Beginner investors shouldn’t wait for a market flop to hit before putting extra savings to work on the TSX Index. Indeed, rates on your favourite risk-free investments – think guaranteed investment certificates (GICs), bonds, and bond exchange-traded funds (ETFs) – have gone down, and they’ll likely keep going down over the coming months and quarters.
Indeed, the Bank of Canada (BoC) now has the means to reduce rates at a potentially quicker rate following the latest round of inflation data. Undoubtedly, it may not feel like the inflation beast has been slain. Still, with September Consumer Price Index (CPI) numbers falling below 2% to 1.6%, it certainly seems like the Bank of Canada may need to get just a bit more aggressive with its rate-hike schedule.
Lower rates are perceived by most as some pretty good news for the economy, especially as it attempts to proceed forward without sinking into a mild or severe economic recession. While lower rates could spell good things for Canadian and U.S. stocks over the next couple of years, it’s also a negative for some savers, especially older savers who are retired and just cannot afford to take on too much risk.
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It can make sense to take risks as risk-free rates fall
Indeed, stocks are risky assets, even those that are defensive in nature (think the consumer staple plays), with big dividends and lower degrees of correlation to the rest of the stock market. When the market does take a spill, any publicly traded stock can also fold, especially if there’s a short-term rush for cash. Though rare, such scenarios can and likely will continue to happen.
That’s why beginning investors should be ready to ride out particularly nasty ruts in the road before they have a chance to appear. In this piece, we’ll check in with one top stock that makes a great “first buy” for new investors seeking to put money to work in October but are feeling somewhat hesitant by the looming U.S. election and swollen valuations after the latest year-to-date run-up.
Buying stocks on strength can leave you vulnerable to the next correction. That said, there’s no telling when the next dip will be. The best you can do is to ease into the markets and take advantage of the opportunities as they arise.
Couche-Tard: A great beginner stock
Without further ado, consider shares of Alimentation Couche-Tard (TSX:ATD), which have been volatile in recent sessions following the brutal correction amid its attempt to land a deal to buy the great 7-Eleven. Undoubtedly, it came as quite a shock when Couche-Tard raised its offer considerably to win the right to scoop up the Japanese-based convenience store giant.
Though the managers at 7-Eleven may have their doubts about whether the deal is good enough to take, a recent big-name shareholder seems to be in favour of being bought up by Couche-Tard. For now, the Canadian convenience retailing giant wants to also buy 7 & i Holdings’ businesses. Either way, ATD stock looks more or less like a good deal itself while it’s going for 19.1 times trailing price-to-earnings (P/E) with a dividend yield just shy of the 1% mark.
Deal or not, Couche-Tard knows value like few others, and it sees the long-term opportunity to be had in the Asian region. Whether it can get a strong foundation, like 7-Eleven, as it embarks on its global expansion journey remains the big question. Either way, investors should hang in for the ride as the firm continues growing in a way that’s easy enough to understand for those new to markets and business.
