When you start investing in the stock market, it might seem like a great idea to go for high-growth stocks that can purportedly give you massive returns on your investment. However, investments with the promise of high growth are also inherently riskier.
A smarter move is to create a portfolio that can offer you a good balance between growth and stability. This way, your stable investments can offset or mitigate losses from your riskier investments and let you enjoy sustainable long-term returns.
Day trading in the stock market isn’t the best way to enjoy real returns. Canadians should understand that investing in stocks requires an investment horizon of at least a decade, if not more. Investing with a long game in mind can let you enjoy returns that can benefit your long-term financial goals.
As such, here are two top TSX stocks you can consider for stability and growth.
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A stock for slow and steady growth
Canadian National Railway Co. (TSX:CNR) is a rock-solid TSX stock that is a staple in many investment portfolios. The Montreal-based $97.1 billion market capitalization company is one of the biggest railway operators in North America. Its railway network serves Canada, and the Midwestern and Southern US.
Boasting a 19,500-mile network, it transports everything from petroleum and chemicals to grain, coals, minerals, metals, and automotive products. As one of the world’s largest railway companies, it is also a business vital to the North American economy due to the massive volume of freight it transports.
While it does not offer high growth through capital gains, it offers stable and reliable dividend income that keeps growing each year. As of this writing, it trades for $154.14 per share and boasts a 2.2% dividend yield. As boring as it might seem, it is the kind of stock that offers more stability when most others falter.
A stock for market-beating returns
Dollarama Inc. (TSX:DOL) is a Montreal-based $38.8 billion market capitalization company that owns the largest dollar store retail chain in Canada. While most growth-focused stocks carry significant capital risk, Dollarama can be considered an exception. The strength of the underlying business can make it a good investment for stability and growth.
Dollarama has a defensive business model that generates solid sales and earnings, regardless of economic environments. It offers products to consumers at low and fixed prices. The strategy lets Dollarama generate strong revenue during economic downturns, when people seek essentials at discounted rates.
The discount retailer’s solid business has allowed Dollarama stock to consistently deliver above-average capital gains. With its presence growing, it is expected to continue the trend. As of this writing, DOL trades for $137.67 per share and offers dividends at a 0.27% dividend yield.
Foolish takeaway
Your returns from stock market investing will be taxed like other income. However, you can protect some of your income from the stock market by using available contribution room in your Tax-Free Savings Account (TFSA).
Besides cash, you can use the contribution room in your TFSA to hold other assets like stocks. Allocating a portion of the TFSA to buy and hold stocks can help you enjoy the returns from your investment without incurring taxes on it. By using a dividend reinvestment program, you can also unlock the power of compounding to accelerate your tax-free wealth growth.
To this end, CNR stock can be a stellar investment for solid dividend income. DOL stock can also be an excellent holding to inject growth through more reliable capital gains supported by a solid business model.
