Is building wealth a tough task? Not really. By saving $100 per week and following the three easy steps of choose, wait, and watch, you can amass good wealth. Yes, I am talking about buying quality stocks bit by bit at regular intervals and holding on to the investment discipline. This approach also allows for dollar-cost-averaging, whereby money is invested at all levels of the market. This strategy can pay life-changing rewards to long-term investors.
Build a long-term TFSA portfolio
I will now tell you how to walk the path to wealth creation without digging a deep hole in your pocket.
Say you invest $100 per week for 10 years in your Tax-Free Savings Account (TFSA). Your total investment will be $52,000. A portfolio that gives around 8-9% average return can accumulate around $84,000 after a decade.
Seems simple! But the difficulty lies in choosing the right stocks. Invest in diverse companies, those that pay dividends, and those that have resilient businesses and can continue to grow at a healthy pace for 10-15 years.
To get you started, I bring you a portfolio of three stocks in different sectors.
An essential service stock
My first pick is Canadian National Railway (TSX:CNR)(NYSE:CNI). Because of the duopoly nature of the railway industry, there are high barriers to entry, which shields its growth.
It has diverse revenue sources and several subsidiaries. It transports everything from metals and mining to grains and fertilizers to petroleum products, the demand for which will continue forever.
Its soon-to-be-closed acquisition of Kansas City Southern will open up expansion in North America. CNR’s shipment volumes, which dwindled due to COVID-19, are coming on track with the return of consumer spending. Strong volume and pricing will translate into handsome sales over the long term.
Looking at its last five years, the company has seen a steady performance year after year. Its stock surged 80% during this period. Its stellar operations resulting in healthy and rising free cash flow, a strong balance sheet, and rapidly rising shareholder distributions make it a strong pillar for your portfolio.
Look where the future lies
Technology stocks are transforming businesses from physical to digital. One such high-growth stock is Lightspeed POS (TSX:LSPD)(NYSE:LSPD). Though profits are still not visible, the company’s niche in digitizing retailers and restaurants will bring strong growth in the years ahead. COVID has accelerated the shift for these industries.
Lightspeed aims to become the android of omnichannel commerce. It is looking for speedier growth via acquisitions. Its future success depends on its ability to grow its customer base, add more solutions, cross-sell and make more acquisitions.
The company is in its growth stage and has enough momentum to generate attractive returns over the next ten years. The stock doesn’t pay any dividend yet, but it should generate good share price gains.
A utility stock is a must-have
TC Energy (TSX:TRP)(NYSE:TRP) is a natural energy company with a strong financial position and diversified high-quality assets. It has a solid asset base of natural gas pipeline, liquids pipelines, and power and storage facilities. It has $8 billion worth of projects under development.
The company earns revenue from long-term contracts, which generate regular cash flows and make dividend payments sustainable. Even if the markets are to behave wildly, the company will continue to pay dividends. Its current dividend yield of 5.72% is attractive.
TC Energy has been increasing dividend for 21 straight years at a compounded average growth rate (CAGR) of 7%. The company expects to increase the future dividend in the range of 5% to 7%. Though its dividend payout ratio of 72% is high, it can maintain this ratio in future.
Its price-to-earnings ratio of around 13 makes it a bargain buy. In the last decade, the stock has generated an annual return of 12%.
Bottom line
The power of long-term investing is pretty evident from Warren Buffet’s philosophy, which had made him one of the wealthiest in the world. I would not say buy and forget, but holding these stocks for a decade and then reshuffling your portfolio could be a good investment discipline.
