Investing can seem like a daunting task when you are starting out. There are hundreds of different investment products you can choose from.
Investing can be overwhelming when you are starting
GICs (Guaranteed Investment Certificates), mutual funds, indexes, ETFs (exchange-traded funds), commodities, crypto, and individual stocks (just to name a few) are all different types of investment products investors can choose from.
Frankly, there is no right or wrong investment product or strategy to use. You can invest in just one, or you can combine a mix of products and strategies. The great thing is that it really comes down to your temperament, level of commitment, and long-term wealth goals.
GICs
If you have a very low risk tolerance, GICs are a good bet because their returns are guaranteed. Risks are low, but so are the overall returns.
Indexes
If you want exposure to overall economic growth but don’t want much involvement, you may want to buy the index of a market you appreciate. The S&P 500 Index has earned an exceptional approximate 10% compounded annual return for the past decade. Index investing is not without risks, but it is a strong way to invest in the overall stock market if you don’t want to put in much time or effort.
ETFs
If you want to get a little bit more into the weeds, you can buy a variety of ETFs with a focus on sector, theme, or trends that may intrigue you. In essence, you can build a fund of funds. This can provide ample diversification and help you to get thematic focus without having to select individual businesses.
A portfolio of individual stocks
If you are curious and enjoy learning about specific businesses, then investing in stocks can be an exciting endeavour. A stock is a stake in a real business. Businesses take time to grow and develop. As a result, investing in individual stocks requires patience and long-term thinking.
However, you get to build a portfolio for any type of investment mix that you desire. You can weight towards income producing, or you can look for stocks that are persistently undervalue.
You can focus on a sector, or you can balance your weighting across sectors or geographies. It is a truly custom approach that best fits your investment disposition.
If you got $1,000 today and want to take a stock-pickers approach, here are two starter stocks you might want to look at.
A top retail stock
Alimentation Couche-Tard (TSX:ATD) has been a very good long-term compounder for investors. Shareholders have earned a 179% total return over the past five years and a 500% total return over the past 10 years.
This company owns a large portfolio of convenience stores and gas stations around the globe. It uses its operating prowess and scale to maximize cash generation across its portfolio.
It then tends to redeploy the cash into acquisitions that further expand its reach. It has a target to double its business over the coming years, so there should still be attractive upside ahead.
A long-term industrial stock
Canadian National Railway (TSX:CNR) might be a bit more mature in its growth story, but it too could provide attractive, relatively low risk returns. It operates an important network across Canada and the U.S. In many of its geographies it is a monopoly or a duopoly. Consequently, it has persistently strong pricing power.
CNR stock has a total return of 71% over the past five years and 237% over the past 10 years. It pays a 1.9%. However, it has increased its dividend by a low-teens rate for many years. For income and steady growth, CNR is a great bet for a new starting out investor.
