Building a retirement nest egg is something every Canadian should actively focus on, not just investors and traders. Simply stashing the savings in a Registered Retirement Savings Plan (RRSP), even if it offers a generous interest rate, is not how you build a nest egg.
Investing those savings in reliable and rewarding assets is the safest, most time-tested way most Canadians can make a decently sized nest egg.
Out of the limited number of assets you can place in an RRSP (and benefit from its tax-deferral nature), stocks are arguably the safest to handle and manage. Even if you have very limited or no experience with stock investing, there are some safe and predictable picks that every Canadian can confidently put in their RRSPs.
An insurance stock
Sun Life Financial (TSX:SLF) has grown to become a financial giant with multiple business segments and revenue streams, but life and health insurance are still the strongest cores of its business.
However, as a single business segment, Wealth Management accounts for the largest share of the business mix (42% as per its last quarter results). The operations are well-diversified (geographically), with a strong presence in Canada, the U.S., and Asia.
It’s a healthy business with a strong and steadily growing customer base, which is also reflected in the stock performance.
The stock has been increasing slowly but almost consistently (with a few dips along the way) for the last 10 years, resulting in over 80% returns for the period. The dividends are another excellent reason to buy this stock. It’s an aristocrat offering a decent 4.3% yield.
A bank stock
Banking in Canada is relatively safe and resilient, even against strong market headwinds like recessions. And while almost all Canadian bank stocks (especially the Big Six) would do well in every RRSP, the National Bank of Canada (TSX:NA) is a solid pick from a growth perspective. It’s the best growth stock (by far) among the six largest Canadian banks and an established Aristocrat, like its peers.
In the last decade, the bank has risen by about 134%, and if you add the dividends to the returns, the number is over 250% for the period. Thanks to its powerful growth pace (especially compared to other banks), the yield is usually slightly lower than other banks’, but it’s still reasonably decent at 3.5%. The dividend and growth combination makes it a solid choice for your RRSP portfolio.
A retail stock
Canada has many large retail chains, including some with a solid international presence. But if you want to add a solid amount of growth to your RRSP portfolio, Dollarama (TSX:DOL) is arguably the most compelling retail stock right now. It has risen by over 150% in the last five years, and if it keeps growing this way, you can increase your capital (in this company) by three-fold in the next decade.
The impressive stock growth is underpinned by impressive organic growth, both local and international. The retail chain currently has 1,569 stores across 10 provinces, a significant leap from the +460 stores in 2006. The company is planning for over 2,000 stores by 2031. Dollarama also has a sizable footprint in Latin American countries — 547 “Dollarcity” stores.
Foolish takeaway
The three stocks can do well in virtually any RRSP portfolio. They are pretty safe, making them ideal for conservative investors. The return potential is decent enough to be viable for more risk-tolerant, growth-seeking investors. All three are established Aristocrats (though Dollarama’s yield is tiny), making them healthy picks for investors seeking cash accumulation in their RRSPs.
