There are many different answers to the question “how to build generational wealth,” and investing in the stock market is one of them. Many investors have built enough wealth to last for generations in a single lifetime with the stock market, and there are several things we can learn from their investment strategies.
This includes basic good practices like investing as early as possible, not panicking in weak markets, cutting your losses, etc.
However, the most crucial piece of the puzzle (at least one of them) is choosing the right stocks, and there are at least three that might suit most Canadian investors.
An engineering company
WSP Global (TSX: WSP) is one of the most prominent names in engineering services and solutions, not just in Canada but around the globe. It has a massive network of engineering and other professionals (over 66,500 employees) that cater to the needs of a wide range of organizations and entities. The company also has healthy financials and decent earnings.
Its fundamental strengths and organic growth also reflect in the stock’s exceptional performance. The stock has gone up over 580% in the last decade alone, and the overall returns are even more significant (if we take the dividends into account). It is a bit overvalued at the moment, but the long-term potential still stands.
A gold royalties company
Gold is among the handful of commodities and assets that retain their worth over decades. While gold mining stocks are an excellent way to gain exposure to this commodity, Franco-Nevada (TSX: FNV) might be a better pick for building generational wealth.
As one of the world’s largest royalties and streaming businesses with a diverse portfolio of commodities (not just gold), the company allows you to leverage the upside of gold while sheltering you from the downside — price fluctuation (like mining stocks do).
Although its growth has slowed down, and even though it returned 56% in the last five years (which is on track to double your capital in a decade), it’s still an investment worth considering due to its long-term prospects.
A sizable portion of its portfolio is still in the exploration stage, and the company leverages not just the stability of gold but also the trends associated with other metals. It’s also a well-established Dividend Aristocrat.
An energy company
Generational wealth requires more than just growth and might be augmented by solid income-producing assets like Enbridge (TSX: ENB). The largest pipeline company in North America is responsible for transporting a massive segment of the total oil produced and total gas consumed in the region. It’s also a giant in the North American natural gas utility market.
Between its pipeline and utility business, most of its revenues are recurring, predictable, and rock-solid, allowing it to offer consistently generous dividends and modest dividend growth. It has a stellar history when it comes to dividend growth — over 28 consecutive years of dividend increases. The 7.4% yield adds to its appeal.
Foolish takeaway
Apart from their respective return potential, one of the most crucial reason why these three stocks can help you create generational wealth is their business models. They are resilient, rewarding, and are likely to remain relevant for decades to come.
