2-for1 Sale
There are few things that are easy when it comes to finances. It can be an incredibly difficult thing to get into, especially when it comes to investing in the stock market. However, so many investors go in wanting to find the next big thing and make millions.
Bad news: that is not a goal.
That being said, there are certainly ways to achieve your goals and perhaps reach the million-dollar mark if it’s what you’ve identified as what you need for retirement, for example. And there are actually easy ways to achieve this, even in a short period of time.
First: Budget!
If you’re going to reach a million dollars in a short period of time, then you need to budget enough money to put aside to achieve this amount. That means cutting back on things you don’t need, so you can put it instead towards your savings and investments.
A good place to start is putting aside between 5% and 10% of each paycheque towards your investments. Then you can drip feed into your investments over a long period of time. This helps even out any drops in the market. Rather than waiting and trying to time the market, missing out on passive income and returns in the meantime, you’ll instead see stable growth in the long run.
Choose the right investments
When it comes to choosing the right investments, definitely speak with your financial advisor. However, I’m going to provide you with a solid example. If you were to invest in anything, I would certainly consider one of the Big Six banks. And a great choice is Toronto-Dominion Bank (TSX:TD).
TD stock is tied as the largest bank in Canada in terms of assets. What’s more, it continues to grow substantially. This is through its United States presence, online growth, wealth and commercial management, and credit card partnerships.
Yet the reason it’s a safe and stable company is the bank, as with other banks, has provisions for loan losses for times like this. During a recession, shares may drop, and so will loans, but it has funds to pay off those loans and start up fresh again.
So, with TD stock trading at 9.69 times earnings and a dividend yield at 4.84%, it’s a great time to consider the bank.
Reaching a million the easy way
The reason this is so easy is once you’ve done the heavy lifting, it just takes reinvesting again and again — both in terms of funds brought in from your budget and reinvesting dividends. We just have to look at the compound annual growth rate (CAGR). For TD stock, the CAGR is 9.56% for its dividend and 6.9% for shares in the last decade.
Starting out with a $50,000 investment, here is how long it would take to reach $1 million by adding $6,500 annually.
| Year | Shares Owned | Annual Dividend Per Share | Annual Dividend | After DRIP Value | Annual Contribution | Year End Shares Owned | Year End Stock Price | New Balance |
|---|---|---|---|---|---|---|---|---|
| 1 | 635.00 | C$3.81 | C$2,418.77 | C$52,068.07 | C$6,500.00 | 737.15 | C$84.13 | C$62,016.31 |
| 2 | 737.15 | C$4.17 | C$3,076.56 | C$64,680.44 | C$6,500.00 | 839.04 | C$89.94 | C$75,459.56 |
| 3 | 839.04 | C$4.57 | C$3,836.96 | C$78,783.70 | C$6,500.00 | 941.23 | C$96.14 | C$90,490.41 |
| 4 | 941.23 | C$5.01 | C$4,716.17 | C$94,578.19 | C$6,500.00 | 1044.25 | C$102.77 | C$107,322.02 |
| 5 | 1044.25 | C$5.49 | C$5,733.11 | C$112,293.66 | C$6,500.00 | 1148.66 | C$109.87 | C$126,198.88 |
| 6 | 1148.66 | C$6.02 | C$6,909.88 | C$132,193.98 | C$6,500.00 | 1255.05 | C$117.45 | C$147,401.70 |
| 7 | 1255.05 | C$6.59 | C$8,272.40 | C$154,582.61 | C$6,500.00 | 1364.02 | C$125.55 | C$171,253.33 |
| 8 | 1364.02 | C$7.22 | C$9,851.04 | C$179,809.08 | C$6,500.00 | 1476.20 | C$134.21 | C$198,125.56 |
| 9 | 1476.20 | C$7.91 | C$11,681.47 | C$208,276.51 | C$6,500.00 | 1592.25 | C$143.47 | C$228,447.17 |
| 10 | 1592.25 | C$8.67 | C$13,805.65 | C$240,450.59 | C$6,500.00 | 1712.89 | C$153.37 | C$262,713.45 |
| 11 | 1712.89 | C$9.50 | C$16,272.99 | C$276,870.11 | C$6,500.00 | 1838.88 | C$163.96 | C$301,497.34 |
| 12 | 1838.88 | C$10.41 | C$19,141.78 | C$318,159.34 | C$6,500.00 | 1971.03 | C$175.27 | C$345,462.66 |
| 13 | 1971.03 | C$11.41 | C$22,480.91 | C$365,042.83 | C$6,500.00 | 2110.23 | C$187.36 | C$395,379.75 |
| 14 | 2110.23 | C$12.50 | C$26,371.89 | C$418,362.80 | C$6,500.00 | 2257.43 | C$200.29 | C$452,144.00 |
| 15 | 2257.43 | C$13.69 | C$30,911.32 | C$479,099.94 | C$6,500.00 | 2413.68 | C$214.11 | C$516,797.87 |
| 16 | 2413.68 | C$15.00 | C$36,213.91 | C$548,398.06 | C$6,500.00 | 2580.14 | C$228.89 | C$590,557.11 |
| 17 | 2580.14 | C$16.44 | C$42,416.08 | C$627,593.53 | C$6,500.00 | 2758.08 | C$244.68 | C$674,841.97 |
| 18 | 2758.08 | C$18.01 | C$49,680.36 | C$718,250.42 | C$6,500.00 | 2948.89 | C$261.56 | C$771,314.52 |
| 19 | 2948.89 | C$19.74 | C$58,200.68 | C$822,202.61 | C$6,500.00 | 3154.13 | C$279.61 | C$881,923.32 |
| 20 | 3154.13 | C$21.63 | C$68,208.95 | C$941,604.22 | C$6,500.00 | 3375.54 | C$298.90 | C$1,008,956.93 |
There you have it. Twenty years from now, you could have over $1 million in your portfolio from investing in TD stock. Now, wasn’t that easy?
