Will your superannuation be enough to cover your later years? Your best chance for preparing is to start investing now and pick stable stocks that can build your wealth. Choosing good stocks can be difficult, especially when you want to set up a portfolio to fund your retirement.
The quality and longevity of a company are top priorities for long-term investing. If the quality is lacking, future earnings and investor returns can be all over the place – too unstable to produce a good result. If the company may not grow or even survive past ten years or more, long range income and share price gains can't be relied upon.
The famous investor Warren Buffett explained how you should think when picking stocks-
The real test of whether you would like [it] as an investment is whether you would be happy if it never got quoted again, in terms of what the asset did for you.
He means that if tomorrow your favourite stock would stop trading on the stock exchange for ten years, would you still buy it? You'd have to be very confident about the company behind the stock that it will keep on earning.
Here are two dividend stocks that could be a part of a long-term foundation for retirement wealth.
1) Westpac Banking Corp (ASX: WBC)
One of the Big Four banks, it currently offers a 5.1% dividend yield and has a long history of dividend growth. You could imagine that ten or twenty years from now, the bank would still be servicing customers and growing earnings.
2) Woodside Petroleum Limited (ASX: WPL)
The $34.7 billion energy producer may be having some hiccups with recent LNG projects, but with your longer range view for retirement investing, it's not as important. It will still continue to develop or acquire energy assets into the future. Right now, though, its fully franked dividend yields 5.6%, which beats a bank's term deposit interest rate.
Keeping Buffett's philosophy in mind will steer you toward quality companies and away from short-term price speculations.
