Wouldn't it be great to know the future? We could pick out the best investments and avoid all of the traps and barriers that cost us money.
But we can't. So planning for what we want becomes crucial. If you take big investing "bets" on companies based on what the stock will do just in the next six months, or chase after high-flying stocks that have been heavily run up in price, then you're taking your eye off the true goal- long-term wealth and financial freedom.
Unless you have hundreds of thousands of dollars to invest at the start, it's going to take time to build up wealth. Some retirement planning studies say that you'll need about eight times your annual salary saved up by retirement age to live comfortably.
Investing gives you the opportunity to improve your returns and compound the earnings. You make your money work for you when you reinvest your returns to get even bigger returns later.
That's the path to true wealth creation.
Now, here are two companies that have made good returns for investors, but more importantly, they are good, reliable businesses that should be around for a long time. You might want to consider these for your long-term portfolio.
1) Challenger Ltd (ASX: CGF) is an investment management company that specialises in products and services for customers' secure retirement. It offers annuities, for example, that pay a certain amount of return (like passive income) to supplement your savings and superannuation. These are becoming more popular, especially among baby boomers who are swiftly approaching retirement age. That's why the business can continue to grow at a good pace for many years.
The stock pays a healthy 4.1% yield partially franked and has a great track record for raising dividends.
2) REA Group Limited (ASX: REA), the operator of the number one property search website realestate.com.au, has built up a market dominance and a strong brand name that could keep it at the top for a long time. Usually the company has grown its earnings around 30% annually.
That's the kind of high growth stock you'd want in your portfolio, but I think that as the business matures, it may slow down its rapid expansion and begin to pay a higher dividend yield. It might even be a future blue-chip stock. You could get the high growth now and the growing dividend income in the future.
