I’d Aim for $1 Million Buying Just 5 To 10 TSX Stocks

Are you looking to build a $1 million portfolio? Then focus your investments on 5 to 10 stocks instead of 30 to 40.

| More on:
funds, money, nest egg

Image source: Getty Images

Are you investing without a goal in mind? Do you have 40 to 50 stocks in your portfolio without satisfactory returns? Your financial goals determine your investment strategy and the type of stocks you need. If your goal is to earn $1 million, you are looking for growth stocks that can double or triple your money in some time. 

Preparing an investment plan for a $1 million portfolio 

The way compounding interest works, the first $1 million takes the most time. After that, the million doubles at a faster rate. How? Let’s look at an example. Suppose your portfolio gives an average annual return of 6%. Your initial investment of $10,000 would earn you $600. But a $1 million portfolio will earn you $60,000. If you keep reinvesting your $60,000, you can reach $2 million in 12 years at a 6% average return. 

And even if you decide to withdraw $30,000 every year, your $1 million portfolio could become $2 million in 19 years at a 6% average return. As for 6%, even dividend stocks can give you that much return. 

YearInvestmentInvestment Return @ 6%WithdrawalsTotal Amount
2024 $61,800-$30,000$1,061,800
2025 $63,708-$30,000$1,095,508
2026 $65,730-$30,000$1,131,238
2027 $67,874-$30,000$1,169,113
2028 $70,147-$30,000$1,209,260
2029 $72,556-$30,000$1,251,815
2030 $75,109-$30,000$1,296,924
2031 $77,815-$30,000$1,344,739
2032 $80,684-$30,000$1,395,424
2033 $83,725-$30,000$1,449,149
2034 $86,949-$30,000$1,506,098
2035 $90,366-$30,000$1,566,464
2036 $93,988-$30,000$1,630,452
2037 $97,827-$30,000$1,698,279
2038 $101,897-$30,000$1,770,176
2039 $106,211-$30,000$1,846,386
2040 $110,783-$30,000$1,927,170
2041 $115,630-$30,000$2,012,800
How to convert $1 million into $2 million while earning passive income 

So if you are in your mid-20s, you can create a $1 million portfolio in a Tax-Free Savings Account (TFSA) and retire at age 40. When you turn 60, your money could grow to $2 million. 

How is this possible? As per the above model, you spend (3%) less than you earn (6%). The balance goes to generating returns while your $1 million stays invested. 

How many stocks do you need to create a $1 million TFSA portfolio in 11 years?

Now that you know how your investment strategy changes depending on your goal, let’s focus on building the $1 million portfolio. The number of stocks has nothing to do with your returns. The TSX has over 250 stocks. But you only need five to seven stocks you understand and can follow regularly. 

If you invest $6,000 annually in your TFSA and earn a 10% compounded average return, you can hit the $1 million mark after 11 years. Some years may be bullish and some bearish but aim to get 10% average returns in the long term. Here’s how.   

When you select your stock, ask why you are investing in it. How much do you expect this stock to go up? And then review the stock’s performance periodically to see if it is on track. You can keep investing in the same stock whenever it dips from your purchase price and reduce your overall cost. Also, keep booking profits when the stock reaches your target. 

Suppose you have 100 shares of X, keep 60 shares for long-term buy and holds and 40 for short-term opportunistic profit booking.  

One stock to get you started  

Nuvei (TSX:NVEI) is a good stock to buy now as it dipped 24% in May after the company reported a loss in first-quarter earnings. The loss is a one-time expense as it completed the acquisition of Paya. 

Nuvei payments platform is impacted by economic weakness because of its dependence on e-commerce for revenue. Moreover, it is exposed to crypto cyclicality. Paya’s acquisition will open up a new opportunity of enterprise payments from non-cyclical verticals. It will reduce Nuvei’s exposure to e-commerce and bring revenue growth stability. Nuvei stock could grow and fall 20–50% in the short term and give an average return of 10–15% over the medium term. 

Nuvei is a good stock to buy at or below $45. I expect the stock to cross $80 in the growth phase. That is a good price for short-term profit booking.    

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 Puja Tayal has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nuvei. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

railroad with nature background
Dividend Stocks

This Blue-Chip Stock Could Be the Growth Stock of the Next Decade

Blue-chip stocks provide reliability and protection, but this one could also create massive growth in the next decade.

Read more »

Stocks for Beginners

WSP Stock at 52-Week Highs, But More to Come

WSP (TSX:WSP) stock continues to surge past 52-week highs, but there could certainly be more to come for this great…

Read more »

A airplane sits on a runway.
Stocks for Beginners

Where Will Air Canada Stock Be in 5 Years?

Can Air Canada stock yield handsome returns on your investments in the next five years? Let’s find out.

Read more »

Growing plant shoots on coins
Stocks for Beginners

2 Growth Stocks to Buy if There’s Another Market Selloff

Any further downside correction in these two Canadian growth stocks will make them look even more attractive.

Read more »

Growing plant shoots on coins
Stocks for Beginners

3 Growth Stocks to Buy and Hold Forever

Want to compound your investments for years and decades? These three Canadian growth stocks can really deliver for patient shareholders.

Read more »

crypto, chart, stocks
Tech Stocks

CGI Stock: Outperforming Among Falling Tech Stocks

CGI stock (TSX:GIB.A) has blasted past 52-week highs, on top of long-term growth that's remained stable throughout the decades.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Energy Stocks

This 7 Percent Dividend Stock is My Top Pick for Immediate Income

Looking for a solid dividend stock that can provide an immediate income source? Consider this dividend gem now while its…

Read more »

tsx today
Stocks for Beginners

TSX Today: What to Watch for in Stocks on Monday, September 25

After tanking by more than 4% last week, the main TSX index now trades with only 2% year-to-date gains.

Read more »