Written by Karen Thomas, MSc, CFA at The Motley Fool Canada
Investing in your RRSP is always a good thing to try, and it’s never too late to start. Regular deposits into your RRSP account can provide you with significant savings over the years. It can also take advantage of the purchase average and capitalization. Still, deciding which stocks to add to that account can be daunting. Still, it’s definitely worth the investment of your time. The best stocks don’t scream for our attention – we have to find them.
Without further ado, here are three main actions you should consider adding to your RRSP account. Planning for retirement doesn’t have to be that difficult.
RRSP investment: periodic purchase by fixed sums and capitalization
Consider how difficult it can be to time the market. Even the smartest professionals struggle with this. It’s just not an easy thing to do. That’s because there are countless factors that can move the market – interest rates, inflation, consumer spending, to name a few. Then add to that the whole concept of investor psychology, and we have a complex problem. Sometimes we can get it right, but it’s best to use the concept of cost averaging to support us.
The idea behind dollar cost averaging is simply to enter the market to buy stocks at regular intervals. This captures the “average” price of a stock and ensures that if the long-term trend is up, you will participate in it.
Likewise, it also helps in compounding yields. Capitalization is simply “the ability of an asset to generate earnings, which are then reinvested or remain invested with the aim of generating their own earnings”. This has an extremely positive impact over time, so the sooner you invest, the better. It’s just good retirement planning.
So the top stocks I think you should consider for your RRSP are all leaders in their respective industries. This is a diverse list of quality stocks in booming sectors.
A bank stock for your RRSP that has no equal
Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is one of the two major banks in Canada. In fact, it is also one of the five largest banks in North America. This position in which TD Bank finds itself is the result of its longstanding strategy which emphasizes growth as well as risk control.
Currently, TD Bank stock is yielding 3.7%. It has been a reliable bank and stock for decades. As part of an RRSP portfolio, it can be considered an anchor. It is a large company that has done well in most economic environments. Although inflation and possibly economic weakness are in our future, on the other hand, the bank will benefit from rising interest rates.
A technological value
In my opinion, no RRSP portfolio is complete without exposure to technology. I therefore recommend that you consider Computer graphics (TSX:GIB.A)(NYSE: GIB). CGI is a $22 billion IT and business consulting firm. It started in Quebec, but now has a global presence and reach.
CGI’s strategy has always been a “build and buy” strategy. For a long time, management’s objective was to double in size every five to seven years. It is a noble goal. But historically, CGI has been able to achieve this. Today, the IT services industry remains highly fragmented. Therefore, there are plenty of acquisition opportunities where CGI can work its magic. CGI has an exceptional track record of successful acquisitions, adding tons of value to the company.
And a store of energy for the perfection of retirement planning
what can i say about Enbridge (TSX: ENB)(NYSE: ENB)? This energy infrastructure company is an integral part of the North American energy grid. It has been for a long time, and it will be for a long time to come. But Enbridge has been caught up in negative sentiment for some time now, which has caused the stock and its dividend yield will remain high at 6% — a perfect RRSP stock for retirement.
You see, Enbridge has a solid business, with skyrocketing cash flow. Oil and gas will still be needed for many years to come. However, Enbridge also invests in renewable energy. Therefore, this stock will be there for years to come.
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Dumb contributor Karen Thomas owns shares of CGI, Toronto-Dominion and Enbridge. The Motley Fool recommends CGI GROUP INC CL A SV and Enbridge.