Investing for retirement may seem like a daunting task for beginner investors rattled by last year’s wave of market volatility. While broader markets could certainly remain choppy going into year’s end and face-first into a potential economic downturn, I’d argue that it’s still wise to stay on track. It’s never a good idea to take action with your retirement investments based on emotion.
Fear or greed can lead new investors into a bit of trouble. That’s why it’s wise to adopt a slow and steady approach, while always considering how your moves today will impact you in the next five, 10, or even 15 years.
Chasing stock momentum or trends may not be wise with your retirement fund
As a new, self-guided investor, it’s up to you to maximize your total returns relative to the risks you’ll take on. That means not chasing the stocks that only seem to go up by the day. Nvidia (NASDAQ:NVDA) is a GPU (graphics processing unit) giant that’s gotten red hot of late, blasting off on the back of the artificial intelligence trend and an unprecedented demand for its products.
The stock is getting expensive, however — perhaps even beyond expensive. As we learned with the numerous difficult-to-value (high or no price-to-earnings multiples) names at the peak of 2021, it’s never a good idea to “just buy” before conducting due diligence and determining whether a stock under question is undervalued or overvalued.
My guess is that Nvidia stock is extremely overvalued after its latest upward run past the $400-per-share mark. It’s never easy to see a stock surge with you still sitting on the sidelines. However, a good investor knows when a name got away. And they’re disciplined enough not to compensate by jumping in well after a stock has already had a run. Doing so can be very risky and could put one in harm’s way should momentum decide to reverse itself. Sometimes, it doesn’t take any negative news event for a hot stock to cool in a hurry.
In this piece, we’ll check out two dividend stocks that I believe are a better bet for a retirement fund. Both names are easier to value, with payouts that will compensate you gradually over time.
TD Bank: Value and yield are what you’ll get!
TD Bank (TSX:TD) is a top Canadian bank stock that I’ve been bullish on following its latest slip to 52-week lows. After the latest slide, TD stock now finds itself where it was before it announced the end of its proposed merger with First Horizons Bank.
Undoubtedly, the macro headwinds seem steep for TD and the rest of the banking scene. Now that U.S. regional banking woes have settled since March and April, I would have thought TD would have been en route to $85 per share, rather than taking a round trip back to the $77 range.
In any case, I think Mr. Market is wrong to punish TD stock. The bank may have reported underwhelming numbers, but they were expected to be muted given the macro picture. In any case, TD will be a rough ride, but one worthwhile for those looking to add to retirement funds for the next decade.
TD has been through worse. And it’s found a way to recover. At this juncture, I think pessimism is way too high, opening the door for contrarians who are willing to brave the negative momentum. Shares sport a 4.9% dividend yield alongside a 9.37 times trailing price-to-earnings multiple.
