The idea of aggressive saving isn’t exactly new, but financial movements like FIRE — Financial Independence Retire Early (introduced in the early 90s) — made the idea more prominent. The movement encouraged people to live frugally and save as much as 50% of their income.
It wasn’t a viable option for the masses even in the 90s, and now, when the cost of living has risen considerably, and people are having trouble saving even a conservative amount — i.e., 10% of their income each year — it seems almost impossible for many.
It’s important to understand that aggressive saving isn’t necessary for building a solid nest egg, and you can achieve good results by following good retirement planning practices.
This includes starting as early as possible and, instead of keeping your savings in cash, parking them into reliable stocks. Just one powerful growth stock and a trusted dividend stock can help you achieve great results if you hold them for long enough.
A growth stock
goeasy (TSX:GSY) is an alternative financial company that offers personal loans and home loans (for appliances, furniture, etc.) to a wide range of individuals, including people with bad credit.
This has allowed them to tap into a rich market of Canadians who are not catered to by big banks because of their credit score and have to turn to companies like goeasy for their small financing needs. It has seen compelling organic growth and now boasts a massive footprint — over 400 locations.
It also emerged as one of the most powerful growth stocks in the last decade, though it’s currently in correction mode following aggressive post-pandemic growth.
The stock is currently trading at a discount of about 44% from the peak, but its 10-year returns are still quite compelling, over 1,000% if we include the dividends.
Even if the stock manages half these returns in the coming decade, you may grow your capital in this company by about 500% every decade. A decent sum parked in the stock for two or three decades can result in a sizable nest egg.
A dividend stock
Bank stocks in Canada are cherished for their stability and dividends, and Royal Bank of Canada (TSX:RY) is among the best examples of these traits. As the largest bank in Canada and one of the largest in North America, it has an impressive reach and market presence. It’s also one of the oldest and most consistent dividend payers in Canada and an established aristocrat that’s currently offering a juicy 4.4% yield.
The dividends are reason enough to park their capital in this company for most investors, but it’s more than just a solid dividend pick. The stock is also a steady grower and has returned over 170% in the last decade. That’s a sustainable growth pace and replicable across decades. You can also increase the size of your stake by reinvesting the dividends in the bank.
- We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if Royal Bank of Canada made the list!
Foolish takeaway
The two stocks may help you build a solid nest egg, even if you are saving conservatively — i.e., putting away at least 10% of your income each year. You shouldn’t divert all your savings into these two stocks and diversify your portfolio, but if you keep investing in these two stocks for years (ideally decades) and they keep performing this way, you may have a hefty nest egg by the time you retire.
