“Starting as early as possible” is a good rule of thumb for many things in life — especially investing. The sooner you start, the more time you will have to learn from your mistakes and grow the right investments to a decent size. Even though it’s not always a linear trajectory (with your portfolio growing as a function of time), in most cases, more time can give you more investment opportunities.
That’s why young investors are encouraged to start investing as soon as possible. If you start in your 20s, you may have around four decades to grow your retirement savings to a massive nest egg (with the right stocks).
A DRIP, or dividend-reinvestment plan, is also a powerful tool for young investors to develop an income-producing asset for their retirement years. Plenty of great investments can help you turbocharge your retirement plans, especially if you start early.
A bank stock
If you choose an investment from Canadian bank stocks, it’s difficult to go wrong with the pack’s leader: Royal Bank of Canada (TSX:RY). Apart from being the largest bank in the country by market cap and in a few other categories, it’s also a compelling stock for both its dividends and growth potential.
It grew by about 109% in the last decade, and if it continues to grow this way, you can expect your capital in this bank to grow substantially in a few decades. As a Dividend Aristocrat, it has been increasing its payout for the last 12 years and currently offers a decent 4.1% yield.
If you invest $10,000 in the bank, you can generate about $411 a year in dividend income, which is enough to buy at least three new stocks of the bank (for reinvesting).
A consumer staples stock
Metro (TSX:MRU) is another well-established Dividend Aristocrat in Canada that has raised its payouts for about 28 years. The dividends are steady and reliable, based on a relatively evergreen grocery and medicine business. The yield is relatively low at 1.65%, but the growth potential of Metro stock offsets it.
It has grown by about 245% in the last decade. At this pace, the company can double the capital you invest every five years, assuming it keeps growing at this pace.
Another reason to buy this stock for retirement is its steady performance and resilience against weak markets. The stock was one of the quickest to recover after the 2020 crash, and this resilience may serve you well during a long-term holding.
An insurance company
If you are looking for a healthy combination of steady growth and dividends, Sun Life Financial (TSX:SLF), as an investment choice, resembles the Royal Bank of Canada quite a bit. It has risen by about 125% in the last decade and currently offers a juicy yield of about 4.6%.
But its stock price makes it an even more attractive choice for DRIP. It’s currently trading at about $62.5 per share, and with $10,000 in the capital, you can generate enough cash to buy about seven new stocks of Sun Life.
Its stability as a company and a potential long-term holding comes from its leadership position in the life insurance space and a relatively diversified business model. It has three revenue streams and an impressive global presence with offices in 28 markets, including mature and emerging international markets.
Your retirement planning doesn’t have to be overly sophisticated to help you accumulate a decent amount of wealth by the time you retire. The three stocks, all from different industries (diversification), offer a healthy mix of growth potential and dividends.
If they continue to offer returns to their investors, as they have in the past, they may help you turbocharge your retirement funds without the need to manage your portfolio actively.