Investing in the stock market has been a proven method to generate inflation-beating returns and create long-term wealth. For beginner investors, it’s essential to determine an investing approach which in turn depends on factors such as age, investment goals, and risk appetite.
Typically, you need to have a long-term horizon while investing in stocks, as equities are extremely volatile in the near term. For instance, the S&P 500 Index fell over 30% within a few weeks during the onset of COVID-19, making investors extremely nervous.
Alternatively, the S&P 500 index has surged 535% after adjusting for dividends since May 2003. In this period, we have witnessed the dot-com bubble, a financial crisis, a global pandemic, and an ongoing period of high-interest rates.
Once you have chosen to get started with stock market investing, it’s advisable to buy shares of quality companies across multiple sectors to diversify your investments and lower overall risk. Initially, investors should buy shares of companies that are market leaders, armed with a solid balance sheet, and enjoy a wide economic moat.
Here, you can consider buying shares of blue-chip companies that deliver consistent returns. These stocks may include:
Royal Bank of Canada stock
The largest TSX stock, Royal Bank of Canada (TSX: RY), also offers you a dividend yield of 4%. While banking stocks are cyclical, RBC has returned over 800% to shareholders in the last two decades, showcasing the resiliency of its business model. Priced at less than 11.2 times forward earnings, RY stock continues to trade at an attractive multiple.
Canadian National Railway stock
Railroad companies such as Canadian National Railway (TSX: CNR) were primarily responsible for the initial investment booms in the U.S. and Canada. Now, several decades later, they remain an integral part of the economy.
Valued at a market cap of $107 billion, CNR stock also offers you a forward yield of 2%.
Enbridge stock
An energy infrastructure giant, Enbridge (TSX: ENB) is a popular dividend stock on the TSX. Its forward yield is over 6.5%, and dividend payouts have risen by 10% annually in the last 28 years.
Enbridge continues to invest in capital expenditures, which should drive future cash flows higher, making it a top investment for those looking to create a stream of passive income.
Alimentation Couche-Tard stock
Since May 2003, shares of Alimentation Couche-Tard (TSX: ATD) have returned a monstrous 6,000% to investors, dwarfing broader market returns. This Canadian behemoth operates and licenses convenience stores in North America, Asia, and Europe, providing you exposure to the consumer retail sector.
Barrick Gold stock
Barrick Gold (TSX: ABX), is among the largest gold miners in the world. It expects to produce an average of 6.5 million ounces of gold equivalent each year through 2032.
In recent years, this mining heavyweight has looked to improve its balance sheet by selling off noncore assets resulting in higher cash flows and dividend payouts.
Invest in an S&P 500 index fund
If you are wary of buying individual stocks, low-cost index funds such as the Vanguard S&P 500 Index ETF (TSX: VSP) can help you gain exposure to some of the largest companies south of the border. The VSP tracks the S&P 500 Index and is hedged to the CAD, which means you are immune to fluctuations in foreign exchange rates.
Some of the largest holdings of the S&P 500 Index include Apple, Alphabet, Amazon, Walmart, Exxon Mobil, and Visa.
