Financial security is about having enough money to withstand expected financial situations. There are multiple elements in financial security. You can buy life, car, home, and medical insurance for contingencies. You can build an emergency fund for unexpected events. But what about securing your finances from inflation?
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Five ways to invest $5,000 for long-term financial security
A financial security portfolio should cater to five things, and these instruments will help you with that.
Invest $2,000 for inflation-adjusted income
You can start investing $1,000 each in two income-generating stocks that grow their dividends annually by 3% and offer a dividend-reinvestment plan (DRIP).
CT REIT
CT REIT (TSX:CRT.UN) gives you dividends from rental income paid by Canadian Tire for its retail stores. The real estate investment trust (REIT) has the advantage of first choice to develop and buy stores for the retailer. It has been growing its dividend annually every July for the last 12 years and can continue to do so.
A $1,000 investment today can buy 63 units of CT REIT, which will pay dividends of $59.7 in a year. This amount may look small, but if you opt for DRIP, the dividend amount will be used to buy more income-paying units and compound your income in the long term.
| Year | CT REIT Stock Price | Stocks Purchased | Total Share Count | Annual Dividend Per Share | Annual Dividend Income | Total Investment |
| 2025 | $14.51 | 134 | 1185 | $0.8982 | $1,064.78 | |
| 2024 | $14.77 | 124 | 1051 | $0.8982 | $944.42 | $1,944.42 |
| 2023 | $16 | 106 | 927 | $0.8982 | $832.95 | $1,832.95 |
| 2022 | $16.94 | 94 | 821 | $0.854 | $700.82 | $1,700.82 |
| 2021 | $15.69 | 96 | 727 | $0.821 | $596.85 | $1,596.85 |
| 2020 | $16 | 88 | 631 | $0.793 | $500.31 | $1,500.31 |
| 2019 | $12.94 | 111 | 543 | $0.757 | $411.14 | $1,411.14 |
| 2018 | $14.36 | 86 | 432 | $1.000 | $432.28 | $1,432.28 |
| 2017 | $14.92 | 79 | 346 | $0.700 | $242.04 | $1,242.04 |
| 2016 | $12.71 | 88 | 267 | $0.680 | $181.31 | $1,181.31 |
| 2015 | $11.9 | 89 | 179 | $0.663 | $118.42 | $1,118.42 |
| 2014 | $11.15 | 90 | 90 | $0.650 | $58.30 | $1,058.30 |
If you invested $1,000 on January 1 for the last 12 years, your $1,000 investment plus the dividend earned will help you accumulate around 1,185 units by 2025. These units would pay over $1,000 a year.
TC Energy stock
TC Energy (TSX:TRP) is another income-paying stock that gives quarterly dividends from the toll money it collects for transmitting natural gas through its pipelines. It has a history of paying and growing dividends for the last 25 years. Last year, the company split its gas and oil pipeline business. As per the management’s long-term target, it plans to grow its dividend by 3-5% annually. The dividend will keep growing as Canada exports most of its natural gas to the United States and is looking to export to other countries.
The benefit of DRIP is that you can compound your income when your finances are strong and pause it to take monthly and quarterly payouts at times of need. Once things are fine, you can resume DRIP.
Invest $2,000 in growth and income
goeasy (TSX:GSY) can grow your money and income. The company is involved in non-prime lending and earns regular cash flow from charging higher interest on loans. It passes on some of this cash flow to shareholders through dividends.
The company is growing by offering different types of loans — auto and point-of-sale loans — through online and offline modes. As the loan portfolio increases, its share price increases. However, if the credit risk also increases, the share price remains flat, as in the current economic environment.
Now is a good time to buy goeasy stock and lock in a 3.74% yield, and a recovery rally when the economy revives. Note that goeasy does not offer DRIP but grows its dividend by strong double digits.
Invest $1,000 to hedge portfolio against crisis
The above stocks can fall in an economic crisis. At such times, you need defensive stocks. Consider investing $500 each in a gold and technology ETF. Gold prices rise when the value of paper currency falls, thereby balancing any dips in other stocks with a sharp rally. In contrast, technology stocks tend to generate high growth during cyclical trends.
The iShares Gold Bullion ETF and the iShares S&P/TSX Capped Information Tech Idx ETF can help hedge your portfolio against economic crisis and boost growth in cyclical trends.
