The S&P/TSX Composite Index is off to a good start in May 2021 and even closed at a record-high (19,472.70) on the first week. Irwin Michael, a portfolio manager at ABC Funds, said in February 2021 that he sees pent-up dividend increases over the next six to 12 months.
Canadians with enough money can take the cue and start the trek towards $1 million. While the goal isn’t impossible, I should remind you that to pull it off, make the right investment choices and have a long investment horizon.
Invest for the long term
No one gets rich in the stock market overnight. The long-term investment approach is still the best way to have a crack at $1,000,000. You must be ready to lock in your money for the long haul and exercise patience. Historically, stocks deliver better, if not solid, long-term returns.
Volatility is always present, but the extreme ones happen in shorter time frames. The low-interest-rate environment may tempt you to invest only to boost short-term returns. However, it still makes more sense to take the long route now that the TSX is likely to sustain its upward momentum throughout the year.
Know the top-performing sectors
When choosing investments, it would be best to check the advancing or trending sectors. The technology sector (-1.85%) ruled the market in 2020, but so far this year, it’s the poorest performer among the 11 primary sectors. The energy sector (+38.33%) was the worst performer last year but leads the pack, followed by consumer discretionary (+14.31%) and financials (+13.59%).
Watch out for new investment trends
Billionaire investors like Warren Buffett and Nelson Peltz might create a sea change with their increased investments in 5G, the Internet of Things, and the telecom space. Buffett’s Berkshire Hathaway picked up shares of T-Mobile and Verizon, while Peltz’s Trian Partners increased its stake in Comcast to more than US$1 billion.
Jim Patterson of Patterson Advisory Group said, “Telecom is becoming a focus of the investment community because it has not had the price appreciation of other assets.” T-Mobile CEO Mike Sievert said Buffett sees the value of the telecom sector. He adds, “This sector is valuable.”
Make the logical choice
If you were to capitalize on the emerging investment trend, Canada’s largest telecom should be the logical choice. Indeed, BCE (TSX: BCE)(NYSE: BCE) has yet to take off. The telco stock’s trailing one-year price return is only 4.83%. However, market analysts are bullish and forecast a potential 14% appreciation from $59.49 to $67.99.
Regarding the journey to one million, BCE pays a hefty 5.92% dividend. A $150,000 investment today will compound to $842,229.45 if your investment window is 30 years. The sample computation illustrates of power of compounding. BCE is a suitable investment for three compelling reasons.
The nature of the business is enduring, the 5G network rollout will increase monthly recurring revenue by 20%, and BCE is a Dividend Aristocrat. The $53.82 billion company has increased its dividends for 15 consecutive years and an average 5% increase for 12 straight years.
Start the quest
Building wealth is long-drawn activity but rewarding if you have the financial discipline to see it through. A Dividend Aristocrat like BCE should help you get to your destination. Set your sights on $1 million and start the quest in 2021.
