What is your age, and at what age do you want to retire? Ask yourself this question, and if you have 18-20 years to retirement, this article will give you stock ideas to plan your portfolio. The rising debt and improved healthcare have increased Canada’s average retirement age to 64. But why waste the second half of life working at the office when you can go on vacation in the Bahamas?
Pre-requisites for an early retirement
The government already takes care of 30% of your retirement income through Old Age Security (OAS) and the Canada Pension Plan (CPP). Retirement planning includes a lot more. You need to know which account to choose and what costs to calculate for pension. But in this article, I will touch upon the investment part.
When investing early for retirement, find stocks that are shaping the future:
- Magna International (TSX:MG)(NYSE:MGA)
- Descartes Systems (TSX:DSG)(NASDAQ:DSGX)
- BCE (TSX:BCE)(NYSE:BCE)
- Canadian Utilities (TSX:CU)
- iShares S&P/TSX Capped Information Technology Index ETF (TSX:XIT)
The future of automotive is electric and autonomous vehicles (EV/AV). All major auto markets — China, Europe, and the United States — are investing in EV infrastructure. Until now, the chip supply shortage held back auto-related stocks like Magna. But this is a temporary headwind that will ease, and auto engineering and component maker Magna will benefit from the upcoming EV wave. The company has secured design wins from 24 of the top 25 EV makers.
Magna stock has surged 8.5% in the first week of October, and this is just the beginning. This is a good time to buy the stock and enjoy double-digit growth. It can grow your money multifold in the next 15 years.
Another thing that will grow even in the coming 20 years is logistics and the supply chain. As long as people, information, and goods transport from one place to another, demand for supply chain management (SCM) will exist. Descartes Systems helps meet the demand-supply dynamics.
Descartes is one of the top 10 players in the SCM market. The stock has surged at a 20% compounded annual rate in the last five years and can continue growing over 15% for the next decade, as e-commerce gains momentum. The 7% dip in October has created an opportunity to buy the stock at a good price and enjoy the seasonal rally.
Canada’s telecom giant BCE is basking on the rally of the 5G evolution. The communication evolution takes around 10 years to materialize its full potential. For instance, the 4G rollout began in 2010, and it has changed the way people access the internet. 5G will do the same. It’s not just laptops or watches, it will connect drones and robots to the internet. 5G is a big deal, and BCE is preparing the infrastructure. The 5G rollout will bring new subscriptions money for BCE and probably drive its dividends.
Make the most of the 5% correction in the stock from its September high and lock in a 5.54% dividend yield. There is a possibility that the stock could pay dividends for the rest of your life.
Electricity demand will only grow in the future with the rollout of EV/AVs, robots, and smart cities. For over a century, power is produced locally, and it is likely to continue for another decade or two. This will keep Canadian Utilities pretty busy. Canadian Utilities generates, distributes, and retails electricity, and also transmits natural gas. It uses the money to build more capacity and pay dividends. It has been paying dividends for 49 years and growing it for 27 years.
The company could continue its dividend tradition for the next 20 years or till Canada shifts a large portion to renewable energy.
The technology ETF
Technology is shaping the future, from e-commerce to online payment to the blockchain. There are too many technologies working simultaneously. The XIT ETF gives you exposure to all good tech stocks trading on the Toronto stock exchange. The ETF has grown at a 10-year compounded annual rate of over 10%. Canadian tech companies have just started to flourish, and the next 10 years could bring significant growth.
The above five stocks will give you a good blend of growth and dividend and help you build a strong retirement pool in the next 20 years.