The tariff war has been the theme of 2025. Developments on the tariff front are driving the markets. Recently, the stock market surged on signs of optimism as Canada’s Prime Minister is in constant communication with the U.S. President over lifting tariffs. The TSX Composite Index neared its record high, recovering 17% from the April dip when retaliatory tariffs were paused. This volatility presents an opportunity as well as a threat for retirees.
If you are considering allocating your retirement money to term deposits, the Bank of Canada is slashing interest rates, which could erode the purchasing power of your retirement fund.
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How to allocate money in retirement stocks
The key to mitigating risk is diversification. Consider diversifying your money across sectors and asset classes that are uncorrelated. To give you an example, factors such as interest rates, economic growth, and house prices, which affect the real estate sector, do not affect the technology sector. Consider holding one stock from each sector.
Minimize risk through diversification
CT REIT (TSX: CRT.UN) buys, maintains, intensifies, and develops Canadian Tire stores. The retailer occupies 92.8% of the REIT’s leased area and contributes 91.8% to the base minimum rent. While the REIT’s performance is linked to that of the retailer, the impact is only felt when there is a significant change. Canadian Tire is carrying out its True North growth strategy, in which it will open more than 30 Canadian Tire and 18 Mark’s stores. CT REIT may get the first choice to carry out the store intensification and development, but the pace will continue to be slow as it has been for the last few quarters.
Nevertheless, the rent from existing stores will continue. In the first quarter, CT REIT’s net income jumped 4.5%, and adjusted funds from operations jumped 4.7% as it realized higher rent from the intensification projects it completed last year. This helped the REIT lower its dividend payout ratio to 72.2% from 73.1% a year ago. The REIT increased distributions by 3.3%, passing on the higher income to unitholders.
You can invest $10,000 in this stock, buy 618 units, and get $48.8 per month in payouts at a $0.07903 monthly distribution per unit. This amount could grow annually by 3% for decades while your $10,000 remains intact, or grow by 5–10% as CT REIT’s unit price increases.
Constellation Software stock
You could allocate another $10,000 to a resilient growth stock, Constellation Software (TSX: CSU), to increase your portfolio value. While this amount may only buy you two shares, it could double your money in five years. The market volatility has pulled down some stock prices, creating an opportunity for Constellation to buy small vertical-specific software companies at a discount.
Most of Constellation’s acquisitions have sticky and recurring cash flows from maintenance contracts. In the short term, its revenue and free cash flow growth may slow amid weak economic activity. However, growth may accelerate next year as Constellation consolidates the earnings of acquired companies.
The stock made an all-time high of $5,300 in May and has dipped 7.7% since then. Now is a good time to buy and hold the stock. Constellation’s enterprise value will increase as more companies are added to its earnings, and consequently, its share price will also rise.
Fight inflation with stocks that benefit from it
You can allocate the remaining $30,000 to stocks that benefit from high inflation, as you will buy their products regardless of the price. This includes grocery and natural gas, used for heating, vehicles, and cooking.
Loblaw (TSX: L) stock has significantly outperformed some of the high-growth tech stocks, surging 236% in the last five years. It is a buy even though the stock is trading near its all-time high, as there is more upside. Loblaw runs supermarkets, pharmacies, and apparel stores. High inflation could shift demand from high-ticket items to essentials, and Loblaw will benefit from increased volumes. Whereas the opposite happens in a strong economy, when Loblaw benefits from higher profit margins, helping your portfolio fight inflation.
Canadian Natural Resources can also help fight inflation with its 5.3% dividend yield, which is growing at an average annual rate of over 20%.
