Canadian retail investors should realize its essential to begin a recurring stream of passive income, allowing them to grow wealth over time. A passive-income stream generally helps you accelerate your retirement plans while providing households with the flexibility to tide over uncertain economic periods that may result in layoffs and loss of income.
So, let’s see how to invest $15,000 and create a passive-income portfolio in 2024.
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Invest in high-dividend ETFs
Investing in quality dividend ETFs (exchange-traded funds) is a low-cost way to begin a passive-income stream. Here, you gain exposure to several companies across sectors, offering investors diversification.
Among the most popular dividend ETFs in Canada is iShares Core MSCI Canadian Quality Dividend ETF (TSX: XDIV). Unlike several other dividend ETFs, the XDIV has a monthly payout of $0.13 per share, indicating a forward yield of almost 6%.
With more than $1 billion in assets under management, the XDIV ETF has an expense ratio of 0.11% and a management fee of 0.10%. Companies part of the financial sector account for 42.8% of the ETF, followed by energy at 22.6%, utilities at 17.5% and communication at 9%.
The top five holdings of the ETF include Suncor Energy, Pembina Pipeline, Royal Bank of Canada, Fortis, and Sun Life Financial, which account for 45% of the ETF.
As ETFs significantly lower investment risk, you should allocate around 50% of your savings, or $7,500, to the XDIV ETF. An investment of $7,500 in the XDIV ETF five years ago would be worth close to $12,000 today after adjusting for dividends.
Invest in blue-chip dividend stocks
While dividend ETFs offer diversification, you can consider holding shares of dividend-growth stocks such as Enbridge (TSX: ENB) to outpace broader market returns. Enbridge offers shareholders a tasty dividend yield of 7.5%, and the energy giant has raised these payouts for 29 consecutive years, significantly enhancing the yield at cost.
Enbridge’s robust balance sheet, sustainable payout ratio, reasonable debt levels, and predictable cash flows have allowed the TSX stock to deliver inflation-beating returns in the last two decades.
You can identify other blue-chip dividend stocks, such as Enbridge, and enjoy outsized gains over the long term. Canadian investors can allocate up to 20% in individual dividend stocks.
Invest in GICs
Investing in stocks is a proven strategy to outpace inflation. However, you can further diversify your portfolio and lower investment risk by purchasing fixed-income instruments such as Guaranteed Investment Certificates (GICs). Interest rates have moved higher in the last two years, making fixed-income products such as bonds attractive to investors.
A GIC is like a fixed deposit. Here, you can deposit a certain sum of money with banks or financial institutions for a specific period, after which you will be entitled to interest income as well as the initial deposit amount.
Several Canadian banks currently offer an interest rate of 5% on GIC deposits. Canadians can invest about 30% in GICs and lock in higher interest rates in 2024. For those nearing retirement, this number can be much higher.
