Are You 25 or Younger? Invest Just $75 Per Month for $197K by Retirement

Young investors don’t need to invest a lot and don’t need risky options. Just this one ETF and $75 each month can create huge tax-free returns.

| More on:
edit Colleagues chat over ketchup chips

Image credit: Photo by CIRA/.CA.

Young Canadians may not have too much when it comes to investing for their retirement. However, this is the perfect time to think about it. If you’re already budgeting, consider just adding just $75 per month to put towards retirement. And all of it could be tax free.

Consider your TFSA as a retirement option

The Tax-Free Savings Account (TFSA) was originally introduced as another retirement option for Canadians. If you have the goal of retirement in mind, starting out with a TFSA is an excellent choice.

You can not only invest each month but also collect passive income that’s all tax free. That passive income can then be sent right back into your TFSA stock of choice on top of the $75. Do this again and again, ideally through automated payments, and you can be set up for life.

An option to choose

Now, if you’re going to do this for life, then you don’t want to choose just some random growth stock. Sure, you can put aside some of your investments for riskier options, but not as a whole. Instead, consider investing in your retirement through a conservative option for stable growth as well as stable dividends.

This will allow you to see your funds rise higher and higher because you have decades of time ahead of you. What’s more, choosing a safe option means that should a recession hit when you want to retire, you’ll be ahead of the game.

An option I would consider is Vanguard FTSE Global All Cap ex Canada Index ETF (TSX:VXC). This company provides you with global exposure to companies on the Financial Times Stock Exchange (FTSE). It merely excludes Canada, so you can pick up the slack there elsewhere.

Shares are up 7% in the last year alone and year to date after the market dipped. You can also bring in a dividend yield at 1.82% — not a huge yield, but, again, you don’t need much!

How much you could make

The Vanguard ETF has grown at a compound annual growth rate (CAGR) of 7.52% in the last nine years since coming on the market. Its dividend of $0.98 has grown at a CAGR of 9.3% in that time. So, let’s see what that $75 per month, or $900 a year, could get you by the time you turn 60.

Stock PriceDividendDividends ReceivedShares PurchasedTotal Shares AccumulatedStock ValueTotal InvestmentDividends Reinvested

At the end of 35 years, your total investment of $31,500 will have grown to $196,976.29 from just $75 per month!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in Vanguard Ftse Global All Cap Ex Canada Index ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Canadian Dollars
Dividend Stocks

Where I’d Invest a $10,000 Windfall Right Now

This investing strategy increases returns while reducing risk.

Read more »

money cash dividends
Dividend Stocks

2 Dividend Stocks for Passive Income

Both of these dividend stocks are good sources of long-term passive income. They also currently trade at good valuations.

Read more »

Close up shot of senior couple holding hand. Loving couple sitting together and holding hands. Focus on hands.
Dividend Stocks

These 3 Canadian Dividend Stocks Are a Pensioner’s Best Friend

Are you a pensioner looking for dividend stocks to add to your portfolio? Here are three top picks!

Read more »

Dividend Stocks

3 No-Brainer Stocks to Buy With $200 Right Now

Are you looking to invest $200 in stocks right now? Here are three no-brainer stocks to invest your money in…

Read more »

Dividend Stocks

TFSA Investors: How to Earn $350/Month in Passive Income

Add 7.78%-yielding Enbridge stock and 4.5%-yielding Fortis to your TFSA for a generous passive income stream for the long term.

Read more »

A golden egg in a nest
Dividend Stocks

Passive Income: How to Earn $200 Per Month in Your TFSA Portfolio

Who doesn't want a little extra passive income? Here's one way you could earn $200/month of diversified, tax-free income!

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

2 Dividend Stocks That Are Insanely Oversold Right Now

BCE (TSX:BCE) and another battered dividend stock are ripe for buying for brave bargain hunters.

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Dividend Stocks to Buy While They Are on Sale

These top TSX dividend stocks now offer great yields.

Read more »