Retiring early is the dream of hundreds of thousands of Canadians, but only some get to realize that dream. It requires a massive nest egg to sustain the early retirees until their pensions kick in and then augment that pension to maintain their financial lifestyle.
The earlier you want to retire, the larger your nest egg should be. Growing this nest egg would require suitable investments, decent capital, and enough time.
If you are starting with $100,000 in savings and two decades to grow your investments, four top stocks may help you build a nest egg to the requisite proportions.
A bank stock
National Bank of Canada (TSX:NA) is the best growth stock in the Canadian banking sector. It’s the smallest of the Big Six banks and mainly relies upon its regional presence. Still, its growth has been decently higher than its larger counterparts that boast a significant international presence as well (mainly in the U.S.).
Like all other bank stocks in Canada, it’s also a generous and reliable Dividend Aristocrat, which magnifies the overall returns the company promises. The bank returned over 290% to its investors in the last decade through capital appreciation and dividends.
Assuming it maintains this number for the next two decades, you may experience about 5.8-fold growth. If you divert one-fourth of your capital ($25,000), you may see it rise to $145,000 with this projected growth.
A non-bank lender
While banks dominate Canada’s lending market, hundreds of thousands (if not millions) of Canadians may not qualify to lend with a bank due to a low credit score. This is where companies like goeasy (TSX:GSY) come into play.
It offers (small) personal and home loans to people with less-than-ideal credit scores/history. This business model has allowed this company to grow to the size of a small bank, and it has over 400 locations across Canada.
Apart from a correction the stock has yet to recover from, it has been an exceptional growth stock in the last decade. Even though it’s currently trading at a 57% discount, its overall returns (including dividends) for the last decade are massive — about 1,074%. Assuming the stock might grow your capital by 20-fold in the next two decades (following its current growth pattern), you may grow $25,000 into about $500,000.
A tech stock
Tech stocks in Canada generally have good track records regarding capital growth, but if you add consistency to the mix, no stock comes even close to Constellation Software (TSX:CSU). It has been one of the most consistent growth stocks for the last two decades in the entire TSX — not just the tech sector.
In the last decade, the stock has grown by about 1,890%. If you add the dividend, the overall returns become even more attractive — over 2,300%. Assuming it can maintain this momentum for the next two decades, you may invest $25,000 for a nest egg of around $1,150,000 (best-case scenario).
An EV stock
Lion Electric (TSX:LEV) is a small-cap electric vehicle (EV) stock growing smaller daily. Apart from a brief bullish momentum early on, the stock has mostly gone down since its inception and is currently trading at a 90% discount from its peak. Since it only started trading on the TSX in 2021, we don’t even have a half-decade worth of data on the stock’s growth potential.
However, as an EV stock, it may be a promising untapped opportunity. It’s also a bit unique compared to traditional EV stocks, which make personal/family vehicles, thanks to its focus on mass transport, primarily school buses. When the U.S. and Canadian governments start covering their school fleets with EVs, companies like Lion Electric may see their business soar, and the stock might follow.
If we use NFI Group’s (a similar but older company) rise to the peak as a precedent, we have about 800% growth in less than a decade (about 1,600% in two decades if the growth had continued). If Lion Electric matches that growth in the next two decades, your $25,000 capital may grow to $400,000.
The four stocks (assuming the best-case scenario) might help you build a nest egg of about $2,195,000. If you reinvest the dividends instead of cashing them out, the number might be significantly higher because three of the four companies pay dividends. That can pave the way for early retirement.