or, if you’ve chosen a strong company, you could simply invest that $500 each month into the same stock. The choice is yours!

Personally, I like the option of putting $500 away once a month and waiting for a dip. Then if there isn’t a dip you’re happy with, have a time each year where you can take that chunk of change and just put it into the stock, so you don’t miss out on any more opportunities.

Buy blue

Canadian banks continue to be some of the best options as blue-chip stocks. But of the Big Six banks, I continue to like Royal Bank of Canada (TSX:RY)(NYSE:RY). The bank is the biggest of the Big Six by market capitalization, currently at $123 billion. It recently reported its first-quarter earnings, and investors were impressed at the bank’s recovery.

Royal Bank saw a 10% increase in net income year over year, with strong diluted earnings per share growth of 11% over the same time frame. The impact of low interest rates and higher expenses was offset by increased client activity and the rebound in the markets. It even included record earnings in its Capital Markets segment up 21%, and positive earnings growth in its Personal & Commercial Banking, Wealth Management, and Insurance sectors, which have been highly lucrative for years.

But investors also get a strong dividend from this Dividend Aristocrat. The bank didn’t cut its dividend during the market downturn and has paid a dividend each year since 1870. Investors can use that cash to add to its hoard and put it down on the stock.

Bottom line

So, if you’re going to get to a million dollars in a decade, it will take a large investment. Looking at past share growth, Royal Bank stock offers a compound annual growth rate (CAGR) of 12% over the last two decades. It also has a dividend CAGR of 8% during the last decade.

Using that information, it would take an investment of $230,000 to reach that million-dollar point in a decade while reinvesting dividends. However, if you have some time on your hands, it would only take $66,000 to reach a million dollars in 20 years. That way, you can put all your investment into your TFSA given the limit is $75,500 as of writing!

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 Amy Legate-Wolfe owns shares of ROYAL BANK OF CANADA.

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