Where to invest $1,000 for the next 5 years

Creating an investment portfolio is one of the best things you can do to help you achieve financial independence. A misconception is that investors need a lot of money to go public. That couldn’t be further from the truth. With just $1,000, you could start an investment portfolio and prepare for a comfortable retirement. In this article, I will discuss three stocks investors should buy and hold over the next five years.

This is my best growth action

If I could only choose one Canadian stock to invest in over the next five years, it would be Shopify (TSX:SHOP)(NYSE:SHOP). This company has become one of the world’s leading enablers of the growing e-commerce industry. It provides a platform and many tools necessary for merchants to operate online stores. What makes Shopify so appealing is that it offers solutions that appeal to both new entrepreneurs and large corporations.

Although Shopify’s stock has fallen over the past year, I think it could recover over the next five years. Its business remains very stable, with Shopify’s monthly recurring revenue growing at a compound annual growth rate (CAGR) of 38% over the past five years. The company also continues to expand its network of corporate partnerships. Last week, Shopify announced it would partner with YouTube, making it easier for content creators to sell goods to consumers.

Buy stocks with strong dividends

Investors should also consider buying dividend stocks. What makes these types of stocks attractive is that they can help supplement or even replace an investor’s primary source of income. Additionally, dividend stocks tend to be more established and therefore less volatile than growth stocks. There are many different factors investors need to consider when looking at dividend stocks.

In this article, we will use Canadian National Railway (TSX:CNR)(NYSE:CNI) as an example. First, investors should consider whether a company has been able to increase its dividend over time. This is important because investors stand to lose purchasing power if a stock is unable to continually increase its dividend. Canadian National has successfully increased its dividend in each of the past 25 years, making it one of 11 TSX-listed companies to currently exceed this mark.

Canadian National is also increasing its dividend at a rapid pace. Over the past five years, this stock has increased its dividend at a CAGR of 12.2%. If the company can keep raising its dividend at this rate, investors could be looking at a quarterly dividend of $1.30 per share five years from now.

Invest in financial institutions

Finally, investors should consider buying shares of financial institutions. If you look at the most important companies in the country, you will notice that a large part of these companies operate in the financial sector. So companies like Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) could be great to hold in your portfolio.

Brookfield operates a portfolio of nearly $725 billion in assets under management. Through its subsidiaries, this company is exposed to the infrastructure, real estate, renewable utilities and private equity markets. Brookfield offers a stock that may be attractive to both growth and dividend-oriented investors. Over the past 27 years, Brookfield shares have grown at a CAGR of nearly 15%. It did so while retaining its title as Canada’s dividend aristocrat, having raised its dividend for more than a decade.

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