The great wealth transfer is already underway.
Baby boomers around the world are already transferring cash over not just to their children but their grandchildren. And what’s more, by 2030, all Baby Boomers will be above 65 and thinking of retirement as well as how to pass on that wealth.
Thinking of the future will certainly be nothing new. But thinking about how you’re going to create wealth that lasts for your children and grandchildren is different, especially when it comes to investing in stocks.
With that in mind, there are three Canadian stocks that could certainly help achieve long-term, generational wealth. And these are the ones I would consider on the TSX today.
Source: Getty Images
A growth stock
First off, if you want to create generational wealth that lasts, you’ll need to have a growth stock on hand. Now, it might seem strange to consider a “lasting” growth stock. Usually, these stocks come and go. But in the case of Constellation Software (TSX: CSU), this has been growth that certainly lasts.
The software acquisition company has proven its worth time and again over the years, with a management team that can identify the best and most valuable opportunities across the world. The company will consolidate niche software companies in vertical markets and push them out to create even higher returns.
Over the last decade alone, CSU stock has achieved a compound annual growth rate (CAGR) of around 30%! This has made it a top performer in Canada among stocks on the TSX today. And this is all supported by a healthy balance sheet, consistent profitability, and the ability to continue this growth strategy.
A dividend stock
Now, growth is great, and CSU stock has a dividend, but it’s certainly not much when considering the company’s high share price. That’s why another option for lasting generational wealth should be a solid dividend stock. And one I would consider is Bank of Nova Scotia (TSX: BNS).
Granted, BNS stock recently had earnings that saw shares drop. But I would see this as an opportunity to pick up the stock with a track record of almost 200 years of dividend payments! What’s more, the stock offers a diversified business model to support dividend growth. This includes personal and commercial banking and wealth management. But the most exciting option is its emerging market sector, with a lot of exposure in Latin and South America.
Again, earnings were down due to recent economic uncertainty. However, long-term this is a great bank stock with a lot of growth and dividend potential. What’s more, you can grab a dividend yield of 6.43% as of writing. That’s far higher than the five-year average of 5.39% as of writing.
An index fund
Finally, Warren Buffett has always mentioned that if there’s any one thing you can invest safely in, it’s an index fund such as one that follows the S&P 500. However, this index is heavily focused on Big Tech at the moment. So, instead, I would choose a more diversified index fund for lasting generational wealth.
One option to consider is BMO S&P/TSX Capped Composite Index ETF (TSX: ZCN). This index seeks to track the capped composite index, with a very low management expense ratio (MER) of just 0.06%. Furthermore, the capped part is crucial. Even if one company on the TSX today should take up more room and make it riskier, the index fund will instead cap that amount at a level to reduce risk.
The fund has a long history of providing returns, offering a 2.14% dividend yield with shares up 4.57% in the last year and 10% in the last five years. So, it has lower growth, but overall, it is incredibly safe for those wanting to protect their generational wealth.
